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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
GARDEN RIDGE CORPORATION
(Name of Subject Company)
GARDEN RIDGE CORPORATION
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(including the associated preferred stock purchase rights)
(Title of Class of Securities)
36541P104
(CUSIP Number of Class of Securities)
JANE ARBUTHNOT
GARDEN RIDGE CORPORATION
19411 ATRIUM PLACE, SUITE 170
HOUSTON TEXAS 77084
(281) 579-7901
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person filing statement)
COPIES TO:
DAVID F. TAYLOR
LOCKE LIDDELL & SAPP LLP
3400 CHASE TOWER
600 TRAVIS
HOUSTON, TEXAS 77002
(713) 226-1496
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Garden Ridge Corporation, a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 19411 Atrium Place, Suite 170, Houston, Texas 77084. The title
of the class of equity securities to which this statement relates is the
Company's common stock, par value $0.01 per share (the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the "Offer") described in the
Tender Offer Statement on Schedule 14D-1, dated November 23, 1999 (as amended or
supplemented, the "Schedule 14D-1"), filed by GR Acquisition Corporation, a
Delaware corporation (the "Purchaser"), GRDG Holdings LLC, Three Cities Fund II
L.P. and Three Cities Offshore II C.V. with the Securities and Exchange
Commission (the "Commission"), relating to an offer by the Purchaser to purchase
all of the outstanding shares of Common Stock and associated preferred stock
purchase rights (collectively, the "Shares") at a price of $11.50 per Share, net
to the seller in cash, without interest thereon (the "Offer Price"), upon the
terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase, dated November 23, 1999, and the related Letter of Transmittal
(together, the "Offer Documents"), copies of which are filed as Exhibits 1 and 2
to this Solicitation/Recommendation Statement on Schedule 14D-9 (this "Schedule
14D-9"), respectively.
The Offer Documents indicate that the principal executive offices of the
Purchaser are located at the offices of Three Cities Research, Inc., 650 Madison
Avenue, New York, New York, 10022. The Offer is being made pursuant to the Plan
and Agreement of Merger, dated as of November 22, 1999 (the "Merger Agreement"),
between the Company and the Purchaser. A copy of the Merger Agreement is filed
as Exhibit 3 to this Schedule 14D-9, and is incorporated herein by reference in
its entirety. Pursuant to the Merger Agreement, if (1) at least 51% of the
outstanding shares of Common Stock which neither the Purchaser nor its parent,
GRDG Holdings LLC, owns when the Purchaser makes a public announcement of the
Offer are properly tendered in response to the Offer and not withdrawn, (2) the
Purchaser purchases the shares of Common Stock which are properly tendered in
response to the Offer and not withdrawn, and (3) the conditions to the Merger
(as hereinafter defined) are satisfied or waived, then the Purchaser will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation. In the Merger, each Share outstanding immediately
before the Effective Time (as defined in the Merger Agreement) (other than
Shares held in the treasury of the Company or Shares owned by the Purchaser or
any other direct or indirect subsidiary of the Company), will be converted into
and become the right to receive $11.50 per Share, net to the seller in cash,
without interest thereon (the "Merger Price"). The Merger Agreement is
summarized in Item 3 of this Schedule 14D-9.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above. Unless the context otherwise
requires, references to the Company in this Schedule 14D-9 are to the Company
and its subsidiaries, viewed as a single entity.
(b) Each material contract, agreement, arrangement and understanding and
actual potential conflict of interest between the Company or its affiliates and
(1) the Company's executive officers, directors or affiliates or (2) the
Purchaser, its executive officers, directors or affiliates, is described below
or incorporated herein by reference as provided below.
Certain contracts, agreements, arrangements and understandings between the
Company and its executive officers, directors and affiliates are described in
the sections entitled "Common Stock Outstanding and Principal Holders Thereof,"
"Director Compensation," and "Certain Transactions" in the Company's Proxy
Statement dated April 29, 1999, relating to its 1999 Annual Meeting of
Stockholders held on June 10, 1999 (the "Proxy Statement"). A copy of such Proxy
Statement is filed as Exhibit 4 hereto and is incorporated herein by reference.
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THE MERGER AGREEMENT
The Merger Agreement, a copy of which is attached as Exhibit 3 to this
Schedule 14D-9, should be read in its entirety for a more complete description
of the terms and provisions of the Merger Agreement. The following is a summary
of certain portions of the Merger Agreement which relate to arrangements among
the Company and the Purchaser and the Company's executive officers and
directors.
Agreement with Respect to Director and Officer Indemnification and
Insurance. Following the Merger, the surviving corporation will honor, and will
not amend or modify for a period of six years, the obligations of the Company to
indemnify present and former directors, officers or employees. The surviving
corporation will maintain for at least six years the Company's directors' and
officers' insurance in effect on the date of the Merger Agreement to the extent
that such insurance is available at a cost not exceeding $75,000.
Stock Options. All outstanding stock options will be canceled prior to the
consummation of the Offer in exchange for an amount in cash equal to the amount,
if any, by which the Merger Price exceeds the per share exercise price of the
option, times the number of shares of Common Stock issuable upon exercise of the
option in full. In addition, as of the Effective Time of the Merger, all stock
option plans shall terminate and no participant in any stock option plan shall
have any right to acquire any capital stock of the Company.
RIGHTS AGREEMENT
The Company has in place an amended and restated rights agreement dated as
of July 14, 1999 (the "Rights Agreement"). The Rights Agreement was adopted by
the Board for the purpose of protecting the Company and the stockholders from
coercive or otherwise unfair takeover attempts.
Under the Rights Agreement, upon certain "Triggering Events," each
stockholder of the Company, other than stockholders who have acquired beneficial
ownership of 25% or more of the Company's shares (defined by the Rights
Agreement as "Acquiring Persons"), are entitled to exercise certain "Rights". If
any Acquiring Person were to acquire 25% or more of the Shares of the Company,
each Right then outstanding would become a right to buy that number of Preferred
Shares that at the time of acquisition would have a market value of two times
the purchase price of the Right. If the Company were acquired in a merger or
other business combination transaction or more than 50% of its consolidated
assets or earning power were sold, each holder of a Right will thereafter have
the right to receive that number of shares of common stock of the acquiring
company which at the time of such transaction would have a market value of two
times the purchase price of the Right.
These Rights, if exercised, significantly dilute the value of the Acquiring
Person's Shares, thus making it very expensive for the Acquiring Person to
acquire control of the Company without the consent of the Company.
The Offer and the Merger normally would constitute Triggering Events under
the Rights Agreement. However, the Board, because it has determined that the
Offer and the Merger are in the best interests of the Company's stockholders,
and in order to facilitate the Offer and the Merger, has amended the Rights
Agreement to provide that none of the Purchaser, GRDG Holdings LLC, Three Cities
Fund III, L.P., nor any of their respective affiliates is an Acquiring Person
(as defined under the Rights Agreement), and that the Offer, Merger, and other
transactions contemplated by the Merger Agreement are not Triggering Events (as
defined under the Rights Agreement) so as to trigger the Rights issued under the
Rights Agreement, and do not otherwise result in any of the consequences
contemplated by the Rights Agreement. This amendment to the Rights Agreement is
required by the Merger Agreement. A copy of the Rights Agreement and the
amendment to same are filed herewith as Exhibits 5 and 6 and are incorporated
herein by reference, and the foregoing summary is qualified in its entirety by
reference thereto.
LIMITATION OF LIABILITY
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director unless, and only to
the extent that, such director is liable (1) for any breach of the director's
duty of
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loyalty to the Company or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or are in violation of law,
(3) for any transactions from which the director derived any improper personal
benefits, or (4) for any violations under Section 174 of the Delaware General
Corporation Law. The effect of this provision of the Company's Certificate of
Incorporation is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of his fiduciary duty (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (1) through (4) above. This provision does not
limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a breach
of a director's fiduciary duty.
CERTAIN CONFLICTS
Stock Options. As of the date of filing of this Schedule 14D-9, the current
directors and executive officers of the Company as a group hold stock options to
purchase an aggregate of approximately 573,950 shares at exercise prices ranging
from $5.563 to $27.625 per Share granted under the Company's stock option plans.
All outstanding stock options will be canceled prior to the consummation of the
Offer in exchange for an amount in cash equal to (a) the amount, if any, by
which the Merger Price exceeds the per share exercise price of the option, times
(b) the number of shares of common stock issuable upon exercise of the option in
full. In addition, as of the Effective Time of the Merger, all stock option
plans shall terminate and no participant in any stock option plan shall have any
right to acquire any capital stock of the Company.
Employment Agreements. The Company maintains an employment agreement with
Paul T. Davies (the "Davies Employment Agreement"), President and Chief
Executive Officer of the Company, a copy of which is filed herewith as Exhibit 7
and is incorporated herein by reference. The Davies Employment Agreement
provides that upon a Change of Control (as defined in the Davies Employment
Agreement), the unvested option to purchase 375,000 shares of Common Stock
granted to Mr. Davies under Section 4.4.3 of the Davies Employment Agreement
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. This option will
be treated as set forth above under "Stock Options." In addition, the Davies
Employment Agreement provides that upon termination of Mr. Davies' employment by
the Company after a Change of Control transaction is announced, the Company
shall pay to Mr. Davies a lump sum in amount equal to 200% times the sum of (a)
Mr. Davies' Base Compensation (as defined in the Davies Employment Agreement) in
the Company's most recent fiscal year plus (b) Mr. Davies' Bonus Payment (as
defined in the Davies Employment Agreement) for the Company's most recent fiscal
year. The acquisition of Shares pursuant to the Offer and the Merger will
constitute a Change of Control for purposes of the Davies Employment Agreement.
The Company has also entered into an employment agreement with Armand
Shapiro, a director of the Company, a copy of which is filed herewith as Exhibit
8 and is incorporated herein by reference.
Other Matters. Certain other transactions have occurred, or relationships
exist, between the Company and its directors, executive officers or affiliates.
See "Director Compensation" in Exhibit 4 hereto.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Company's Board of Directors has approved the Merger Agreement and
the transactions contemplated thereby and determined that the Offer and the
Merger are fair to and in the best interests of the stockholders of the Company
and recommends that all stockholders of the Company accept the Offer and tender
all their Shares pursuant to the Offer. This recommendation is based in part
upon an opinion (the "Fairness Opinion") received by the Company from The
Robinson-Humphrey Company, LLC ("Robinson-Humphrey") that the consideration to
be received by the Company's stockholders in the Offer and the Merger is fair to
the stockholders from a financial point of view. No limitations were imposed by
the Board or management of the Company on Robinson-Humphrey with respect to the
investigation made, or the procedures followed by it, in rendering the Fairness
Opinion. For purposes of its opinion, Robinson-Humphrey relied, without
independent verification, on the accuracy, completeness and fairness of all
financial and other
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information reviewed by it. The Fairness Opinion contains a description of the
factors considered, the assumptions made and the scope of review undertaken by
Robinson-Humphrey in rendering its opinion. THE FULL TEXT OF THE FAIRNESS
OPINION RECEIVED BY THE COMPANY FROM ROBINSON-HUMPHREY IS FILED AS EXHIBIT 9 TO
THIS SCHEDULE 14D-9 AND IS INCORPORATED HEREIN BY REFERENCE IN ITS ENTIRETY.
STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
The Merger is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer at least that
number of Shares which would constitute 51% of the outstanding Shares which
neither the Purchaser nor GRDG Holdings owns when the Purchaser makes a public
announcement of the Offer (the "Minimum Condition"). Under Delaware law, the
approval of the Board and the affirmative vote of the holders of a majority of
the outstanding Shares are required to approve the Merger. Accordingly, if the
Minimum Condition is satisfied, the Purchaser will have sufficient voting power
to cause the approval of the Merger without the affirmative vote of any other
stockholder.
The Offer is scheduled to expire at 12:00 midnight, New York City Time, on
Wednesday, December 22, 1999, unless the Purchaser, subject to certain
limitations, elects to extend the period of time for which the Offer is open. A
copy of the press release issued jointly by the Company and the Purchaser on
November 22, 1999, announcing the Offer and the Merger is filed as Exhibit 10 to
this Schedule 14D-9 and is incorporated herein by reference.
(b) In July 1992, a group of entities advised by Three Cities Research,
Inc. ("TCR") and other investors acquired the Company. At that time, the Company
entered into an Advisory Agreement with TCR under which it agreed that, for five
years, it would pay TCR a fee of $50,000 per year for advisory services and
reimburse TCR for out-of-pocket expenses up to $25,000 per year. That Advisory
Agreement was renewed in 1996 for another five years.
In November 1994, the entities advised by TCR sold some stock of the
Company to additional private investors.
In May 1995 and April 1996, the Company and some of its stockholders sold
Common Stock in underwritten public offerings. Also, between August 1995 and
June 1996, the entities advised by TCR distributed some of their shares to their
investors. The public offerings and distributions of shares to investors reduced
the shares owned by the entities advised by TCR to 2% of the outstanding Common
Stock. However, Teribe Ltd., one of the investors in those entities (which
subsequently has been renamed Quilvest American Equity Ltd.) owned an additional
11.95% of the outstanding Common Stock. It subsequently increased its ownership
to 19.89%.
During the second and third quarters of 1996, the Company's Common Stock
traded at prices in excess of $20 per share (giving effect to a June 1996 stock
split), reaching a high of $30 per share in May 1996. However, late in 1997, the
price of the Common Stock fell to below $10 per share and, although it rose back
to slightly more than $20 per share during the second quarter of 1998, by
October 1998 it had fallen below $7 per share and by April 1999 it had fallen to
slightly more than $5 per share.
During the early summer of 1999, while TCR was speaking with investors in
its prior funds about their investing in Three Cities Fund III, L.P. (which was
being formed), several of those investors complained about the performance of
the Company's Common Stock. Because TCR believed the Common Stock was
under-valued, H. Whitney Wagner, a managing director of TCR who is a member of
the Company's Board, suggested that the Company purchase back some of its Common
Stock. Subsequently, on August 26, 1999, the Company began a tender offer for up
to 3,000,000 shares of its Common Stock at $7 per share. A total of 1,189,411
shares were tendered in response to this tender offer, which ended on September
23, 1999.
On September 30, 1999, J. William Uhrig, a managing director of TCR, sent a
letter to Paul Davies, the President and Chief Executive Officer of the Company,
proposing that funds advised by TCR and a group of investors in prior TCR funds
who still hold Common Stock acquire all the stock of the Company through a
tender offer and a merger in which all the Company's stockholders, other than
those who participated in the acquisition, would receive $9.50 per share. In
that letter, Mr. Uhrig requested that, in order to be sure that
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TCR's arranging to have stockholders contribute their Common Stock to the
Purchaser would not cause the contemplated tender offer and merger to be subject
to the special requirements of Section 203 of the Delaware General Corporation
Law, the Company's Board approve the acquisition by the Purchaser of some or all
of the shares of the Company's Common Stock held by former investors in funds
advised by TCR. That letter made it clear that the Board's taking that action
would in no way commit it to approve the transaction proposed in the letter or
any other transaction. However, it would make it possible for TCR to form the
Purchaser and put it in a position to proceed with a transaction if the
Company's Board approved one.
After receiving TCR's September 30 letter, the Company's Board formed a
Special Committee, consisting of four directors who had no relationship with TCR
or funds advised by it. In particular, the Special Committee did not include H.
Whitney Wagner, who is a managing director of TCR, Ira Neimark, who serves at
TCR's request on the board of another company in which funds advised by TCR have
a controlling interest (and who resigned from the Company's Board prior to the
formation of the Special Committee), Armand Shapiro, who is one of the
stockholders of the Company who subsequently exchanged his Shares for interests
in GRDG Holdings, or Alyson Henning, who has invested in funds advised by TCR.
On October 22, 1999, Mr. Davies met with Mr. Uhrig and discussed TCR's
proposal. He told Mr. Uhrig that the Board had formed the Special Committee,
that the Special Committee would be retaining Robinson-Humphrey to advise it
with regard to the transaction, and that Robinson-Humphrey was analyzing TCR's
proposal. Mr. Davies suggested that Mr. Uhrig speak with a representative of
Robinson-Humphrey to explain in more detail what TCR was contemplating. Mr.
Uhrig did that on the following day.
On October 26, 1999, the representative of Robinson-Humphrey told Mr. Uhrig
that the Special Committee had met with its advisors and had decided it would
not recommend a transaction in which a fund advised by TCR acquired the Company
for $9.50 per share. When Mr. Uhrig called Mr. Davies and asked why the Special
Committee had taken that action, in view of the fact that $9.50 per share was
substantially higher than the market price of the Company's Common Stock (which
at that time was slightly more than $6.50 per share), Mr. Davies said he thought
the actions of the Special Committee had not been fully communicated, and
suggested that Mr. Uhrig meet in person with the representative of
Robinson-Humphrey.
On November 1, 1999, Mr. Uhrig and an attorney for TCR and funds it advised
met in TCR's offices with the representative of Robinson-Humphrey and an
attorney for the Company (with another attorney for the Company participating by
conference telephone). At this meeting, the representatives of the Company said
the Special Committee had decided it could not recommend a transaction at $9.50
per share. In response to a question, they said the Special Committee had not
determined a price which it thought it could recommend. Mr. Uhrig then discussed
the possibility that the funds might consider making a tender offer at $9 per
share without the recommendation of the Company's Board, if the Board would not
recommend against the tender offer. The Company's representatives said they
would ask the Special Committee to meet to discuss what price might be
acceptable to it.
On November 4, 1999, Mr. Uhrig called the representative of
Robinson-Humphrey and told him that the funds would be willing to increase the
price they would pay to $11 per share, but would not go higher than that.
On the following day, the representative of Robinson-Humphrey told Mr.
Uhrig by telephone that the Special Committee had determined it would recommend
an offer at $12.25 per share. Mr. Uhrig said the funds would not make an offer
at that price, but that they would offer $11.50 per share if (i) the Special
Committee and the Board would recommend the offer, (ii) the Company would agree
not to solicit offers from anyone else, (iii) the Company would agree that if it
received a higher, unsolicited offer, the funds would be given an opportunity to
match that higher offer and (iv) the Company would agree that if it terminated
its agreement with the funds in order to accept a higher offer from somebody
else, the Company would make a termination payment to the funds equal to 3% of
the value of the Company's shares at the price the funds had agreed to pay and
would reimburse the funds for their expenses up to 1% of that amount.
On November 8, 1999, the Special Committee voted to authorize
Robinson-Humphrey to inform Mr. Uhrig that the Special Committee was inclined to
pursue a transaction at $11.50 per share, subject to
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negotiation of a definitive agreement and receipt of assurance that the funds
could obtain the necessary financing. In addition, the Special Committee voted
to recommend that the Board approve the acquisition of more than 15% of the
outstanding Common Stock by the Purchaser or GRDG Holdings.
On November 8, 1999, the attorneys for the funds sent a draft of a Plan and
Agreement of Merger to the attorneys for the Company. Negotiations regarding
that Plan and Agreement of Merger took place over the following two weeks.
On November 22, 1999, the Special Committee recommended that the Board
approve the Merger Agreement and the transactions contemplated by it, and the
Board did so. In addition, at the recommendation of the Special Committee, the
Board amended the Company's Rights Agreement so none of the Purchaser, GRDG
Holdings or their affiliates would be an "acquiring person" for purposes of that
Agreement. Shortly after that, the Merger Agreement was signed. The parties
announced the transaction later that day pursuant to a joint press release.
In arriving at its decision to approve the Offer and the Merger and
recommend that the Company's stockholders accept the Offer and tender their
Shares, the Board considered a number of factors, including, without limitation,
the following:
(i) the financial and other terms and conditions of the Offer and the
Merger Agreement;
(ii) the fact that the $11.50 per Share price to be received by the
Company's stockholders in both the Offer and the Merger represents a
substantial premium over the historical trading prices for the Shares,
including a premium over the closing market price of $7.25 per Share on
November 19, 1999, the last full trading day prior to the approval and
execution of the Merger Agreement;
(iii) the written opinion of Robinson-Humphrey that the consideration
to be received by the Company's stockholders pursuant to the Offer and the
Merger is fair to such stockholders from a financial point of view. A copy
of Robinson-Humphrey's written opinion is filed as Exhibit 9 to this
Schedule 14D-9 and is incorporated herein by reference. Such opinion should
be read in its entirety for a description of the procedures followed,
assumptions and qualifications made, matters considered and limitations of
the review undertaken by Robinson-Humphrey;
(iv) the fact that the Offer and the Merger were not conditioned on
the availability of financing which, combined with the experience,
reputation and financial condition of the Purchaser, increased the
likelihood that the proposed Offer and Merger will be consummated;
(v) the fact that the Company may terminate the Merger Agreement in
order to approve a proposed business combination by a third party on terms
more favorable to the Company's stockholders than the Offer and the Merger,
upon the payment of the Purchaser's expenses up to $1,285,000 and a
$3,850,000 termination fee;
(vi) the effect of the Offer and the Merger on the Company's
relationships with its employees and customers; and
(vii) the advice of the Company's legal advisors with respect to the
terms of the Merger Agreement, the Offer and the Merger.
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The Board of Directors recognized that consummation of the Offer and the
Merger will deprive current stockholders of the Company of the opportunity to
participate in the future growth prospects of the Company and, therefore, in
reaching its conclusion to approve the Offer and the Merger, determined that the
historical results of operations and future prospects of the Company are
currently adequately reflected in the $11.50 price per Share.
In light of all the factors set forth above, the Board of Directors
approved the Offer and the Merger. In view of the variety of factors considered
in connection with its evaluation, the Board of Directors did not assign
relative weights to the specific factors considered in reaching its decision or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to it and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Robinson Humphrey to provide the Fairness Opinion in
connection with the proposed Offer and Merger. Pursuant to a letter agreement,
dated October 11, 1999, between the Company and Robinson-Humphrey Company, the
Company has agreed to pay Robinson-Humphrey the following:
(a) A retainer fee of $25,000, payable upon the signing of the letter
agreement;
(b) A fee of $100,000 for a financial review and analysis and
recommendations for response and any further actions to be taken by the Company;
(c) A fee of $200,000 payable upon the delivery of the Fairness Opinion by
Robinson-Humphrey;
(d) If during the term of Robinson-Humphrey's engagement or within one year
after the termination of Robinson-Humphrey's engagement, an acquisition of the
Company occurs, then the Company pays to Robinson-Humphrey the following
percentages of the consideration involved in the acquisition less any amounts
previously paid pursuant to the paragraphs above:
(1) In the event an acquisition is completed by Three Cities Fund, L.P.
or any affiliated investors thereof, the following schedule will be
applied to determine the fee payable to Robinson-Humphrey
<TABLE>
<CAPTION>
TOTAL CONSIDERATION PERCENTAGE
- ------------------- ----------
<S> <C>
Up to and including $10.00 per Share...................... 0.5%
Plus an amount over $10.00 per Share...................... 1.0%
</TABLE>
(2) In the event an acquisition is completed by a party other than Three
Cities Research, Inc. or any affiliated investors thereof, then the
Company will pay a fee to Robinson-Humphrey equal to 1.0% of the
consideration.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on its
behalf with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) On August 26, 1999, the Company began a tender offer for up to
3,000,000 shares of Common Stock at $7 per Share. A total of 1,189,411 Shares
were tendered in response to this tender offer, which ended on September 23,
1999. On November 18, 1999, Armand Shapiro, a director of the Company exercised
options to purchase an aggregate of 259,500 shares of Common Stock. The exercise
price for 180,000 of the Shares was $0.11 per Share and the exercise price for
the remaining 79,500 shares was $3.33 per Share. Other than as set forth in the
preceding sentences, during the past sixty (60) days, no transactions in the
Shares have been
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effected by the Company or, to the best of the Company's knowledge, by any
executive officer, directors, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director, affiliate and subsidiary of the Company currently intends to tender
all Shares to Purchaser which are held of record or beneficially by such person
or over which he, she or it has sole dispositive power.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (1) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary thereof; (2) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (3) a tender offer for or other acquisition of securities by or of the
Company; or (4) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that relates
to, or would result in, one or more of the events referred to in Item 7(a)
above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement required by Section 14(f) and Rule 14(f)-1 of the
Exchange Act will be furnished separately to Stockholders in connection with the
possible designation by the Purchaser, pursuant to the Merger Agreement, of
certain persons to be appointed to the Board of Directors of the Company other
than at a meeting of the Company's Stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1 -- Offer to Purchase, dated November 22, 1999*
2 -- Letter of Transmittal*
3 -- Plan and Agreement of Merger, dated as of November 22,
1999, between the Purchaser and the Company
4 -- Proxy Statement of the Company dated April 29, 1999
5 -- Amended and Restated Rights Agreement dated July 14, 1999
6 -- Amendment to Rights Agreement dated November 22, 1999
7 -- Employment Agreement with Paul T. Davies dated June 7,
1999
8 -- Employment Agreement with Armand Shapiro dated June 1,
1999
9 -- Fairness Opinion of The Robinson-Humphrey Company, LLC*
10 -- Press release issued by the Company and the Purchaser on
November 22, 1999
</TABLE>
- ---------------
* Included in copies mailed to Stockholders
8
<PAGE> 10
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
November 23, 1999
GARDEN RIDGE CORPORATION
/s/ JANE L. ARBUTHNOT
------------------------------------
Jane L. Arbuthnot, Chief Financial
Officer
<PAGE> 11
GARDEN RIDGE
NOVEMBER 23, 1999
DEAR GARDEN RIDGE CORPORATION STOCKHOLDER:
We are pleased to inform you that on November 22, 1999, Garden Ridge
Corporation ("Garden Ridge") entered into an agreement with GR Acquisition
Corporation, a wholly owned subsidiary of GRDG Holdings LLC ("Purchaser"), which
provides for the acquisition of Garden Ridge by means of a cash tender offer and
a subsequent merger.
As the first step of this acquisition, Purchaser is making a cash tender
offer for any and all outstanding shares of Garden Ridge's common stock (the
"Shares") at a price of $11.50 per Share, net to the seller in cash. Subject to
certain conditions, Purchaser and Garden Ridge will be merged subsequent to the
completion of the tender offer, and the remaining outstanding Shares will be
converted into the right to receive $11.50 per Share. The tender offer is
conditioned on, among other things, there being properly tendered and not
withdrawn at least 51% of the outstanding shares which Purchaser or GRDG
Holdings did not own when it made a public announcement of the tender offer.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TENDER OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF GARDEN RIDGE'S STOCKHOLDERS AND
RECOMMENDS THAT EVERY STOCKHOLDER OF GARDEN RIDGE ACCEPT THE TENDER OFFER AND
TENDER HIS, HER OR ITS SHARES.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached
Recommendation/Solicitation Statement on Schedule 14D-9 that is being filed
today with the Securities and Exchange Commission, including the opinion of The
Robinson-Humphrey Company, LLC, Garden Ridge's financial advisor, to the effect
that the consideration to be received by the stockholders pursuant to the offer
and the merger is fair to such holders from a financial point of view.
Enclosed for your consideration are copies of the tender offer materials
and Garden Ridge's Schedule 14D-9. These documents should be read carefully. In
particular, I call your attention to Item 4 of the Schedule 14D-9, which
describes both the reasons for the Board's recommendation and certain additional
information that stockholders may wish to consider before taking action with
respect to the offer.
Very truly yours,
GARDEN RIDGE SIGNATURE
Paul T. Davies
President and Chief Executive Officer
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1 -- Offer to Purchase, dated November 22, 1999*
2 -- Letter of Transmittal*
3 -- Plan and Agreement of Merger, dated as of November 22,
1999, between the Purchaser and the Company
4 -- Proxy Statement of the Company dated April 29, 1999
5 -- Amended and Restated Rights Agreement dated July 14, 1999
6 -- Amendment to Rights Agreement dated November 22, 1999
7 -- Employment Agreement with Paul T. Davies dated June 7,
1999
8 -- Employment Agreement with Armand Shapiro dated June 1,
1999
9 -- Fairness Opinion of The Robinson-Humphrey Company, LLC*
10 -- Press release issued by the Company and the Purchaser on
November 22, 1999
</TABLE>
- ---------------
* Included in copies mailed to Stockholders
<PAGE> 1
EXHIBIT 3
PLAN AND AGREEMENT OF MERGER
DATED
NOVEMBER 22, 1999
BETWEEN
GARDEN RIDGE CORPORATION
AND
GR ACQUISITION CORPORATION
<PAGE> 2
<TABLE>
<S> <C> <C>
ARTICLE 1 THE TENDER OFFER...........................................................................1
1.1 The Tender Offer...............................................................................1
1.2 Company Action.................................................................................3
ARTICLE 2 THE MERGER.................................................................................4
2.1 Agreement to Effect Merger.....................................................................4
2.2 The Merger.....................................................................................5
2.3 Certificate of Incorporation...................................................................5
2.4 By-Laws........................................................................................6
2.5 Directors......................................................................................6
2.6 Officers.......................................................................................6
2.7 Stock of the Company...........................................................................6
2.8 Stock of Acquisition...........................................................................6
2.9 Stockholders Meeting...........................................................................7
2.10 Voting by Acquisition..........................................................................8
2.11 Payment for Shares.............................................................................9
2.12 Options and Warrants..........................................................................11
2.13 Stock Purchase Plan...........................................................................11
ARTICLE 3 EFFECTIVE TIME OF MERGER..................................................................11
3.1 Date of the Merger............................................................................11
3.2 Execution of Certificate of Merger............................................................12
3.3 Effective Time of the Merger..................................................................12
ARTICLE 4 REPRESENTATIONS AND WARRANTIES............................................................12
4.1 Representations and Warranties of Acquisition.................................................12
4.2 Representations and Warranties of the Company.................................................15
4.3 Termination of Representations and Warranties.................................................22
ARTICLE 5 ACTIONS PRIOR TO THE MERGER...............................................................23
5.1 Activities Until Effective Time...............................................................23
5.2 HSR Act Filings...............................................................................25
5.3 No Solicitation of Offers; Notice of Proposals from Others....................................25
5.4 Acquisition's Efforts to Fulfill Conditions...................................................26
5.5 Company's Efforts to Fulfill Conditions.......................................................26
ARTICLE 6 CONDITIONS PRECEDENT TO MERGER............................................................26
6.1 Conditions to the Company's Obligations.......................................................26
6.2 Conditions to Acquisition's Obligations.......................................................27
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 7 TERMINATION...............................................................................29
7.1 Right to Terminate............................................................................29
7.2 Manner of Terminating Agreement...............................................................31
7.3 Effect of Termination.........................................................................31
ARTICLE 8 ABSENCE OF BROKERS........................................................................32
8.1 Representations and Warranties Regarding Brokers and Others...................................32
ARTICLE 9 OTHER AGREEMENTS..........................................................................32
9.1 Indemnification for Prior Acts................................................................32
ARTICLE 10 GENERAL...................................................................................33
10.1 Expenses......................................................................................33
10.2 Access to Properties, Books and Records.......................................................33
10.3 Press Releases................................................................................34
10.4 Entire Agreement..............................................................................34
10.5 Effect of Disclosures.........................................................................34
10.6 Captions......................................................................................34
10.7 Prohibition Against Assignment................................................................35
10.8 Notices and Other Communications..............................................................35
10.9 Governing Law.................................................................................36
10.10 Amendments....................................................................................36
10.11 Counterparts..................................................................................36
</TABLE>
2
<PAGE> 4
PLAN AND AGREEMENT OF MERGER
This is a Plan and Agreement of Merger (the "Agreement") dated as of
November 22, 1999, between Garden Ridge Corporation (the "Company"), a Delaware
corporation, and GR Acquisition Corporation ("Acquisition"), a Delaware
corporation.
ARTICLE 1
THE TENDER OFFER
1.1 The Tender Offer. (a) On the date of this Agreement, Acquisition is
acquiring approximately 4,998,200 shares of common stock of the Company ("Common
Stock"). Not later than the first business day after the date of this Agreement,
Acquisition will make a public announcement of an offer (the "Tender Offer") to
purchase any and all of the outstanding Common Stock which Acquisition or its
parent, GR Holdings, LLC ("Holdings"), does not then own at a price (the "Tender
Offer Price") of $11.50 per share, net to the seller, in cash.
(b) Within five business days after the public announcement of the Tender
Offer, Acquisition will file with the Securities and Exchange Commission ("SEC")
a Tender Offer Statement on Schedule 14D-1 with respect to the Tender Offer
(together with any amendments or supplements, the "Schedule 14D-1"), including
forms of an offer to purchase, a letter of transmittal and a summary
advertisement (the Schedule 14D-1 and the documents included in it by which the
Tender Offer will be made, as they may be supplemented or amended, being the
"Offer Documents"). Promptly after the Offer Documents are filed with the SEC,
Acquisition will communicate the Tender Offer to the record holders and
beneficial owners of the Common Stock. Each of Acquisition and the Company will
promptly correct any information or provided by it for use in the Offer
Documents if and to the extent that information is or becomes incomplete or
inaccurate in any material respect, and Acquisition will supplement or amend the
Offer Documents to the extent required by the Securities Exchange Act of 1934,
as amended
1
<PAGE> 5
(the "Exchange Act") and the rules under it, file the amended or supplemented
Offer Documents with the SEC and, if required, disseminate the amended Offer
Documents to the Company's stockholders. The Company and its counsel will be
given a reasonable opportunity to review the Offer Documents and any amendments
or supplements to them before they are filed with the SEC or disseminated to the
Company's stockholders.
(c) The day on which the Tender Offer expires (the "Expiration Date") will
not be earlier than 20 business days, and will not be later than 60 days, after
the day on which the Schedule 14D-1 is filed with the SEC.
(d) Subject to the conditions to the Tender Offer set forth on Exhibit
1.1-E and the other conditions set forth in this Agreement, Acquisition will,
not later than five days after the Expiration Date, accept for payment and pay
for all the shares of Common Stock which are properly tendered in response to
the Tender Offer and not withdrawn. The obligation of Acquisition to accept for
payment and pay for shares which are properly tendered and not withdrawn will
not be subject to any conditions other than those set forth on Exhibit 1.1-E.
Acquisition will not, without the prior consent of the Company, (i) decrease the
Tender Offer Price below that described in subparagraph (a), (ii) decrease the
number of shares being solicited in the Tender Offer, (iii) change the form of
consideration payable in the Tender Offer, (iv) modify or add to the conditions
set forth on Exhibit 1.1-E or (v) extend the Expiration Date to a day which is
more than 60 days after the day on which the Schedule 14D-1 is filed with the
SEC, except that (A) if the waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") have not expired
or been terminated at least three days before the Expiration Date, the
Expiration Date may be extended until 10 business days after the day on which
the waiting periods under the HSR Act expire or are terminated, (B) if the
Tender Offer is modified to increase the Tender Offer Price or in any other
manner permitted by this Agreement, the Expiration Date may be extended until 10
business days after the day on
2
<PAGE> 6
which Acquisition makes a public announcement of the modification, (C) if anyone
other than Acquisition makes a tender offer for Common Stock before the Tender
Offer expires, Acquisition may extend the Expiration Date until not more than 10
business days after the other tender offer expires, and (D) if Acquisition is
prevented by an order of a court or other governmental agency from accepting
shares which are tendered in response to the Tender Offer, Acquisition may
extend the Expiration Date until 10 business days after Acquisition is able to
accept shares without violating any order of any court or other governmental
agency.
1.2 Company Action. (a) The Company approves of and consents to the Tender
Offer and represents and warrants that its Board of Directors (the "Board"),
acting on the recommendation of a Special Committee (the "Special Committee")
none of the members of which are partners in, employees of or otherwise
affiliated with Three Cities Research, Inc. or any investment fund managed by
it, has (i) determined that this Agreement and the transactions contemplated by
it are fair to and in the best interests of the Company and its stockholders,
(ii) approved this Agreement and the transactions contemplated by it, including
Acquisition's acquiring Common Stock on the date of this Agreement as described
in Paragraph 1.1(a), the Tender Offer and the Merger (described in Article 2),
and (iii) resolved to recommend that the Company's stockholders accept the
Tender Offer, tender their shares in response to the Tender Offer, and adopt and
approve this Agreement and the Merger. Notwithstanding anything contained in
this subparagraph (a) or elsewhere in this Agreement, if the Board, based upon
written advice from its counsel, determines in good faith to withdraw, modify or
amend the recommendation, because the failure to do so could reasonably be
expected to be a breach of the directors' fiduciary duties under applicable law,
that withdrawal, modification or amendment will not constitute a breach of this
Agreement.
(b) The Company will file with the SEC, promptly after Acquisition files
the Schedule 14D-1, a Solicitation/Recommendation Statement on Schedule 14D-9
(together with
3
<PAGE> 7
any amendments or supplements, the "Schedule 14D-9") containing the
recommendations described in subparagraph (a) and will disseminate the Schedule
14D-9 as required by Rule 14d-9 under the Exchange Act. The Company and
Acquisition each agrees to correct promptly any information provided by it for
use in the Schedule 14D-9 if and to the extent that information is or becomes
incomplete or inaccurate in any material respect and the Company will file any
corrected Schedule 14D-9 with the SEC and disseminate the corrected Schedule
14D-9 to the Company's stockholders to the extent required by the Exchange Act
or the rules under it.
(c) In connection with the Tender Offer, the Company will promptly furnish
Acquisition with mailing labels, security position listings and any other
available listing or computer files containing the names and addresses of the
record holders or beneficial owners of shares of Common Stock as of a recent
date and the Company will furnish Acquisition with such additional information
and assistance (including, without limitation, updated lists of stockholders,
mailing labels and lists of securities positions) as Acquisition or its
representatives may reasonably request in order to communicate the Tender Offer
to the record holders and beneficial owners of the Common Stock. Subject to the
requirements of applicable law, Acquisition will hold in confidence the
information contained in any such labels, listings or files, and will use that
information only in connection with the Tender Offer and the Merger. If this
Agreement is terminated, Acquisition will return to the Company the originals
and all copies of that information which are in Acquisition's possession.
ARTICLE 2
THE MERGER
2.1 Agreement to Effect Merger. If (a) at least 51% of the outstanding
shares of Common Stock which neither Acquisition nor Holdings owns when
Acquisition makes a public announcement of the Tender Offer are properly
tendered in response to the Tender Offer and not withdrawn, (b) Acquisition
purchases the shares of Common Stock which are properly
4
<PAGE> 8
tendered in response to the Tender Offer and not withdrawn, and (c) the
conditions to the Merger set forth in Paragraph 6.2 are satisfied or waived,
Acquisition will take all steps in its power, including voting, and causing its
affiliates to vote, all the Common Stock beneficially owned by any of them in
favor of adoption of this Agreement and approval of the Merger, to cause
Acquisition to be merged into the Company (the "Merger") on the terms and with
the effects set forth in Paragraphs 2.2 through 2.8.
2.2 The Merger. In the Merger, Acquisition will be merged into the Company,
which will be the surviving corporation of the Merger (the "Surviving
Corporation"). Except as specifically provided in this Agreement, when the
Merger becomes effective, (i) the real and personal property, other assets,
rights, privileges, immunities, powers, purposes and franchises of the Company
will continue unaffected and unimpaired by the Merger, (ii) the separate
existence of Acquisition will terminate, and Acquisition's real and personal
property, other assets, rights, privileges, immunities, powers, purposes and
franchises will be merged into the Surviving Corporation, and (iii) the Merger
will have the other effects specified in Section 259 of the Delaware General
Corporation Law (the "DGCL").
2.3 Certificate of Incorporation. From the Effective Time (described in
Paragraph 3.3) until subsequently amended, the Certificate of Incorporation of
Acquisition immediately before the Effective Time will be the Certificate of
Incorporation of the Surviving Corporation, except that it will provide that (i)
the name of the Surviving Corporation will be "Garden Ridge Corporation," and
(ii) the number of shares which the Surviving Corporation will be authorized to
issue will be 400,000 shares of common stock, par value $.01 per share, and that
Certificate of Incorporation, separate and apart from this Agreement, may be
certified as the Certificate of Incorporation of the Surviving Corporation.
5
<PAGE> 9
2.4 By-Laws. At the Effective Time, the By-Laws of Acquisition immediately
before the Effective Time will be the By-Laws of the Surviving Corporation, and
will remain so until they are altered, amended or repealed.
2.5 Directors. The directors of Acquisition immediately before the
Effective Time will be the directors of the Surviving Corporation after the
Effective Time and will hold office in accordance with the By-Laws of the
Surviving Corporation.
2.6 Officers. The officers of the Company immediately before the Effective
Time will be the officers of the Surviving Corporation after the Effective Time
and will hold office at the pleasure of the Board of Directors, and in
accordance with the By-Laws, of the Surviving Corporation.
2.7 Stock of the Company. (a) Except as provided in subparagraph (b), at
the Effective Time each share of Common Stock which is outstanding immediately
before the Effective Time will be converted into and become the right to receive
a sum in cash equal to the Tender Offer Price (the "Merger Price").
(b) Each share of Common Stock held in the treasury of the Company, and
each share of Common Stock held by Acquisition or by any direct or indirect
subsidiary of the Company, immediately before the Effective Time will, at the
Effective Time, be cancelled and cease to exist and no payment will be made with
respect to any of those shares.
2.8 Stock of Acquisition. At the Effective Time, each share of stock of
Acquisition ("Acquisition stock") which is outstanding immediately before the
Effective Time will be converted into and become one share of the same class of
stock of the Surviving Corporation. At the Effective Time, a certificate which
represented Acquisition stock will automatically
6
<PAGE> 10
become and be a certificate representing the number of shares of the class of
Surviving Corporation stock into which the Acquisition stock represented by the
certificate was converted.
2.9 Stockholders Meeting. (a) If the conditions described in Paragraph 2.1
are satisfied, and if approval by the Company's stockholders is required by
applicable law or by the rules of the Nasdaq National Market (if they are
applicable) in order to enable the Company to consummate the Merger, the Company
will:
(i) hold a special meeting of its stockholders as soon as practicable
following the Expiration Date for the purpose of adopting this Agreement and
approving the Merger (the "Stockholders Meeting");
(ii) as promptly as practicable after the Expiration Date, (v) file
with the SEC (if the Company is required to file proxy materials with the SEC) a
proxy statement (the "Proxy Statement") and other proxy soliciting materials
relating to the Stockholders Meeting, (w) respond promptly to any comments made
by the staff of the SEC with respect to the Proxy Statement or other proxy
soliciting materials and in all other ways use its best efforts to cause review
of the Proxy Statement to be completed as promptly as practicable, (x) as
promptly as practicable, and in any event within 5 days after the Company is
informed that the SEC staff has no further contents about the Proxy Statement,
cause the Proxy Statement to be mailed to its stockholders, (y) cause the
Stockholders Meeting to be held not later than the 30th day after the day on
which the Proxy Statement is mailed, and (z) in all other respects, use its best
efforts to cause its stockholders to adopt this Agreement and approve the
Merger; and
(iii) include in the Proxy Statement the recommendation of the Board
that the stockholders of the Company vote in favor of the adoption of this
Agreement and approve the Merger, unless the Board, based upon written advice
from its counsel, determines in good faith
7
<PAGE> 11
that the failure to amend or withdraw that recommendation could reasonably be
expected to be a breach of the directors' fiduciary duties under applicable law.
(b) Acquisition will (i) supply to the Company all information in
Acquisition's possession, including any required financial statements of
Acquisition, which the Company is required to include in the Proxy Statement and
(ii) in all other respects cooperate with the Company in its efforts to file the
Proxy Statement with the SEC and cause review of the Proxy Statement to be
completed as promptly as practicable after it is filed with the SEC.
2.10 Dissenting Shares. (a) Notwithstanding any provision of this Agreement
to the contrary, Common Stock that is outstanding immediately prior to the
Effective Time which is held by stockholders who have complied with Section 262
of the DGCL (including making a timely demand for appraisal and not voting in
favor of or consenting to the Merger) will not be converted into the right to
receive the Merger Price. Instead, if the Merger takes place, the Surviving
Corporation will pay the holders of those shares the fair value of the shares
determined as provided in Section 262 of the DGCL. Shares held by stockholders
who fail to perfect, or who otherwise properly withdraw or lose, their rights to
receive the fair value of their shares determined under Section 262 of the DGCL
will be deemed to have been converted, at the later of the Effective Time or the
time they withdraw or lose their rights to receive the fair value of their
shares, into the right to receive the Merger Price, without any interest.
(b) The Company will promptly give Acquisition (i) notice of any
demands for appraisal received by the Company, any withdrawals of any such
demands, and any other communications required by, or relating to, Section 262
of the DGCL which the Company receives and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company will not, except with the prior written
8
<PAGE> 12
consent of Acquisition, make any payment with respect to any demand for payment
of the fair value of shares or offer to settle or settle any such demand.
2.11 Payment for Shares. (a) Prior to the Effective Time, Acquisition will
designate a bank or trust company to act as Paying Agent in connection with the
Merger (the "Paying Agent"). At, or immediately before, the Effective Time,
Acquisition or the Surviving Corporation will provide the Paying Agent with the
funds necessary to make the payments contemplated by Paragraph 2.7. Until used
for that purpose, the funds will be invested by the Paying Agent, as directed by
Acquisition, in obligations of or guaranteed by the United States of America or
obligations of an agency of the United States of America which are backed by the
full faith and credit of the United States of America, in commercial paper
obligations rated A-1 or P-1 or better by Moody's Investors Services Inc. or
Standard & Poor's Corporation, or in deposit accounts, certificates of deposit
or banker's acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks with capital, surplus
and undivided profits aggregating more than $200 million (based on the most
recent financial statements of the banks which are then publicly available at
the SEC or otherwise).
(b) Promptly after the Effective Time, the Surviving Corporation will
cause the Paying Agent to mail to each person who was a record holder of Common
Stock at the Effective Time, a form of letter of transmittal for use in
effecting the surrender of stock certificates representing Common Stock
("Certificates") in order to receive payment of the Merger Price. When the
Paying Agent receives a Certificate, together with a properly completed and
executed letter of transmittal and any other required documents, the Paying
Agent will pay to the holder of the Certificate, or as otherwise directed in the
letter of transmittal, the Merger Price with regard to the shares represented by
the Certificate, and the Certificate will be cancelled. No interest will be paid
or accrued on the cash payable upon the surrender of Certificates. If payment is
to be made to a person other than the person in whose name a surrendered
Certificate is
9
<PAGE> 13
registered, the surrendered Certificate must be properly endorsed or otherwise
be in proper form for transfer, and the person who surrenders the Certificate
must provide funds for payment of any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the surrendered
Certificate or establish to the satisfaction of the Surviving Corporation that
the tax has been paid. After the Effective Time, a Certificate which has not
been surrendered will represent only the right to receive the Merger Price,
without any interest.
(c) If a Certificate has been lost, stolen or destroyed, the Surviving
Corporation will accept an affidavit and indemnification reasonably satisfactory
to it instead of the Certificate.
(d) At any time which is more than six months after the Effective
Time, the Surviving Corporation may require the Paying Agent to deliver to it
any funds which had been made available to the Paying Agent and have not been
disbursed to holders of shares of Common Stock (including, without limitation,
interest and other income received by the Paying Agent in respect of the funds
made available to it), and after the funds have been delivered to the Surviving
Corporation, former stockholders of the Company must look to the Surviving
Corporation for payment of the Merger Price upon surrender of the Certificates
held by them. Neither the Surviving Corporation nor the Paying Agent will be
liable to any former stockholder of the Company for any Merger consideration
which is delivered to a public official pursuant to any abandoned property,
escheat or similar law.
(e) After the Effective Time, the Surviving Corporation will not
record any transfers of shares of Common Stock on the stock transfer books of
the Company or the Surviving Corporation, and the stock ledger of the Company
will be closed. If, after the Effective Time, Certificates are presented for
transfer, they will be cancelled and treated as having been surrendered for the
Merger Price.
10
<PAGE> 14
2.12 Options and Warrants. At the Effective Time, each option or warrant
issued by the Company which is outstanding at that time (a) will become the
right to receive a sum in cash equal to (i) the amount, if any, by which the
Merger Price exceeds the per share exercise price of the option or warrant,
times (ii) the number of shares of Common Stock issuable upon exercise of the
option or warrant in full (irrespective of vesting provisions), and (b) except
as described in clause (a), will be cancelled. In order to receive the amount to
which a holder of an option or warrant is entitled under this Paragraph, the
holder must deliver to the Company (i) any certificate or option agreement
relating to the option or warrant and (ii) a document in which the holder
acknowledges that the payment the holder is receiving is in full satisfaction of
any rights the holder may have under or with regard to the option or warrant
2.13 Stock Purchase Plan. At the Effective Time, (i) all funds held in
participants' accounts under the Company's Stock Purchase Plan which were
contributed in accordance with elections made prior to the date of this
Agreement and which have not yet been used to purchase Common Stock will be paid
over to the Company and (ii) each participant will receive from the Company
$11.50 for each $9.775 paid over to the Company from the participant's account.
ARTICLE 3
EFFECTIVE TIME OF MERGER
3.1 Date of the Merger. The day on which the Merger is to take place (the
"Merger Date") will be (a) the day on which the Merger is approved by the
holders of a majority of the outstanding shares of Common Stock or (b) if
stockholder approval of the Merger is not required by applicable law or by the
rules of the Nasdaq National Market (if they are applicable), a day designated
by Acquisition which will be not later than 10 days after the Expiration Date.
The Merger Date may be changed with the consent of the Company and Acquisition.
11
<PAGE> 15
3.2 Execution of Certificate of Merger. Not later than 3:00 P.M. on the day
before the Merger Date, (a) Acquisition and the Company will each execute a
certificate of merger (the "Certificate of Merger") substantially in the form of
Exhibit 3.2 and deliver it to Rogers & Wells LLP for filing with the Secretary
of State of Delaware. Rogers & Wells LLP will be instructed that, if it is
notified on the Merger Date that all the conditions in Article VI have been
fulfilled or waived, it is to cause the Certificate of Merger to be filed with
the Secretary of State of Delaware on the Merger Date or as soon after that date
as is practicable.
3.3 Effective Time of the Merger. The Merger will become effective at 11:59
P.M. on the day when the Certificate of Merger is filed with the Secretary of
State of Delaware (that being the "Effective Time").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Acquisition. Acquisition represents
and warrants to the Company as follows:
(a) Acquisition is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) Acquisition has all corporate power and authority necessary to
enable it to enter into this Agreement and carry out the transactions
contemplated by this Agreement. All corporate actions necessary to authorize
Acquisition to enter into this Agreement and carry out the transactions
contemplated by it have been taken. This Agreement has been duly executed by
Acquisition and is a valid and binding agreement of Acquisition, enforceable
against Acquisition in accordance with its terms.
12
<PAGE> 16
(c) Neither the execution or delivery of this Agreement or of any
document to be delivered in accordance with this Agreement nor the consummation
of the transactions contemplated by this Agreement or by any document to be
delivered in accordance with this Agreement will violate, result in a breach of,
or constitute a default (or an event which, with notice or lapse of time or both
would constitute a default) under, the Certificate of Incorporation or by-laws
of Acquisition, any agreement or instrument to which Acquisition or any
subsidiary of Acquisition is a party or by which any of them is bound, any law,
or any order, rule or regulation of any court or governmental agency or other
regulatory organization having jurisdiction over Acquisition or any of its
subsidiaries, except violations or breaches of, or defaults under, agreements or
instruments which would not have a Material Adverse Effect on the Company (as
defined below).
(d) No governmental filings, authorizations, approvals or consents, or
other governmental action, other than the termination or expiration of waiting
periods under the HSR Act, if any, are required to permit Acquisition to fulfill
all its obligations under this Agreement.
(e) Acquisition was formed solely for the purpose of engaging in the
transaction contemplated by this Agreement. Acquisition has not, and on the
Effective Date will not have, engaged in any activities or incurred, directly or
indirectly, any obligations or liabilities, except the activities relating to or
contemplated by this Agreement and obligations or liabilities incurred in
connection with those activities and with the transactions contemplated by this
Agreement.
(f) Neither the Offer Documents nor any information supplied by
Acquisition for inclusion in the Schedule 14D-9 will, at the respective times
the Schedule 14D-1 and the Schedule 14D-9 are filed with the SEC and first
published, sent or given to the Company's stockholders, contain a false or
misleading statement with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
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<PAGE> 17
statements therein, in light of the circumstances under which they are made, not
misleading. On the date the Proxy Statement is mailed to the Company's
stockholders and on the date of the Stockholders Meeting, none of the
information supplied by Acquisition for inclusion in the Proxy Statement will be
false or misleading with respect to any material fact or will omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier communication
with respect to the Stockholders Meeting or the solicitation of proxies to be
used at the Stockholders Meeting. However, Acquisition does not make any
representations or warranties with respect to information supplied by the
Company or any of its affiliates or representatives for inclusion in the
Offering Documents, or with respect to the Schedule 14D-9 or the Proxy Statement
(except to the extent of information supplied by Acquisition for inclusion in
the Schedule 14D-9 or the Proxy Statement). The Offering Documents will comply
as to form in all material respects with the requirements of the Exchange Act
and the rules under it.
(g) Acquisition is wholly owned by GR Holdings, LLC ("Holdings"),
which in turn, until the date of this Agreement, has been wholly owned by Three
Cities Fund III, L.P. ("Three Cities"). Three Cities has, or has arranged equity
investments or loans which will provide, sufficient funds to enable Acquisition
to purchase and pay for in a timely manner all the Common Stock which is
tendered in response to the Tender Offer and enable Acquisition to fulfill in a
timely manner all of its other obligations under this Agreement.
(h) None of Acquisition, Holdings or Three Cities is the subject of
any suit or governmental proceeding which seeks to prevent Acquisition from
completing the transactions which are the subject of this Agreement, nor, to the
best of Acquisition's knowledge, has any such suit or proceeding been
threatened.
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4.2 Representations and Warranties of the Company. The Company represents
and warrants to Acquisition as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The Company has all corporate power and authority necessary to
enable it to enter into this Agreement and carry out the transactions
contemplated by this Agreement. All corporate actions necessary to authorize the
Company to enter into this Agreement and carry out the transactions contemplated
by it, other than adoption of this Agreement by the stockholders of the Company,
have been taken. This Agreement has been duly executed by the Company and is a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(c) Neither the execution and delivery of this Agreement or of any
document to be delivered in accordance with this Agreement nor the consummation
of the transactions contemplated by this Agreement or by any document to be
delivered in accordance with this Agreement will violate, result in a breach of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, the Certificate of Incorporation or
By-Laws of the Company, any agreement or instrument to which the Company or any
subsidiary of the Company is a party or by which any of them is bound, any law,
or any order, rule or regulation of any court or governmental agency or other
regulatory organization having jurisdiction over the Company or any of its
subsidiaries, except violations or breaches of, or defaults under, agreements or
instruments which would not have a Material Adverse Effect on the Company,
Acquisition, Holdings or any stockholder of Holdings.
(d) Except as shown on Exhibit 4.2-D, no governmental filings,
authorizations, approvals, or consents, or other governmental action, other than
the expiration or termination of
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<PAGE> 19
waiting periods under the HSR Act, if any, are required to permit the Company to
fulfill all its obligations under this Agreement.
(e) The Company and each of its subsidiaries is qualified to do
business as a foreign corporation in each state in which it is required to be
qualified, except states in which the failure to qualify, in the aggregate,
would not have a Material Adverse Effect upon the Company. As used in this
Agreement, the term "Material Adverse Effect" upon a company means a material
adverse effect upon (i) the consolidated financial position of that company and
its subsidiaries taken as a whole, or (ii) the consolidated results of
operations of that company and its subsidiaries taken as a whole compared with
the consolidated results of their operations during the same period of the prior
year. For the purposes of the definition of Material Adverse Effect, (x) an
adverse change in financial condition will be material if it is a reduction of
5% or more in working capital, tangible net worth or net asset value, and (y) an
adverse change in results of operations will be material if it is a reduction of
5% or more in total revenues, net income before income taxes, net income, or
earnings before interest, taxes, depreciation and amortization.
(f) The only authorized stock of the Company is 40,000,000 shares of
Common Stock, par value $.01 per share. At the date of this Agreement, the only
outstanding stock of the Company is 16,176,800 shares of Common Stock. All the
outstanding shares have been duly authorized and issued and are fully paid and
non-assessable. Except as shown on Exhibit 4.2-F, the Company has not issued any
options, warrants or convertible or exchangeable securities, and is not a party
to any other agreements, which require, or upon the passage of time, the payment
of money or the occurrence of any other event may require, the Company to issue
or sell any of its stock. On November 8, 1999, the Board, acting on the
recommendations of the Special Committee, approved for the purposes of the
transaction which are the subject of this Agreement, the acquisition by Holdings
of more than 15% of the outstanding Common
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<PAGE> 20
Stock and the acquisition by Acquisition of any or all the Common Stock which
Holdings at any time owns. By reason of that approval neither the acquisition of
Common Stock by Acquisition described in Paragraph 1.1(a) nor the prior
acquisition of that Common Stock by Holdings will cause acquisition or Holdings
to be subject to the restrictions upon business combinations contained in
Section 203 of the DGCL. In addition, the Company, with the approval of the
Board, has amended the Amended and Restated Rights Agreement (the "Rights
Agreement") dated as of July 14, 1999 between the Company and Chase Mellon
Shareholder Services, L.L.C., to exclude Acquisition, Holdings and Three Cities
from the definition of "Acquiring Person" in the Rights Agreement. As a result
of that amendment, none of the acquisition of Common Stock by Acquisition on the
date of this Agreement described in Paragraph 1.1(a), the acquisition of Common
Stock by Holdings on the date of this Agreement or any of the transactions
contemplated by this Agreement will result in there being a Distribution Date
under the Rights Agreement or otherwise entitle anyone to exercise Rights under
the Rights Agreement.
(g) Except as shown on Exhibit 4.2-G, (i) each of the corporations and
other entities of which the Company owns directly or indirectly 50% or more of
the equity (each corporation or other entity of which a company owns directly or
indirectly 50% or more of the equity being a "subsidiary" of that company) has
been duly organized, and is validly existing and in good standing under the laws
of its state of incorporation, (ii) all the shares of stock of each of the
Company's subsidiaries which are owned by the Company or any of its subsidiaries
are duly authorized, validly issued, fully paid and non-assessable and are not
subject to any preemptive rights, and (iii) neither the Company nor any of its
subsidiaries has issued any options, warrants or convertible or exchangeable
securities, or is a party to any other agreements, which require, or upon the
passage of time, the payment of money or the occurrence of any other event may
require, the Company or any subsidiary to issue or sell any stock or other
equity interests in any
17
<PAGE> 21
of the Company's subsidiaries and, there are no registration covenants or
transfer or voting restrictions with respect to outstanding securities of any of
the Company's subsidiaries.
(h) Since February 1, 1996, the Company has filed with the SEC all
forms, statements, reports and documents it has been required to file under the
Securities Act of 1993, as amended, the Exchange Act or the rules under them.
(i) The Company's Annual Report on Form 10-K for the year ended
January 31, 1999 (the "1999 10-K") and its Report on Form 10-Q for the period
ended August 1, 1999 (the "August 10-Q") which were filed with the SEC,
including the documents incorporated by reference in each of them, each
contained all the information required to be included in it and, when it was
filed, did not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made in it, in light of
the circumstances under which they were made, not misleading. Without limiting
what is said in the preceding sentence, the financial statements included in the
1999 10-K all were prepared, and the financial information included in the
August 10-Q was derived from financial statements which were prepared, in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis (except that financial information included in the
August 10-Q does not contain notes and is subject to normal year end
adjustments) and present fairly the consolidated financial condition and the
consolidated results of operations of the Company and its subsidiaries at the
dates, and for the periods, to which they relate. The Company has not filed any
reports with the Securities and Exchange Commission with regard to any period
which ended, or any event which occurred, after August 1, 1999, except a
Schedule 13E-4 which the Company filed on August 26, 1999, and amended on
October 7, 1999.
(j) Since August 1, 1999, (i) the Company and its subsidiaries have
conducted their respective businesses in the ordinary course and in the same
manner in which they were
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<PAGE> 22
conducted prior to August 1, 1999, and (ii) nothing has occurred which,
individually or in aggregate, has had a Material Adverse Effect on the Company,
except purchases by the Company of its Common Stock, (including purchases
through a tender offer which expired on September 23, 1999), which reduced the
Company's working capital, tangible net worth and net assets.
(k) The assets of the Company and its subsidiaries constitute, in the
aggregate, all the assets (including, but not limited to, intellectual property
rights) used in or necessary to the conduct of their businesses as they
currently are being conducted.
(l) The Company and it subsidiaries have at all times complied, and
currently are complying, with all applicable Federal, state, local and foreign
laws and regulations, except failures to comply which would not reasonably be
expected, in the aggregate, to have a Material Averse Effect on the Company.
(m) The Company and its subsidiaries have all licenses and permits
which are required at the date of this Agreement to enable them to conduct their
businesses as they currently are being conducted, except licenses or permits the
lack of which would not reasonably be expected, in the aggregate, to have a
Material Adverse Effect on the Company.
(n) The Company and each of its subsidiaries has filed when due
(taking account of extensions) all Tax Returns (as defined below) which it has
been required to file and has paid all Taxes shown on those returns to be due.
Those Tax Returns accurately reflect all Taxes required to have been paid,
except to the extent of items which may be disputed by applicable taxing
authorities but for which there is substantial authority to support the position
taken by the Company or the subsidiary and which have been adequately reserved
against in accordance with GAAP on the balance sheet at August 1, 1999 included
in the August 10-Q. Except as shown on Exhibit 4.2-N, (i) no extension of time
given by the Company or any of its subsidiaries
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<PAGE> 23
for completion of the audit of any of its Tax Returns is in effect, (ii) no tax
lien has been filed by any taxing authority against the Company or any of its
subsidiaries or any of their assets, (iii) no Federal, state or local audits or
other administrative proceedings or court proceedings with regard to Taxes are
presently pending with regard to the Company or any of its subsidiaries, (iv)
neither the Company nor any subsidiary is a party to any agreement providing for
the allocation or sharing of Taxes, (v) neither the Company nor any subsidiary
has participated in or cooperated with an international boycott as that term is
used in Section 999 of the Internal Revenue Code of 1986, as amended (the
"Code") and (vi) neither the Company nor any subsidiary has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a Subsection (f) asset (as that term is
defined in Section 341(f)(4) of the Code) owned by the Company or any
subsidiary. For the purposes of this Agreement, the term "Taxes" means all taxes
(including, but not limited to, withholding taxes), assessments, fees, levies
and other governmental charges, and any related interest or penalties. For the
purposes of this Agreement, the term "Tax Return" means any report, return or
other information required to be supplied to a taxing authority in connection
with Taxes.
(o) (i) The Company and its subsidiaries have all material
environmental permits which are necessary to enable them to conduct their
businesses as they currently are being conducted without violating any
Environmental Laws, (ii) the Company has not received any notice of material
noncompliance or material liability under any Environmental Law, (iii) neither
the Company nor any subsidiary has performed any acts, including but not limited
to releasing, storing or disposing of hazardous materials, there is no condition
on any property owned or leased by the Company or a subsidiary, and there was no
condition on any property formerly owned or leased by the Company or a
subsidiary while the Company or a subsidiary owned or leased that property, that
could result in material liability by the Company or a subsidiary under any
Environmental Law and (iv) neither the Company nor any subsidiary is subject to
any order
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<PAGE> 24
of court or governmental agency requiring the Company or any subsidiary to take,
or refrain from taking, any actions in order to comply with any Environmental
Law and no action or proceeding seeking such an order is pending or, insofar as
any officer of the Company is aware, threatened against the Company. As used in
this Agreement, the term "Environmental Law" means any Federal, state or local
law, rule, regulation, guideline or other legally enforceable requirement of a
governmental authority relating to protection of the environment or to
environmental conditions which affect human health or safety.
(p) The Company has conducted tests to determine the extent to which
computer software and hardware and other equipment which it uses are Y2K
Compliant. All computer software and hardware and other equipment which the
Company or a subsidiary uses either is Y2K Compliant or can be made Y2K
Compliant before December 31, 1999 at a total cost to the Company and its
subsidiaries of not more than $100,000. Failures of items sold by the Company to
be Y2K Compliant will not result in liabilities or costs to the Company which,
in aggregate, will have a Material Adverse Effect on the Company. The Company
has conducted a survey of its suppliers seeking to determine the extent to which
their activities may be affected by failures of computer software or hardware or
other equipment to be Y2K Compliant. Based upon the results of that survey, the
Company has no reasonable basis to believe that failures of computer software or
hardware or other equipment used by suppliers of the Company and its
subsidiaries will have a Material Adverse Effect on the Company. As used in this
Agreement, systems and equipment will be Y2K compliant if they are capable of
recognizing that dates in the year 2000 are subsequent to December 31, 1999 and
are otherwise able to operate without being adversely affected by the change
from the twentieth to the twenty-first century.
(q) Except as shown on Exhibit 4.2-Q, there are no contracts,
agreements or other arrangements which could result in the payment by the
Company or by any subsidiary of an "Excess Parachute Payment" as that term is
used in Section 280G of the Code.
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<PAGE> 25
(r) Neither the Schedule 14D-9 nor any information supplied by the
Company for inclusion in the Offering Documents will, at the respective times
the Schedule 14D-9 and the Schedule 14D-1 are filed with the SEC and first
published, sent or given to the Company's stockholders, contain a false or
misleading statement with respect to any material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. On the day the Proxy Statement is mailed to the Company's
stockholders and on the day of the Stockholders Meeting, the Proxy Statement
will not contain a false or misleading statement with respect to any material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading or necessary to correct any statement
in any earlier communication with respect to the Stockholders Meeting or the
solicitation of proxies to be used at the Stockholders Meeting. However, the
Company does not make any representations or warranties with respect to
information supplied by Acquisition or any of its affiliates or representatives
for inclusion in the Schedule 14D-9 or the Proxy Statement, or with respect to
the Offering Documents (except to the extent of information supplied by the
Company for inclusion in the Offering Documents). The Schedule 14D-9 and the
Proxy Statement each will comply as to form in all material respects with the
requirements of the Exchange Act and the rules under it.
4.3 Termination of Representations and Warranties. The representations and
warranties in Paragraphs 4.1, 4.2 and 8.1 will terminate at the Expiration Date,
and neither the Company nor Acquisition, nor any of their respective
stockholders, will have any rights or claims as a result of any of those
representations or warranties after the Expiration Date.
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ARTICLE 5
ACTIONS PRIOR TO THE MERGER
5.1 Activities Until Effective Time. From the date of this Agreement to the
Effective Time, except as described on Exhibit 5.1, the Company will, and will
cause each of its subsidiaries to, except with the written consent of
Acquisition:
(a) Operate its business in the ordinary course and in a manner
consistent with the manner in which it is being operated at the date of this
Agreement.
(b) Take all reasonable steps available to it to maintain the goodwill
of its business and, except as otherwise requested by Acquisition, the continued
employment of its executives and other employees.
(c) At its expense, maintain all its assets in good repair and
condition, except to the extent of reasonable wear and use and damage by fire or
other unavoidable casualty.
(d) Not make any borrowings other than borrowings in the ordinary
course of business under working capital lines which are disclosed in the notes
to the consolidated balance sheet at January 31, 1999 included in the 1999 10-K
or the consolidated balance sheet at August 1, 1999 included in the August 10-Q.
(e) Not enter into any contractual commitments involving capital
expenditures, loans or advances, and not voluntarily incur any contingent
liabilities, except in each case in the ordinary course of business.
(f) Not redeem or purchase any of its stock and not declare or pay any
dividends, or make any other distributions or repayments of debt to its
stockholders (other than payments by subsidiaries of the Company to the Company
or to other wholly owned subsidiaries of the Company).
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<PAGE> 27
(g) Not make any loans or advances (other than advances for travel and
other normal business expenses) to stockholders, directors, officers or
employees.
(h) Maintain its books of account and records in the usual manner, in
accordance with GAAP applied on a consistent basis, subject to normal year-end
adjustments and accruals.
(i) Comply in all material respects with all applicable laws and
regulations of governmental agencies.
(j) Not sell, dispose of or encumber any property or assets, or engage
in any activities or transactions, except in each case in the ordinary course of
business.
(k) Not enter into or amend any employment, severance or similar
agreements or arrangements, or increase the salaries of any employees, other
than through normal annual merit increases averaging not more than 5%.
(l) Not adopt, become an employer with regard to, or amend any
employee compensation, employee benefit or post-employment benefit plan.
(m) Not amend its certificate of incorporation or by-laws.
(n) Not (i) issue or sell any of its stock (except upon exercise of
options which are outstanding on the date of this Agreement or in accordance
with the Company's Stock Purchase Plan as in effect on the date of Agreement) or
any options, warrants or convertible or exchangeable securities or (ii) split,
combine, or reclassify its outstanding stock.
(o) Not authorize or enter into any agreement to take any of the
actions referred to in subparagraphs (a) through (n) above.
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5.2 HSR Act Filings. The Company and Acquisition will each make as promptly
as practicable the filing it is required to make under the HSR Act with regard
to the transactions which are the subject of this Agreement and each of them
will take all reasonable steps within its control (including providing
information to the Federal Trade Commission and the Department of Justice) to
cause the waiting periods required by the HSR Act to be terminated or to expire
as promptly as practicable. The Company and Acquisition will each provide
information and cooperate in all other respects to assist the other of them in
making its filing under the HSR Act.
5.3 No Solicitation of Offers; Notice of Proposals from Others. (a) The
Company will not, and will not authorize or permit its, or any of its
subsidiaries', officers, directors, employees, agents or representatives
(including any investment banker, attorney or accountant retained by it or by
any of its subsidiaries) directly or indirectly to initiate, solicit, encourage
or otherwise facilitate any inquiry or the making of any proposal or offer with
respect to a merger, reorganization, share exchange, consolidation or similar
transaction involving the Company, or any purchase of or tender offer for, all
or any significant portion of the Company's equity securities or any significant
portion of the assets of the Company and its subsidiaries on a consolidated
basis (each of these being an "Acquisition Proposal").
(b) Subparagraph (a) will not prevent the Company from, in response to
an Acquisition Proposal which the Company receives despite complying with
subparagraph (a) and which the Special Committee of the Company's Board
determines, in good faith after consultation with its independent financial
advisor, would result (if consummated in accordance with its terms) in a
transaction which (i) would result in the Company's stockholders' receiving
consideration which is greater than the Tender Offer Price and (ii) would be
more favorable to the Company's stockholders than the Tender Offer and the
Merger, furnishing non-public information (after receipt of an appropriate
Confidentiality Agreement) to the person, entity or
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<PAGE> 29
group (the "Potential Acquiror") which makes the Acquisition Proposal and
entering into discussions and negotiations with that Potential Acquiror.
(c) If the Company receives an Acquisition Proposal, or the Company
learns that someone other than Acquisition is contemplating soliciting tenders
of Common Stock or otherwise proposes to acquire the Company or its Common Stock
if the Company's stockholders do not tender their Common Stock to Acquisition or
do not approve the Merger, the Company will promptly notify Acquisition of that
fact and provide Acquisition with all information in the Company's possession
which Acquisition reasonably requests regarding the Acquisition Proposal,
solicitation of tenders or other proposed transaction, and the Company will
promptly, from time to time, provide Acquisition with any additional information
the Company obtains regarding the Acquisition Proposal, the solicitation of
tenders or the other proposed transaction.
5.4 Acquisition's Efforts to Fulfill Conditions. Acquisition will use its
best efforts to cause all the conditions set forth in Paragraph 6.1 to be
fulfilled on or before the Merger Date.
5.5 Company's Efforts to Fulfill Conditions. The Company will use its best
efforts to cause all the conditions set forth in Paragraph 6.2 to be fulfilled
on or before the Merger Date.
ARTICLE 6
CONDITIONS PRECEDENT TO MERGER
6.1 Conditions to the Company's Obligations. The obligations of the Company
to complete the Merger are subject to satisfaction of the following conditions
(any or all of which may be waived by the Company):
(a) The representations and warranties of Acquisition contained in
this Agreement will, except as contemplated by this Agreement, be true and
correct in all material respects on the Merger Date with the same effect as
though made on that date (except that
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<PAGE> 30
representations or warranties which related expressly to a specified date or a
specified period need only to have been true and correct with regard to the
specified date or period), and Acquisition will have delivered to the Company a
certificate dated that date and signed by the President or a Vice President of
Acquisition to that effect.
(b) Acquisition will have fulfilled in all material respects all its
obligations under this Agreement required to have been fulfilled on or before
the Merger Date.
(c) No order will have been entered by any court or governmental
authority and be in force which invalidates this Agreement or restrains the
Company from completing the transactions which are the subject of this Agreement
(d) If stockholder approval of the Merger is required by applicable
law or by the rules of the Nasdaq National Market (if they are applicable), the
Merger will have been approved by the holders of a majority of the outstanding
shares of Common Stock.
6.2 Conditions to Acquisition's Obligations. The obligations of Acquisition
to complete the Merger are subject to the following conditions (any or all of
which may be waived by Acquisition):
(a) The representations and warranties of the Company contained in
this Agreement will, except as contemplated by this Agreement, be true and
correct in all material respects on the Merger Date with the same effect as
though made on that date (except that representations or warranties which
related expressly as to specified date or a specified period need only to have
been true and correct with regard to the specified date or period), and the
Company will have delivered to Acquisition a certificate dated that date and
signed by the President or a Vice President of the Company to that effect.
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<PAGE> 31
(b) The Company will have fulfilled in all material respects all its
obligations under this Agreement required to have been fulfilled on or before
the Merger Date.
(c) No order will have been entered by any court or governmental
authority and be in force which invalidates this Agreement or restrains
Acquisition from completing the transactions which are the subject of this
Agreement and no action will be pending against the Company, Acquisition,
Holdings or any of Holdings' members relating to the transactions which are the
subject of this Agreement which presents a reasonable likelihood of resulting in
an award of damages against the Company or Acquisition which would be material
after the Merger to the Surviving Corporation and its subsidiaries taken as a
whole or an award of damages against Holdings or a member of Holdings which
would be material to Holdings or any of Holdings' members.
(d) If stockholder approval of the Merger is required by applicable
law or by the rules of the Nasdaq National Market (if they are applicable), the
Merger will have been approved by the holders of at least a majority of the
outstanding shares of Common Stock.
(e) If stockholder approval of the Merger is required by applicable
law or by the rules of the Nasdaq National Market (if they are applicable), the
Effective Time will occur not later than 120 days after the Expiration Time,
unless the Effective Time is delayed until after then because of actions of
Acquisition or its affiliates (other than the Company and its subsidiaries) or
because of Acquisition's failure to fulfill obligations under this Agreement.
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ARTICLE 7
TERMINATION
7.1 Right to Terminate. This Agreement may be terminated at any time prior
to the Effective Time (whether or not the Company's stockholders have approved
the Merger):
(a) By mutual consent of the Company and Acquisition.
(b) By Acquisition if the condition in Paragraph 6.2(e) is not
fulfilled.
(c) By the Company if (i) it is determined that any of the
representations or warranties of Acquisition contained in this Agreement was not
complete and accurate in all material respects on the date of this Agreement or
(ii) any of the conditions in Paragraph 6.1 is not satisfied or waived by the
Company on or before the Merger Date.
(d) By Acquisition if (i) it is determined that any of the
representations or warranties of the Company contained in this Agreement was not
complete and accurate in all material respects on the date of this Agreement or
(ii) any of the conditions in Paragraph 6.2 is not satisfied or waived by
Acquisition on or before the Merger Date.
(e) By the Company if (i) the Company receives an Acquisition Proposal
in which a Potential Acquirer makes a specific proposal to acquire the Company
or substantially all its assets on specific terms (a "Firm Proposal"), or a
Potential Acquiror commences a cash tender offer for all the Company's
outstanding stock (other than any already owned by the Potential Acquiror), (ii)
within 10 business days after the Company receives the Firm Proposal or the
tender offer is commenced, the Special Committee determines the Firm Proposal or
the tender offer is a Superior Proposal and resolves to accept the Superior
Proposal, or to recommend that stockholders tender their shares in response to
the Superior Proposal, unless Acquisition will increase the Tender Offer price
to an amount per share at least as great as the consideration
29
<PAGE> 33
per share the Company's stockholders would receive as a result of the Superior
Proposal or the tender offer, (iii) the Company has given Acquisition at least 5
business days' prior notice (A) of the terms of the Superior Proposal (including
the consideration per share, valuing non-cash consideration as described below,
which the Company's stockholders would receive as a result of the Superior
Proposal), and (B) that unless Acquisition increases the Tender Offer Price to
an amount per share at least as great as the consideration per share the
Company's stockholders would receive as a result of the Superior Proposal, as
set forth in the notice this Agreement will terminate, and (iv) the Company has
(x) paid Acquisition $3,850,000, (y) reimbursed Acquisition for all the expenses
related to the transactions which are the subject of this Agreement which
Acquisition or its affiliates (including Holdings, Three Cities and Three Cities
Research, Inc.) incurred in connection with this Agreement and the transactions
contemplated by it (including reasonable fees and expenses of professionals and
other consultants, commitment fees and other financing costs, and out of pocket
costs incurred by employees in investigating the business and financial
condition of the Company and in connection with the negotiation of this
Agreement and efforts to carry out the transactions which are the subject of
this Agreement) regarding which Acquisition has presented reasonable
documentation to the Company, and (z) agreed in writing to reimburse Acquisition
for all expenses of the type described in clause (y) for which Acquisition
subsequently presents reasonable documentation to the Company (up to a total
reimbursement of expenses under clauses (y) and (z) not exceeding $1,285,000). A
"Superior Proposal" is an Acquisition Proposal which (A) would result in the
Company's stockholders' receiving consideration which is greater than the Tender
Offer Price (valuing non-cash consideration at its fair market value as
determined in good faith by the Board after consultation with its independent
financial advisor), (B) is not subject to the outcome of due diligence or any
other form of investigation, (C) is not subject to a financing contingency and
is from a Proposed Acquiror which the Board reasonably determines in good faith
after consultation with its independent financial advisor has the financial
resources necessary to carry
30
<PAGE> 34
out the transaction and (D) the Board determines in good faith after
consultation with its independent financial advisor to be more favorable to the
Company's stockholders than the Tender Offer and the Merger. A notice that this
Agreement will terminate given pursuant to clause (iii) of the first sentence of
this subparagraph will be irrevocable (unless Acquisition consents in writing to
its being withdrawn by the Company) and will result in this Agreement's
terminating on the later of the date specified in the notice or the date the
Company makes the payments and provides the agreement described in clause (iv)
of the first sentence of this subparagraph. When the Company delivers a notice
pursuant to clause (iii) of the first sentence of this subparagraph,
Acquisition's obligations under Paragraphs 5.2, and 5.5 will terminate.
(f) By either the Company or Acquisition, but only with regard to the
Merger, if less than 51% of the outstanding shares of Common Stock which neither
Acquisition nor Holdings owns when Acquisition makes a public announcement of
the Tender Offer are properly tendered in response to the Tender Offer and not
withdrawn.
7.2 Manner of Terminating Agreement If at any time the Company or
Acquisition has the right under Paragraph 7.1 to terminate this Agreement, it
can terminate this Agreement by a written notice to the other of them that it is
terminating this Agreement.
7.3 Effect of Termination. If this Agreement is terminated pursuant to
Paragraph 7.1, after this Agreement is terminated, neither party will have any
further rights or obligations under this Agreement other than the Company's
obligations under the agreement to reimburse expenses described in Paragraph
7.1(e). Nothing contained in this Paragraph will, however, relieve either party
of liability for any breach of this Agreement which occurs before this Agreement
is terminated.
31
<PAGE> 35
ARTICLE 8
ABSENCE OF BROKERS
8.1 Representations and Warranties Regarding Brokers and Others. The
Company and Acquisition each represents and warrants to the other of them that
nobody acted as a broker, a finder or in any similar capacity in connection with
the transactions which are the subject of this Agreement. The Company and
Acquisition each indemnifies the other of them against, and agrees to hold the
other of them harmless from, all losses, liabilities and expenses (including,
but not limited to, reasonable fees and expenses of counsel and costs of
investigation) incurred because of any claim by anyone for compensation as a
broker, a finder or in any similar capacity by reason of services allegedly
rendered to the indemnifying party in connection with the transactions which are
the subject of this Agreement.
ARTICLE 9
OTHER AGREEMENT
9.1 Indemnification for Prior Acts.
(a) The Surviving Corporation will honor, and will not amend or modify
for a period of not less than six years after the date of this Agreement, any
and all obligations of the Company and its subsidiaries to indemnify present and
former directors, officers or employees of the Company or its subsidiaries (each
an "Indemnified Party") with respect to matters which occur on or prior to the
Effective Time, whether provided in the certificate of incorporation or by-laws
of the Company or any of its subsidiaries, in any of the agreements listed on
Exhibit 9.1-A(1) or under the DGCL. The Surviving Corporation will maintain in
effect for not less than six years after Effective Time with respect to
occurrences prior to the Effective Time the Company's policies of directors and
officers' liability insurance which are in effect on the date of this Agreement
and are listed on Exhibit 9.1-A(2) (notwithstanding any provisions of those
policies that they will terminate as a result of Merger) to the extent that such
insurance (or substantially similar insurance) is available at a cost not
exceeding $75,000.
32
<PAGE> 36
(b) The provisions of this Paragraph 9.1 are intended to be for the
benefit of, and will be enforceable by, the respective directors, officers and
employees of the Company or its subsidiaries to which it relates and their heirs
and representatives and will be binding upon the Surviving Corporation.
ARTICLE 10
GENERAL
10.1 Expenses. The Company and Acquisition will each pay its own expenses
in connection with the transactions which are the subject of this Agreement,
including legal fees.
10.2 Access to Properties, Books and Records. From the date of this
Agreement until the Effective Time, the Company will, and will cause each of its
subsidiaries to, give representatives of Acquisition full access during normal
business hours to all of their respective properties, books and records.
Acquisition will, and will cause its representatives to, hold all information it
receives as a result of its access to the properties, books and records of the
Company or its subsidiaries in confidence, except to the extent that information
(i) is or becomes available to the public (other than through a breach of this
Agreement), (ii) becomes available to Acquisition from a third party which,
insofar as Acquisition is aware, is not under an obligation to the Company, or
to a subsidiary of the Company, to keep the information confidential, (iii) was
known to Acquisition or its affiliates (which include Holdings, Three Cities and
Three Cities Research, Inc.) before it was made available to Acquisition or its
representative by the Company or a subsidiary, (iv) otherwise is independently
developed by Acquisition or its affiliates, or (v) Acquisition reasonably
believes is required to be included in the Offering Documents, the Schedule
14D-9 or the Proxy Statement. If this Agreement is terminated prior to the
Effective Time, Acquisition will, at the request of the Company, deliver to the
Company all documents and other material obtained by Acquisition from the
Company or a
33
<PAGE> 37
subsidiary in connection with the transactions which are the subject of this
Agreement or evidence that that material has been destroyed by Acquisition.
10.3 Press Releases. The Company and Acquisition will consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement, except that nothing in this Paragraph
will prevent either party from making any statement when and as required by law
or by the rules of any securities exchange or securities quotation or trading
system on which securities of that party or an affiliate are listed, quoted or
traded.
10.4 Entire Agreement. This Agreement and the documents to be delivered in
accordance with this Agreement contain the entire agreement between the Company
and Acquisition relating to the transactions which are the subject of this
Agreement and those other documents, all prior negotiations, understandings and
agreements between the Company and Acquisition are superseded by this Agreement
and those other documents, and there are no representations, warranties,
understandings or agreements concerning the transactions which are the subject
of this Agreement or those other documents other than those expressly set forth
in this Agreement or those other documents.
10.5 Effect of Disclosures. Any information disclosed by a party in any
representation or warranty contained in this Agreement (including exhibits to
this Agreement) will be treated as having been disclosed in connection with each
representation and warranty made by that party in this Agreement.
10.6 Captions. The captions of the articles and paragraphs of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.
34
<PAGE> 38
10.7 Prohibition Against Assignment. Neither this Agreement nor any right
of any party under it may be assigned, except that Acquisition may assign its
rights under this Agreement to a corporation or other entity a majority of the
equity of which is owned by persons who, at the time of the assignment, own a
majority of the equity of Acquisition.
10.8 Notices and Other Communications. Any notice or other communication
under this Agreement must be in writing and will be deemed given when it is
delivered in person or sent by facsimile (with proof of receipt at the number to
which it is required to be sent), on the business day after the day on which it
is sent by a major nationwide overnight delivery service, or on the third
business day after the day on which it is mailed by first class mail from within
the United States of America, to the following addresses (or such other address
as may be specified after the date of this Agreement by the party to which the
notice or communication is sent):
If to Acquisition:
GR Acquisition Corporation
c/o Three Cities Research, Inc.
650 Madison Avenue
New York, New York
Attention: J. William Uhrig
Facsimile: 212-980-1142
with a copy to:
David W. Bernstein
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Facsimile: 212-878-8375
If to the Company.:
Garden Ridge Corporation
Suite 170
19411 Atrium Place
Houston, Texas 77084
Attention: President
Facsimile:
35
<PAGE> 39
with a copy to:
Bruce LaBoon
Locke Liddell & Sapp LLP
600 Travis Street
35th Floor
Houston, Texas 77002
Facsimile: 713-223-3717
10.9 Governing Law. This Agreement will be governed by, and construed
under, the substantive laws of the State of Delaware.
10.10 Amendments. This Agreement may be amended only by a document in
writing signed by both the Company and Acquisition.
10.11 Counterparts. This Agreement may be executed in two or more
counterparts, some of which may be signed by fewer than all the parties or may
contain facsimile copies of pages signed by some of the parties. Each of those
counterparts will be deemed to be an original copy of this Agreement, but all of
them together will constitute one and the same agreement.
IN WITNESS WHEREOF, the Company and Acquisition have executed this
Agreement, intending to be legally bound by it, on the day shown on the first
page of this Agreement.
GARDEN RIDGE CORPORATION
By: /s/ Paul T. Davies
-------------------------------
Title: President and Chief
Executive Officer
GR ACQUISITION CORPORATION
By: /s/ J. William Uhrig
-------------------------------
Title: President
36
<PAGE> 1
EXHIBIT 4
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
GARDEN RIDGE CORPORATION
(Name of Registrant as Specified in its Charter)
---------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE> 2
GARDEN RIDGE CORPORATION
19411 Atrium Place, Suite 170
Houston, Texas 77084
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held June
10, 1999
To the Stockholders of
Garden Ridge Corporation:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Garden Ridge Corporation (the "Company") will be held at
Chase Tower, 600 Travis, 25th Floor Conference Room, Houston, Texas 77002, at
10:00 a.m., Houston time, on Thursday, June 10, 1999, for the following
purposes:
1. To elect seven persons to serve as directors on the Board of Directors
until the 2000 annual meeting of stockholders and until their successors
have been elected and have qualified.
2. To increase the number of shares of Common Stock available for grant
under the Company's Amended and Restated 1994 Stock Option Plan by
1,200,000 shares, as more fully set forth under "Proposal No. 2."
3. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending January 30,
2000.
4. To transact such other business as may properly come before the Annual
Meeting, or any adjournment or adjournments thereof.
Stockholders of record at the close of business on April 26, 1999 will be
entitled to notice of and to vote at the Annual Meeting, or any adjournment or
adjournments thereof. Stockholders are cordially invited to attend the Annual
Meeting in person. Those who will not attend and who wish their shares voted
are requested to sign, date and mail promptly the enclosed proxy for which a
return envelope is provided.
By Order of the Board of Directors
Jane L. Arbuthnot, SECRETARY
Houston, Texas
April 27, 1999
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE
URGED TO SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY. IF YOU ATTEND THE
ANNUAL MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE> 3
GARDEN RIDGE CORPORATION
19411 ATRIUM PLACE, SUITE 170
HOUSTON, TEXAS 77084
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Garden Ridge Corporation, a
Delaware corporation ("Garden Ridge" or the "Company"), for use at the annual
meeting of stockholders to be held on Thursday, June 10, 1999, at Chase Tower,
600 Travis, 25th Floor Conference Room, Houston, Texas 77002, at 10:00 a.m.,
Houston time, or at any adjournment or adjournments thereof (such meeting or
adjournment(s) thereof referred to as the "Annual Meeting"). Copies of the
Proxy and Notice and Proxy Statement are being mailed to stockholders on or
about April 27, 1999.
In addition to solicitation by mail, solicitation of proxies may be made
by personal interview, special letter, telephone or telecopy by the officers,
directors and employees of the Company. Brokerage firms will be requested to
forward proxy materials to beneficial owners of shares registered in their
names and will be reimbursed for their expenses. In addition, the Company has
retained the services of Corporate Investor Communications to assist in the
solicitation of proxies either in person or by mail, telephone or telecopy, at
an estimated cost of $2,000 plus expenses. The cost of solicitation of proxies
will be paid by the Company.
A proxy received by the Board of Directors of the Company may be revoked
by the stockholder giving the proxy at any time before it is exercised. A
stockholder may revoke a proxy by notification in writing to the Company at
19411 Atrium Place, Suite 170, Houston, Texas 77084, Attention: Corporate
Secretary. A proxy may also be revoked by execution of a proxy bearing a later
date or by attendance at the annual Meeting and voting by ballot. A proxy in
the form accompanying this Proxy Statement, when properly executed and
returned, will be voted in accordance with the instructions contained therein.
A proxy received by management which does not withhold authority to vote or on
which no specification has been indicated will be voted in favor of the
proposals set forth in this Proxy Statement and for the nominees for the Board
of Directors of the Company named in Proposal No. 1 of this Proxy Statement. A
majority of the outstanding shares will constitute a quorum at the Annual
Meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations of the vote's cast on
proposals presented to stockholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
At the date of this Proxy Statement, management of the Company does not
know of any business to be presented at the Annual Meeting other than those
matters, which are set forth in the Notice accompanying this Proxy Statement.
If any other business should properly come before the Annual Meeting, it is
intended that the shares represented by proxies will be voted with respect to
such business in accordance with the judgment of the persons named in the
proxy.
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<PAGE> 4
COMMON STOCK OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on April 26, 1999,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting. At that date there were outstanding
17,168,595 shares of common stock, par value $0.01 per share ("Common Stock"),
of the Company and the holders thereof will be entitled to one vote for each
share of Common Stock held of record by them on that date for each proposal to
be presented at the Annual Meeting.
The following table sets forth information with respect to the shares of
Common Stock (the only outstanding class of voting securities of the Company)
owned of record and beneficially as of March 31, 1999, unless otherwise
specified, by (i) all persons who own of record or are known by the Company to
own beneficially more than 5% of the outstanding shares of such class of stock,
(ii) each director, nominee for director, and named executive officer, and
(iii) all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NAME NUMBER(1) PERCENT
---- --------- -------
<S> <C> <C>
Armand Shapiro ............................................. 902,020(2) 5.2%
Jane L. Arbuthnot .......................................... 109,247(3) *
David S. Hensley ........................................... 56,500(4) *
Phyllis C. Hink ............................................ 91,600(5) *
Gary W. Ramsey ............................................. 52,671(6) *
Norman M. Brody ............................................ 13,599(7) *
Stephen C. Fox ............................................. 8,333(8) *
Richard E. Nawrot .......................................... 0 *
Terry S. Boyce ............................................. 15,000(9) *
Alyson Henning ............................................. 12,500(10) *
Ira Neimark ................................................ 16,000(9) *
Sam J. Susser .............................................. 23,000(9) *
Barbara S. Tapp ............................................ 5,000(11) *
H. Whitney Wagner .......................................... 372,348(12) 2.0%
Quilvest American Equity, Ltd. ............................. 3,080,000(13) 17.9%
c/o Craigmuir Chambers
P.O. Box 71, Road Town
Tortola British Virgin Islands
J.P. Morgan & Co. Incorporated ............................. 1,351,000(14) 7.9%
60 Wall Street
New York, New York 10260
Morgan Grenfell Incorporated ............................... 1,032,790(14) 6.0%
885 Third Avenue
New York, NY 10022-4802
The Capital Group Companies, Inc. .......................... 995,000(14) 5.8%
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
All directors and executive officers as a group (14 persons) 1,677,818 9.5%
</TABLE>
- - --------------
* Less than 1%
(1) The persons listed have the sole power to vote and dispose of the shares
except as otherwise indicated.
-2-
<PAGE> 5
(2) Includes 208,950 shares that may be acquired within the next 60 days upon
the exercise of outstanding employee stock options.
(3) Includes 97,000 shares that may be acquired within the next 60 days upon
the exercise of outstanding employee stock options.
(4) Includes 20,000 shares that may be acquired within the next 60 days upon
the exercise of outstanding employee stock options.
(5) Includes 70,004 shares that may be acquired within the next 60 days upon
the exercise of outstanding employee stock options and 1,600 shares owned
by her spouse.
(6) Includes 50,000 shares that may be acquired within the next 60 days upon
the exercise of outstanding employee stock options.
(7) Includes 13,333 shares that may be acquired within the next 60 days upon
the exercise of outstanding director options.
(8) Includes 8,333 shares that may be acquired within the next 60 days upon
the exercise of outstanding director options.
(9) Includes 15,000 shares that may be acquired within the next 60 days upon
the exercise of outstanding director options.
(10) Includes 12,500 shares that may be acquired within the next 60 days upon
the exercise of outstanding director options.
(11) Includes 5,000 shares that may be acquired within the next 60 days upon
the exercise of outstanding director options.
(12) Includes 337,342 shares held directly by Three Cities Holdings Limited,
12,734 shares held directly by Three Cities Research, Inc., and 1,616
shares held directly by Three Cities Partners 1990, as to which Mr.
Wagner has disclaimed beneficial ownership.
(13) Based on information in Form 4 filed by Quilvest American Equity Ltd. for
December 1998.
(14) Based on information in Schedule 13G filed for the year ended December
31, 1998.
-3-
<PAGE> 6
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
GENERAL
Seven directors are to be elected at the Annual Meeting. The Company
recommends voting for the election of each of the nominees for director listed
below. The persons named as proxy holders in the accompanying proxy intend to
vote each properly signed and submitted proxy for the election as a director of
each of the persons named as a nominee below under "Nominees for Director"
unless authority to vote in the election of directors is withheld on such
proxy. If, for any reason, at the time of the election one or more of the
nominees should be unable to serve, the proxy will be voted for a substitute
nominee or nominees selected by the Board of Directors. Directors are elected
by a plurality of votes cast at the Annual Meeting.
Unless otherwise specified, all properly executed proxies received by the
Company will be voted for the election of the directors listed below to hold
office until the 2000 annual meeting of stockholders and until each of their
respective successors is elected and qualified.
THE COMPANY RECOMMENDS VOTING "FOR" THE NOMINEES.
NOMINEES FOR DIRECTOR
The following table sets forth the name, age and principal position of
each nominee for director to hold office until the 2000 annual meeting of
stockholders.
NAME AGE POSITION
---- --- --------
Armand Shapiro..... 57 Chief Executive Officer and Chairman of the Board
Terry S. Boyce..... 59 Director
Alyson Henning..... 44 Director
Ira Neimark........ 77 Director
Sam J. Susser...... 59 Director
Barbara S. Tapp.... 48 Director
H. Whitney Wagner.. 43 Director
ARMAND SHAPIRO joined the Company in June 1990 as Chairman of the Board
and Chief Executive Officer. For seven years prior to joining Garden Ridge, Mr.
Shapiro was in executive management at ComputerCraft, Inc. ("ComputerCraft"),
then a publicly traded retailer of computer products, most recently serving as
President from 1986 to 1990. Mr. Shapiro was associated with a family-owned
corporation, Modern Furniture Rentals, Inc. as Chief Operating Officer prior to
joining ComputerCraft. Mr. Shapiro serves on the board of directors of SSP
Partners, Inc., which owns and operates convenience stores.
TERRY S. BOYCE has been a director of the Company since 1992. Mr. Boyce
has been the managing partner in the executive search firm of Boyce, Davis
Partners, Inc. (formerly Boyce Partners, Inc.) since November 1995. Mr. Boyce
previously was a partner in the executive search firm of Ingram & Aydelotte,
Inc., from January 1994 to November 1995. Mr. Boyce was the vice president of
administration for the Rockefeller Group, Inc., from 1982 to 1990, and was
president of Boyce & Associates, Inc., a management-consulting firm, from 1991
to 1993.
-4-
<PAGE> 7
ALYSON HENNING has been a director of the Company since 1997. Ms. Henning
has been the Chief Business Development Officer, Worldwide for Ammirati Puris
Lintas, an international marketing firm, since January 1996. From 1985 to 1995,
Ms. Henning held various management positions within Ammirati Puris Lintas.
IRA NEIMARK has been a director of the Company since 1996. Mr. Neimark has
served as a retail consultant since 1992. From 1975 to 1992, Mr. Neimark held
various management positions with Bergdorf Goodman, most recently as Chairman of
the Board and Chief Executive Officer. Mr. Neimark serves on the board of
directors of Factory-2-U Stores, Inc. and Hermes Paris.
SAM J. SUSSER has been a director of the Company since 1992. Mr. Susser
currently serves as Chairman of the Boards of SSP Partners, Inc. and has served
as Chief Executive Officer of Southguard Corp., the predecessor of SSP Partners
from 1988 to 1990. Mr. Susser also has served as Chairman and Chief Executive
Officer of Susser Petroleum Company from 1979 to 1989. From 1987 to 1992, Mr.
Susser served as Chairman and Chief Executive Officer of Shaper Partners, an
investment partnership.
BARBARA S. TAPP has served as the Editor-in-Chief of Arts and Antiques, a
TransWorld publication, since 1998. From 1990 to 1998, Ms. Tapp served as editor
of ATLANTA HOMES & LIFESTYLES, a Wiesner publication. Prior thereto, Ms. Tapp
served as executive editor of Southern Homes from 1989 to 1991.
H. WHITNEY WAGNER has been a director of the Company since 1992. Mr.
Wagner has served as a Managing Director of TCR, a private investment advisory
firm, since 1989. He joined TCR in 1983 and was elected a Vice President in
1986. Mr. Wagner serves on the boards of directors of Factory-2-U Stores, Inc.
and Pameco Corp., all publicly traded companies.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met four times in fiscal 1999. The Board of
Directors has established Compensation, Audit and Nominating Committees. The
Compensation Committee, which met twice in fiscal 1999, is composed of Messrs.
Boyce, Susser and Wagner and is responsible for establishing salaries, bonuses,
stock options and other compensation for the Company's executive officers. The
Audit Committee, which met once in fiscal 1999, is composed of Messrs. Susser
and Wagner and is responsible for recommending independent auditors, reviewing
with the independent auditors the scope and results of the audit engagement,
establishing and monitoring the Company's financial policies and control
procedures and overseeing the Company's investment funds policy. The Board of
Directors has also established a Nominating Committee, which is comprised of
Messrs. Neimark, Boyce, Shapiro and Wagner and is responsible for reviewing the
size and composition of the Board of Directors, recommending to the Board of
Directors candidates for election to the Board of Directors and reviewing
matters relating to potential conflicts of interest and directors' fees and
retainers. The Nominating Committee will consider suggestions from stockholders
for nominees to serve as directors, if such proposals are submitted to
Corporate Secretary, 19411 Atrium Place, Suite 170, Houston, Texas 77084.
During fiscal 1999, the Nominating Committee met one time. All directors
attended at least 75% of the meetings of the Board of Directors and the
meetings of the committees on which they served in fiscal 1999.
DIRECTOR COMPENSATION
Independent directors of the Company receive $10,000 per year and $500
per meeting of the Board attended. All directors receive reimbursement of
reasonable out-of-pocket expenses incurred in connection with meetings of the
Board and committees thereof. Pursuant to the 1996 Non-Employee Director Stock
Option Plan, all non-employee directors receive annually an automatic grant of
a stock option to purchase 5,000 shares at an exercise price equal to the fair
market value of the Common Stock on the date of grant. All directors receive
such compensation except for
-5-
<PAGE> 8
Messrs. Wagner and Shapiro. The Compensation Committee annually approves the
number of shares granted to directors.
EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the
persons who are not directors and who are executive officers of the Company:
NAME AGE POSITION
------ --- ----------------------------------------
Gary W. Ramsey....... 56 Executive Vice President - Stores
Jane L. Arbuthnot.... 39 Chief Financial Officer and Secretary
David S. Hensley..... 46 Vice President - General Merchandise Manager
Phyllis C. Hink...... 56 Vice President-Human Resources and Operations
Norman M. Brody...... 52 Vice President - Property Development
Stephen C. Fox....... 47 Vice President - Planning and Allocation
Richard E. Nawrot.... 52 Chief Information Officer
GARY RAMSEY joined the Company in 1996 as Executive Vice President
Stores. From 1995 to 1996, Mr. Ramsey was a consultant, and from 1993 to 1995,
he was the Senior Vice President - General Merchandise Manager of Montgomery
Wards. From 1964 to 1993, Mr. Ramsey held various management positions with
Sears Roebuck and Company, including Chief Executive Officer of Sears Business
Centers.
JANE L. ARBUTHNOT joined Garden Ridge in July 1990 as Vice President -
Controller and Assistant Secretary, was promoted to Chief Financial Officer in
1991 and elected as Secretary in 1992. From 1983 to 1990, Ms. Arbuthnot held
various management positions at ComputerCraft, most recently as Vice President -
Controller. Prior to joining ComputerCraft, she was employed by Arthur Andersen
& Co. SC. Ms. Arbuthnot is a certified public accountant.
DAVID S. HENSLEY joined the Company in June 1990 as Vice President
General Merchandise Manager. From 1982 to 1990, Mr. Hensley served as a Product
Marketing Director for ComputerCraft, and prior to 1982 he served as a senior
buyer for Foley's Department Stores.
PHYLLIS C. HINK joined Garden Ridge in October 1990 as Vice President
Operations and assumed responsibility as well for Human Resources in 1993.
From 1978 to 1990, Ms. Hink served as Vice President of both Operations and
Human Resources for ComputerCraft.
NORMAN M. BRODY joined the Company in 1997 as Vice President - Property
Development. From 1995 to 1997, Mr. Brody was the Regional Real Estate Manager
of Target Stores. From 1993 to 1995, Mr. Brody was Senior Real Estate Manager of
Best Buy Co. From 1985 to 1993, Mr. Brody was President of The Shopping Center
Group, Inc. Mr. Brody is a licensed attorney.
STEPHEN C. FOX joined Garden Ridge in June 1997 as Vice President
Planning and Allocation. Mr. Fox has held various management positions in
retail planning organizations including, Vice President of Planning and
Replenishment at Oshman's from 1996 to 1997, Vice President of Planning and
Replenishment at Northern Automotive in 1995, and Senior Vice President of
Replenishment with Caldor Corp from 1990 to 1994.
-6-
<PAGE> 9
RICHARD E. NAWROT joined Garden Ridge in August 1998 as Chief Information
Officer. From 1997 to 1998, Mr. Nawrot was Vice President of Information
Services for SuperValu. Prior to SuperValu, Mr. Nawrot was the Chief Information
Officer for Payless Cashways until September 1997. Since 1970, Mr. Nawrot has
served as the Chief Information Officer of retail companies in the specialty,
discount, department and building supplies sector.
COMPENSATION COMMITTEE REPORT(1)
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of outside directors. The Committee is responsible for
establishing and administering the compensation policies applicable to the
Company's executive officers. All decisions by the Committee are subject to
review and approval of the full Board of Directors.
The Company's executive compensation philosophy and specific compensation
plans tie a significant portion of executive compensation to the Company's
success in meeting specific profit, growth and performance goals.
The Company's compensation objectives include attracting and retaining
the best possible executive talent, motivating executive officers to achieve
the Company's performance objectives, rewarding individual performance and
contributions, and linking executives' and stockholders' interests through
equity based plans.
The Company's executive compensation consists of three key components:
base salary, annual incentive compensation and stock options, each of which is
intended to complement the others and, taken together, to satisfy the Company's
compensation objectives. The Compensation Committee's policies with respect to
each of the three components are discussed below.
BASE SALARY. In the early part of each fiscal year, the Compensation
Committee reviews the base salary of the Chief Executive Officer ("CEO") and
the recommendations of the CEO with regard to the base salary of all other
executive officers of the Company and approves, with any modifications it deems
appropriate, annual base salaries for each of the executive officers.
Recommended base salaries of the executive officers, other than the CEO, are
based on an evaluation of the individual performance of the executive officer,
including satisfaction of annual objectives. The recommended base salary of the
CEO is based on achievement of the Company's annual goals relating to financial
objectives, including earnings growth and return on capital employed, and an
evaluation of individual performance. Recommended base salaries of the
executive officers are also in part based upon an evaluation of the salaries of
those persons holding comparable positions at comparable companies.
ANNUAL INCENTIVE COMPENSATION. The Company's executive officers are
entitled to participate in a discretionary incentive bonus plan which provides
for the payment of annual bonuses to be paid in cash, stock, or a combination
thereof, based on the relative success of the Company in attaining certain
financial objectives and certain subjective factors as established from time to
time by the Committee and/or the Board of Directors. The Committee will
consider aggregate incentive cash and stock bonus payments to the executive
officers, as a group, of up to 100% of aggregate annual executive base
salaries, and will consider bonus payments to be paid in stock in excess of 50%
of aggregate
- - --------
(1) Notwithstanding filings by the Company with the Securities and
Exchange Commission ("SEC") that have incorporated or may incorporate by
reference other SEC filings (including this proxy statement) in their entirety,
this Compensation Committee Report shall not be incorporated by reference into
such filings and shall not be deemed to be "filed" with the SEC except as
specifically provided otherwise.
-7-
<PAGE> 10
annual executive base salaries. The Committee awarded no cash or stock bonuses
to the named executive officers for fiscal 1999.
STOCK OPTIONS. The primary objective of the stock option program is to
link the interests of the Company's stockholders to the executive officers and
other selected employees of the Company through the grant of significant annual
grants of stock options. The aggregate number of options recommended by the
Committee is based on practices of the same comparable companies utilized for
determining base salary, while actual grants of stock options reflect each
individual's expected long-term contribution to the success of the Company. The
Committee made no grants of stock options to the named executive officers in
fiscal 1999.
Compensation Committee: Terry S. Boyce, Sam J. Susser and H. Whitney
Wagner.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of Directors of the
Company was, during fiscal 1999, an officer or employee of the Company or any
of its subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries.
H. Whitney Wagner, a member of the Compensation Committee of the
Company's Board of Directors, is a Managing Director of TCR. The Company has
entered into an Advisory Agreement with TCR pursuant to which the Company has
agreed to pay TCR a fee of $50,000 per annum for advisory services and to
reimburse TCR for out-of-pocket expenses approved in advance by the Company,
for a five-year period ending on July 16, 2001.
Sam J. Susser, a member of the Compensation Committee of the Company's
Board of Directors, is chairman of the board of directors of SSP Partners, Inc.
Armand Shapiro, Chairman and Chief Executive Officer of the Company, serves on
the Board of SSP Partners, Inc.
Except as set forth above, during fiscal 1999, no executive officer of
the Company served as (i) a member of the compensation committee (or other
board committee performing equivalent functions) of another entity, one of
whose executive officers served on the Compensation Committee of the Board of
Directors, (ii) a director of another entity, one of whose executive officers
served on the Compensation Committee of the Board of Directors, or (iii) a
member of the compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive officers served
as a director of the Company.
-8-
<PAGE> 11
COMPENSATION TABLES
The following table sets forth compensation information for the chief
executive officer and the four most highly compensated executive officers of
the Company during the Company's fiscal years 1999, 1998 and 1997, for services
rendered during such years to the Company or any of its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------ ------------------
FISCAL SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- --------------------------- ------ ------- ------- ------------------ ------------
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
Armand Shapiro ............................................ 1999 350,000 -- -- --
Chairman of the Board and ............................... 1998 350,000 98,000 16,500 --
Chief Executive Officer ................................. 1997 350,000 -- 4,950 --
Jack E. Lewis ............................................. 1999 175,465 -- -- 804,882(1)
President and ........................................... 1998 245,000 90,000 13,500 --
Chief Operating Officer ................................. 1997 223,700 -- 4,050 --
Gary W. Ramsey ............................................ 1999 233,750 -- -- --
Executive Vice President - .............................. 1998 215,000 64,000 -- --
Stores .................................................. 1997 29,356 -- 75,000 --
Norman M. Brody ........................................... 1999 168,750 -- -- 35,295(2)
Vice President - Property ............................... 1998 55,635 12,000 -- --
Development
Jane L. Arbuthnot ......................................... 1999 155,000 -- -- --
Chief Financial Officer ................................. 1998 136,667 36,000 5,000 --
and Secretary ........................................... 1997 116,500 -- 1,500 --
</TABLE>
(1) Mr. Lewis left the Company October 1, 1998, with severance
compensation totaling $804,882.
(2) Mr. Brody received compensation of $35,295 for certain relocation
expenses.
In fiscal 1999 there were no grants of options to purchase shares of the
Company's Common Stock to any of the named executive officers.
-9-
<PAGE> 12
The following table presents information regarding options exercised in
fiscal 1999 and the value of options outstanding at January 31, 1999 for each
of the named executive officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
--------------------------- ---------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Armand Shapiro .............................. 25,500 $ 91,290 280,950 -- $ 1,612,395 --
Jack E. Lewis ............................... 49,500 -- 17,550 -- 0 --
Gary W. Ramsey .............................. 0 -- 50,000 25,000 0 --
Norman M. Brody ............................. 0 -- 13,333 26,667 0 --
Jane L. Arbuthnot ........................... 4,000 19,055 97,000 -- 608,130 --
</TABLE>
(1) Value is based upon a fair market value of $7.31 per share at fiscal 1999
year end.
PERFORMANCE GRAPH
The following performance graph provided by Zacks Investment Research,
Inc. compares the performance of the Company's Common Stock to the S&P 500
Index and the S&P Retail Stores-Specialty Index since May 9, 1995, the first
day of public trading of the Company's Common Stock.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
DESCRIPTION 5/95 1996 1997 1998 1999
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
GARDEN RIDGE CO ($) $100.00 $220.00 $114.99 $211.66 $ 97.49
S & P 500 ($) $100.00 $125.93 $159.10 $201.91 $267.52
S & P Retail Stores - Specialty($) $100.00 $100.30 $109.98 $117.41 $109.88
</TABLE>
-10-
<PAGE> 13
PROPOSAL NO. 2 - INCREASE IN SHARES AVAILABLE FOR
GRANT UNDER THE AMENDED AND RESTATED 1994 STOCK OPTION PLAN
The Board of Directors of the Company has approved an amendment (the
"Amendment") to the Amended and Restated 1994 Stock Option Plan (the "1994
Plan") to make an additional 1,200,000 shares of Common Stock available for
issuance pursuant thereto, and has directed that the Amendment to the 1994 Plan
be submitted to the stockholders for approval.
The 1994 Plan was initially adopted in 1994, and an aggregate of 219,176
shares of Common Stock were reserved for issuance pursuant thereto. The 1994
Plan was then amended and restated in 1996, 1997 and 1998, and an additional
200,000 shares, 100,000 shares and 250,000 shares of Common Stock,
respectively, were reserved for issuance pursuant thereto for a current total
of 769,176 shares. As of March 31, 1999, there were 250,710 remaining shares of
Common Stock available for issuance under the 1994 Plan. If Proposal No. 2 is
approved by the stockholders, there will be 1,450,710 shares of Common Stock
available for issuance under the 1994 Plan. In the opinion of the Board of
Directors, it is appropriate to consider amending the 1994 Plan to increase
such number of shares available for issuance because of the current intentions
of the Company to attract additional senior management personnel.
PURPOSE. The purpose of the 1994 Plan 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, or a committee constituted for such
purpose, may from time to time determine. The Company believes that the
possibility of participation in the 1994 Plan through receipt of incentive
options ("Incentive Options") or nonqualified options ("Nonqualified Options")
(Incentive Options and Nonqualified Options shall be collectively referred to
herein as "Stock Options"), will provide participants an incentive to perform
more effectively and will assist the Company in obtaining and retaining people
of outstanding training and ability.
TERM. The 1994 Plan was initially adopted in 1994 and will terminate in
April 2004, unless earlier terminated by the Board.
ADMINISTRATION. The 1994 Plan is administered by the Stock Option
Committee (the "Committee") of the Board of Directors which is comprised of at
least two members of the Board of Directors, and all members of the Committee
are "disinterested persons" (as defined in Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended). No member
of the Committee is eligible to participate in the 1994 Plan while serving as a
member of the Committee. All questions of interpretation and application of the
1994 Plan are determined by the Committee, and each Stock Option granted under
the 1994 Plan has a term selected by the Committee.
PARTICIPATION. All named executive officers and other key employees of
the Company or any subsidiary of the Company are eligible for selection to
participate in the 1994 Plan. As stated, directors of the Company who are not
regular employees of the Company and members of the Committee are not eligible
to participate in the 1994 Plan. The Board of Directors or the Committee shall
determine from time to time the individuals who are to receive Stock Options
under the 1994 Plan. The number of employees eligible to participate in the
1994 Plan is approximately 100. During the lifetime of participants, Stock
Options shall be exercisable only by the optionee, and no Stock Options will be
transferable otherwise than by will or the laws of descent and distribution.
SHARES OF STOCK AVAILABLE FOR GRANT. A total not exceeding an aggregate
amount of 250,710 shares of the Company's Common Stock are currently available
for issuance under the 1994 Plan. If the amendment is approved by the
stockholders, a total of 1,450,710 shares of the Company's Common Stock will be
available for issuance under the 1994 Plan. The shares may be treasury shares
or authorized but unissued shares. In the event a Stock Option expires
unexercised, is terminated, or is canceled or forfeited, the shares of Common
Stock allocable to the unexercised portion of that Stock Option may again be
subject to a Stock Option under the 1994 Plan.
-11-
<PAGE> 14
The 1994 Plan provides that the number of shares subject thereto and
shares covered by Stock Options outstanding will 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, as well as 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 1994 Plan or of the other stockholders of
the Company, as applicable.
COMPENSATION DEDUCTION LIMITATION. Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), generally limits to $1 million per year
per employee the tax deduction available to publicly traded companies for
certain compensation paid to named executive officers. There is an exception
(Section 162(m)(4)(C)) from this deduction limitation, for certain
"performance-based compensation," if specified requirements are satisfied,
including: (i) the establishment by a compensation committee comprised solely
of two or more outside directors of performance goals which must be met for the
additional compensation to be earned, (ii) the approval of the material terms
for the performance goals by the stockholders after adequate disclosure, and
(iii) the certification by the compensation committee that the performance
goals have been met. The 1994 Plan is designed to satisfy these statutory
requirements for Incentive Options and Nonqualified Options. Therefore, for all
grants intended to satisfy Section 162(m) of the Code, the Company is entitled
to deduct an amount equal to the ordinary income reportable by each optionee on
exercise of a Nonqualified Option and the Early Disposition (as defined below)
of shares of Common Stock acquired by exercise of an Incentive Option.
STOCK OPTIONS. The Committee may designate a Stock Option as an Incentive
Option or as a Nonqualified Option. The terms of each Stock Option shall be set
out in a written option agreement which incorporates the terms of the 1994
Plan.
The purchase price per share of Common Stock (the "Purchase Price") of a
Nonqualified Option may not be less than the par value of a share of Common
Stock of the Company, and the Nonqualified Option may not be exercisable after
10 years from the date of grant. The Purchase Price of an Incentive Option may
not be less than 100% of the Fair Market Value (as defined in the 1994 Plan) of
the Common Stock on the date of grant, and the Incentive Option may not be
exercisable after 10 years from the date of grant. Additionally, the grant of
Incentive Options to an employee owning over 10% of the voting Stock of the
Company must be at an exercise price of not less than 100% of the Fair Market
Value of the stock on the date of grant, and the Incentive Option may not be
exercisable after 5 years from the date of grant. The aggregate fair market
value of all shares of Common Stock with respect to which Incentive Options are
exercisable for the first time by any optionee during any one calendar year
shall not exceed $100,000. On April 23, 1999 the last reported sales price of
the Common Stock was $7.39 per share.
Stock Options may be exercised by written notice of exercise and payment
of the Stock Option price in cash, by check or in previously owned shares of
Common Stock valued at fair market value on the date of exercise. Special rules
apply which limit the time of exercise of a Stock Option following an
employee's termination of employment or upon the occurrence of a "Significant
Event" (as defined in the 1994 Plan). The Committee may impose additional
restrictions on the exercise of any Stock Option.
AMENDMENT OF THE 1994 PLAN. The Board of Directors or the Committee may
amend, rescind, suspend or terminate the 1994 Plan at any time, provided that
the 1994 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 the event
that the Board of Directors or the Committee determines that stockholder
approval of any amendment to the 1994 Plan is necessary or desirable, 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. No change may be made in, and no amendment, rescission,
suspension or termination of the 1994 Plan shall have an effect on, Stock
Options previously granted under
-12-
<PAGE> 15
the 1994 Plan which may impair or alter the rights or obligations of the
holders thereof except with the consent of the optionee.
CHANGE IN CONTROL. Upon the consummation of a Significant Event, the
Company, upon obtaining approval by the Board, may elect to waive any and all
restrictions on the vesting of rights under Stock Options granted pursuant to
the 1994 Plan by providing written notice thereof to the optionees, in which
event the Company shall have the option (the "Termination Option") to require
all optionees to exercise their vested but unexercised stock options upon the
occurrence of the Significant Event by providing them written notice thereof at
least 10 days before the occurrence of such Significant Event. If the Company
exercises its Termination Option, each Stock Option that is vested but
unexercised as of the date of the Significant Event shall terminate.
FEDERAL TAX CONSEQUENCES. The grant of Incentive Options to an employee
does not result in any income tax consequences. The exercise of an Incentive
Option generally does not result in any income tax consequences to an employee
if (i) the Incentive Option is exercised by the employee during his employment
with the Company or a subsidiary of the Company, or within a specified period
after termination of employment, and (ii) the employee does not dispose of
shares acquired pursuant to the exercise of an Incentive Option before the
expiration of two years from the date of grant of the Incentive Option or one
year after exercise and the transfer of the shares to him, whichever is later
(the "Waiting Period"). However, the excess of the fair market value of the
shares of Common Stock as of the date of exercise over the 1994 Plan price is a
tax preference item for purposes of determining an employee's alternative
minimum tax in the year of exercise, if applicable.
An employee who disposes of his Incentive Option shares prior to the
expiration of the Waiting Period (an "Early Disposition") generally will
recognize ordinary income in the year of sale in an amount equal to the excess,
if any, of (a) the lesser of (i) the fair market value of the shares as of the
date of exercise or (ii) the amount realized on the sale, over (b) the
Incentive Option price. Any additional amount realized on an Early Disposition
should be treated as capital gain to the employee, short or long term,
depending on the employee's holding period for the shares. If the shares are
sold for less than the option price, the employee will not recognize any
ordinary income but will recognize a capital loss, short or long term,
depending on the holding period.
As a result of changes made by the IRS Restructuring and Reform Act of
1998 reducing the required holding period for assets afforded long-term capital
gains tax treatment, if an employee sells shares acquired pursuant to the
exercise of an Incentive Option after December 31, 1997, the employee will
generally recognize a long-term capital gain or loss on the sale if the shares
were held for more than twelve (12) months. Under those circumstances, if the
employee recognizes a long-term capital gain on the sale, his or her long-term
capital gain will be taxed at a maximum rate of 20%. After December 31, 2000,
the sale by an employee of shares acquired pursuant to the exercise of an
Incentive Option which are held for more than five years will be taxed at a
maximum rate of 18%.
The Company will not be entitled to a deduction as a result of the grant
of an Incentive Option, the exercise of an Incentive Option, or the sale of
Incentive Option shares after the Waiting Period. If an employee disposes of
Incentive Option shares in an Early Disposition, the Company would be entitled
to deduct the amount of ordinary income recognized by the Employee.
The grant of Nonqualified Options under the 1994 Plan will not result in
the recognition of any taxable income by the optionee. An optionee will
recognize ordinary income on the date of exercise of the Nonqualified Option
equal to the excess, if any, of (i) the fair market value of the shares
acquired as of the exercise date, over (ii) the exercise price. The tax basis
of these shares for purposes of a subsequent sale includes the Nonqualified
Option price paid and the ordinary income reported on exercise of the
Nonqualified Option. The income reportable on exercise of a Nonqualified Option
is subject to federal income and employment tax withholding. Generally, the
Company will be entitled to a deduction for its taxable year within which the
optionee recognizes compensation income in the amount reportable as income by
the optionee on the exercise of a Nonqualified Option.
-13-
<PAGE> 16
GRANTS UNDER THE 1994 PLAN. There have been no grants under the 1994 Plan
since the Board approved the Amendment set forth in this proposal; accordingly,
the benefits or amounts that will be received as a result of the Amendment are
not currently determinable.
In fiscal 1999 there were no grants of options to purchase shares of the
Company's Common Stock to any of the named executive officers or non-executive
directors as a group.
In fiscal 1999, there were grants of options to purchase shares of the
Company's Common Stock to executive officers as a group and non-executive
officer employees as a group as set forth in the table below.
NEW PLAN BENEFITS
THE AMENDED AND RESTATED 1994 STOCK OPTION PLAN
NAME NUMBER OF UNITS
---- ---------------
Executive Group............................... 40,000
Non-Executive Officer Employee Group.......... 71,000
STOCKHOLDER APPROVAL REQUIREMENT. The approval of the amendment requires
the affirmative vote of a majority of the shares of Common Stock voting on the
matter. Accordingly, abstentions and broker non-votes applicable to shares at
the Annual Meeting will not be included in the tabulation of votes cast on this
proposal.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 2.
PROPOSAL NO. 3 - RATIFICATION AND APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Arthur Andersen LLP as
its independent public accountants to audit the accounts of the Company for the
fiscal year ending January 30, 2000. Arthur Andersen LLP has advised the
Company that it will have a representative in attendance at the Annual Meeting
who will respond to appropriate questions presented.
Management recommends that the appointment of Arthur Andersen LLP as
independent public accountants of the Company for the fiscal year ending
January 30, 2000, be ratified by the stockholders. Unless otherwise specified,
all properly executed proxies received by the Company will be voted for such
ratification at the meeting or any adjournment thereof.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 3.
CERTAIN TRANSACTIONS
The Company has used and will continue to use, as it deems appropriate,
Neon Electric Corporation for the design, construction and installation of its
signs. In fiscal 1999, the Company paid Neon Electric Corporation $1,313,288
for its services. Sherman Hink, the spouse of Phyllis C. Hink, Vice President
Human Resources of the Company, is the owner of Neon Electric Corporation. The
Company believes these services were on terms at least as favorable to the
Company as those, which could have been obtained elsewhere.
-14-
<PAGE> 17
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and written representations from reporting persons that no Form 5
was required. The Company does not believe that any reporting person failed to
file on a timely basis reports as required by Section 16(a) of the Exchange
Act.
PROPOSALS, NOMINATIONS AND OTHER BUSINESS FOR NEXT ANNUAL MEETING
The Board of Directors knows of no other matters than those described
above which are likely to come before the Annual Meeting. If any other matters
properly come before the meeting, persons named in the accompanying form of
proxy intend to vote such proxy in accordance with their best judgment on such
matters.
To be included in the proxy statement, any proposals of holders of Common
Stock of the Company intended to be presented at the Annual Meeting of
Stockholders of the Company to be held in 2000 must be received by the Company,
addressed to the Secretary of the Company, 19411 Atrium Place, Suite 170,
Houston, Texas 77084, no later than December 28, 1999, and must otherwise
comply with the requirements of Rule 14a-8 under the Securities Exchange Act of
1934.
Any holder of Common Stock of the Company desiring to bring business
before the 2000 annual meeting of stockholders in a form other than a
stockholder proposal in accordance with the preceding paragraph must give
written notice that is received by the Company, addressed to the Secretary of
the Company, 19411 Atrium Place, Suite 170, Houston, Texas, 77084, no earlier
than February 11, 2000 and no later than March 8, 2000.
By Order of the Board of Directors
Jane L. Arbuthnot, SECRETARY
April 27, 1999
THE COMPANY WILL FURNISH WITHOUT CHARGE ADDITIONAL COPIES OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 1999 TO INTERESTED
SECURITY HOLDERS ON REQUEST. THE COMPANY WILL FURNISH TO ANY SUCH PERSON ANY
EXHIBITS DESCRIBED IN THE LIST ACCOMPANYING SUCH REPORT UPON PAYMENT OF
REASONABLE FEES RELATING TO THE COMPANY'S FURNISHING SUCH EXHIBITS. REQUESTS
FOR COPIES SHOULD BE DIRECTED TO THE SECRETARY AT THE COMPANY'S ADDRESS
PREVIOUSLY SET FORTH.
-15-
<PAGE> 18
PROXY PROXY
GARDEN RIDGE CORPORATION
19411 Atrium Place, Suite 170
Houston, Texas 77084
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held June 10, 1999
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Garden Ridge Corporation (the "Company") will be held at Chase
Tower, 600 Travis, 25th Floor Conference Room, Houston, Texas 77002, at 10:00
a.m., Houston time, on Thursday, June 10, 1999, for the following purposes.
STOCKHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON APRIL 26, 1999 WILL BE
ENTITLED TO NOTICE OF AND TO VOTE AT THE ANNUAL MEETING, OR ANY ADJOURNMENT OR
ADJOURNMENTS THEREOF. STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL
MEETING IN PERSON. THOSE WHO WILL NOT ATTEND AND WHO WISH THEIR SHARES VOTED
ARE REQUESTED TO SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY FOR WHICH A
RETURN ENVELOPE IS PROVIDED.
<PAGE> 19
Please mark
your votes as
indicated in [X]
this example
1. To elect seven persons to serve as directors on FOR WITHHELD the Board of
Directors until the 2000 annual [ ] [ ] meeting of stockholders and until
their successors have been elected and have qualified.
Nominees: Armand Shapiro, Terry S. Boyce, Alyson Henning, Ira Neimark, Sam J.
Susser, Barbara S. Tapp, H. Whitney Wagner
(INSTRUCTION: To withhold authority to vote for any individual nominees, write
that nominee's name in the space provided below.)
- -------------------------------------------------------------------------------
2. To increase the number of shares of Common FOR AGAINST ABSTAIN Stock
available for grant under the Company's [ ] [ ] [ ] Amended and Restated
1994 Stock Option Plan by 1,200, 000 shares, as more fully set forth
under "Proposal No. 2."
3. To ratify the appointment of Arthur Andersen LLP as FOR AGAINST ABSTAIN the
Company's independent public accountants for the [ ] [ ] [ ] fiscal year
ending January 30, 2000.
4. To transact such other business as may properly come FOR AGAINST ABSTAIN
before the Annual Meeting, or any adjournment or [ ] [ ] [ ] adjournments
thereof.
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED TO
SIGN, DATE AND MAI L PROMPTLY THE ENCLOSED PROXY. I F YOU ATTEND THE ANNUAL
MEETING. YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
Signature____________________________ Signature_______________________________
Date________ NOTE: Please sign as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
<PAGE> 1
EXHIBIT 5
GARDEN RIDGE CORPORATION
and
CHASE MELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
AMENDED AND RESTATED RIGHTS AGREEMENT
Dated as of July 14, 1999
<PAGE> 2
TABLE OF CONTENTS
Section 1. CERTAIN DEFINITIONS...............................................1
Section 2. APPOINTMENT OF RIGHTS AGENT.......................................6
Section 3. ISSUANCE OF RIGHT CERTIFICATES....................................6
Section 4. FORM OF RIGHT CERTIFICATES........................................8
Section 5. EXECUTION, AUTHENTICATION AND DELIVERY............................9
Section 6. REGISTRATION.....................................................10
Section 7. MUTILATED, DESTROYED, LOST AND STOLEN RIGHT CERTIFICATES.........10
Section 8. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS....11
Section 9. CANCELLATION OF RIGHT CERTIFICATES...............................13
Section 10. AUTHORIZATION OF SHARES.........................................13
Section 11. RECORD DATE.....................................................13
Section 12. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER
OF RIGHTS.....................................................14
Section 13. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES......19
Section 14. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.................................................19
Section 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.........................21
Section 16. RIGHTS OF ACTION................................................22
Section 17. AGREEMENT OF RIGHT HOLDERS......................................22
Section 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER...............23
Section 19. CONCERNING THE RIGHTS AGENT.....................................23
Section 20. DUTIES OF RIGHTS AGENT..........................................24
Section 21. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.......26
Section 22. CHANGE OF RIGHTS AGENT..........................................27
Section 23. ISSUANCE OF NEW RIGHT CERTIFICATES..............................27
Section 24. REDEMPTION......................................................28
Section 25. MANDATORY REDEMPTION AND EXCHANGE...............................29
Section 26. NOTICE OF CERTAIN EVENTS........................................30
Section 27. NOTICES.........................................................31
Section 29. SUPPLEMENTS AND AMENDMENTS......................................31
Section 30. SUCCESSORS......................................................32
Section 31. BENEFITS OF THIS AGREEMENT......................................32
Section 32. SEVERABILITY....................................................32
Section 33. GOVERNING LAW...................................................32
Section 34. COUNTERPARTS....................................................32
Section 35. DESCRIPTIVE HEADINGS............................................32
<PAGE> 3
AMENDED AND RESTATED RIGHTS AGREEMENT
This Amended and Restated Rights Agreement, dated as of July 14, 1999, is
between Garden Ridge Corporation, a Delaware corporation (the "COMPANY"), and
Chase Mellon Shareholder Services, L.L.C., as Rights Agent.
WHEREAS, effective on June 4. 1997, the Board of Directors of the Company
authorized and directed the issuance to the holders of record of Common Shares
of the Company outstanding at the close of business on June 17, 1997 (the
"Record Date") of one Right with respect to each Common Share of the Company
outstanding on the Record Date, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earlier of the Distribution Date,
the Redemption Date and the Final Expiration Date; and
WHEREAS, the Board of Directors has authorized and directed the Company
to amend the Rights Agreement dated June 4, 1997 between the Company and the
Rights Agent in order better to preserve the ability of the Board of Directors
of the Company to ensure that the long-term strategic plans of the Company are
effected in a manner that the Board of Directors believes is in the best
interests of the Company and its shareholders and will maximize the value of
the shares of the Company's outstanding capital stock;
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereto agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings indicated:
"ACQUIRING PERSON" shall mean:
(i) any Person who or which, together with all Affiliates and Associates
of such Person, shall be the Beneficial Owner of 25% or more of the Voting
Shares of the Company then outstanding, but shall not include the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any trustee of or fiduciary with respect to any
such plan when acting in such capacity.
(ii) notwithstanding the foregoing parts of this definition, no Person
shall become an "Acquiring Person" as the result of an acquisition of Voting
Shares by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person
to 25% or more of the Voting Shares of the Company then outstanding; PROVIDED,
HOWEVER that, if a Person shall become the Beneficial Owner of 25% or more of
the Voting Shares of the Company then outstanding by reason of share purchases
by the Company and shall after such share purchases by the Company and at a
time when such Person is the Beneficial Owner
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<PAGE> 4
of 25% or more of the Voting Shares of the Company then outstanding, become the
Beneficial Owner of any additional Voting Shares of the Company, then such
Person shall be deemed to be an "Acquiring Person."
(iii) notwithstanding the foregoing parts of this definition, if the
Board of Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person," as defined pursuant to parts (i) and
(ii) of this definition has become such inadvertently, and such Person divests
a sufficient number of Voting Shares so that such Person would no longer be an
"Acquiring Person," by such deadline as the Board of Directors shall set, then
such Person shall not be deemed to be an "Acquiring Person" for any purposes of
this Agreement.
"AGREEMENT" shall mean this Rights Agreement as hereafter amended from
time to time.
"AFFILIATE" and "ASSOCIATE" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Agreement.
"BENEFICIAL OWNER" shall mean, with respect to any security, any Person
who is deemed to be a "Beneficial Owner" of, or is deemed to "own beneficially"
such security. A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "own beneficially" any securities that (without duplication):
(i) such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly, within the meaning of either Section
13 or 16 of the Exchange Act;
(ii) such Person or any of such Person's Affiliates or Associates has (A)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options, or otherwise; or (B) the right
to vote pursuant to any agreement, arrangement or understanding; or
(iii) are beneficially owned, directly or indirectly, by any other Person
with which such Person or any of such Person's Affiliates or Associates has any
agreement arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding voting or
disposing of any securities of the Company; PROVIDED, HOWEVER, that, for
purposes of each clause of this definition, a Person shall not be deemed the
Beneficial Owner of, or to own beneficially, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; and PROVIDED, FURTHER, that, for purposes of each
clause of this definition, a Person shall not be deemed the Beneficial Owner
of, or to own beneficially, any security as a result
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<PAGE> 5
of any agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding (1) arises solely from a revocable
proxy or consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report).
Notwithstanding anything in this definition to the contrary, the phrase
"then outstanding," when used with respect to a Beneficial Owner of securities
of the Company (or to the number of such securities "beneficially owned"),
shall mean the number of such securities then issued and outstanding together
with the number of such securities not then actually issued and outstanding
which such Person would be deemed to own beneficially hereunder.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day
on which banking institutions in the State of Texas are authorized or obligated
by law or executive order to close.
"CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m., Houston time,
on such date; PROVIDED, HOWEVER, that if such date is not a Business Day it
shall mean 5:00 p.m., Houston time, on the next succeeding Business Day.
"CLOSING PRICE," with respect to any security, shall mean the last quoted
price or, if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the Nasdaq National Market or such
other system then in use, or, in case such security is not then listed on such
system, then the last sale price, regular way, on a specific Trading Day or, in
case no such sale takes place on such Trading Day, the average of the closing
bid and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such security is listed or
admitted to trading or, if such security is not then listed or admitted to
trading on any national securities exchange, or, if on any such Trading Day
such security is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such security selected by the Board of Directors of the Company. If
such security is not publicly held or so listed or traded, "Closing Price"
shall mean the fair value per unit of such security as determined in good faith
by the Board of Directors of the Company, whose determination shall be
described and the Closing Price set forth in a statement filed with Rights
Agent.
"COMMON SHARES" when used with respect to the Company shall mean shares
of capital stock of the Company which have no preference over any other class
of stock with respect to dividends or assets, which are not redeemable at the
option of the Company and with respect to which no sinking, purchase or similar
fund is provided and shall initially mean the shares of common stock, having a
par value of $0.01 per share, of the Company. "Common Shares" when used with
reference to any Person other than the Company shall, if used with reference to
a corporation, mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
3
<PAGE> 6
first-mentioned Person and, if used with reference to any other Person, mean
the equity interest in such Person (or, if the net worth determined in
accordance with generally accepted accounting principles of another Person
(other than an individual) which controls such first-mentioned Person is
greater than such first-mentioned Person, then such other Person) with the
greatest voting power or managerial power with respect to the business and
affairs of such Person.
"COMPANY" shall mean Garden Ridge Corporation, a Delaware corporation, and
its successors.
"COMPANY ORDER" means a written request or order signed in the name of
the Company by its Chairman of the Board, its Chief Executive Officer, or
President or a Vice President, and by its Chief Financial Officer, Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Rights Agent.
"CORPORATE TRUST OFFICE" means the principal office of the Rights Agent
at which it administers its corporate trust business, which, in the case of
Chase Mellon Shareholder Services, L.L.C., shall, until hereafter changed, be
its office at 85 Challenger Road, Ridgefield, New Jersey 07660-2108.
"DISTRIBUTION DATE" shall mean the earlier of (i) the tenth Business Day
after the Shares Acquisition Date and (ii) the tenth Business Day (or such
later date as may be determined by action of the Board of Directors prior to
such time as any Person becomes an Acquiring Person) after the date of
commencement by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) of, or after the date of the first public announcement
of the intent of any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) to commence a tender or exchange offer, the
consummation of which would result in any Person becoming the Beneficial Owner
of 25% or more of the then outstanding Voting Shares of the Company; PROVIDED,
HOWEVER, that an occurrence described in clause (ii) of this definition above
shall not cause the occurrence of the Distribution Date if the Board of
Directors of the Company shall, prior to such tenth Business Day (or such later
date as described in clause (ii) above), determine that such tender or exchange
offer is spurious, unless, thereafter, the Board of Directors of the Company
shall make a contrary determination, in which event the Distribution Date shall
occur on the later to occur of such tenth Business Day (or such later date as
described in clause (ii) above) and the date of such latter determination.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute thereto.
"FINAL EXPIRATION DATE" shall mean the Close of Business on June 3, 2007.
4
<PAGE> 7
"PERSON" shall mean any individual, firm, corporation, partnership,
limited partnership, limited liability company, trust or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"PREFERRED SHARE" shall mean one share of Series A Junior Participating
Preferred Stock issued by the Company having the rights and qualifications
described in EXHIBIT B.
"PURCHASE PRICE" shall mean the initial price at which the holder of a
Right may, subject to the terms and conditions of this Agreement, purchase one
Unit of a Preferred Share (which initial price is set forth in Section 8(b)
hereof), as such price shall be adjusted pursuant to the terms of this
Agreement.
"REDEMPTION DATE" shall mean the time at which the Rights are redeemed
pursuant to Section 24 herein or the time at which all of the Rights are
mandatorily redeemed and exchanged pursuant to Section 25 hereof.
"REDEMPTION PRICE" shall have the meaning specified in Section 24(b)
herein.
"RIGHT" shall mean one Preferred Share purchase right which initially
represents the right of the registered holder thereof to purchase one Unit of a
Preferred Share upon the terms and subject to the conditions herein set forth.
"RIGHT CERTIFICATE" shall mean a certificate, in substantially the form
of EXHIBIT A attached to this Rights Agreement, evidencing the Rights
registered in the name of the holder thereof.
"RIGHTS AGENT" shall mean Chase Mellon Shareholder Services, L.L.C. and
any successor thereto appointed in accordance with the terms hereof, in its
capacity as agent for the Company and the holders of the Rights pursuant to
this Agreement.
"RIGHTS REGISTER" and "RIGHTS REGISTRAR" shall have the meanings
specified in Section 6.
"SECTION 12(A)(II) EVENT" shall mean the event described in Section
12(a)(ii) hereof.
"SECTION 14 EVENT" shall mean the event described in Section 14 hereof.
"SHARES ACQUISITION DATE" shall mean the first date of public
announcement (which for purposes of this definition shall include without
limitation a report filed pursuant to Section 13(d) or Section 16(a) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person
has become such.
"SUBSIDIARY" of any Person shall mean any corporation or other entity of
which a majority of the outstanding capital stock or other equity interests
having ordinary voting power in the election of directors or similar officials
is owned, directly or indirectly, by such Person.
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<PAGE> 8
"SUMMARY OF RIGHTS" shall mean a Summary of Rights to Purchase Preferred
Shares in substantially the form attached as EXHIBIT C to this Agreement.
"TRADING DAY" shall mean a day on which the principal national securities
exchange on which any of the Voting Shares of the Company are listed or
admitted to trading is open for the transaction of business or, if none of the
Voting Shares of the Company is listed or admitted to trading on any national
stock exchange, a Business Day.
"TRIGGERING EVENT" shall mean the Section 12(a)(ii) Event or any Section
14 Event.
"UNIT" shall, with respect to the Preferred Shares, mean one
one-thousandth (1/1000th) of a share.
"VOTING SHARES" shall mean (i) the Common Shares of the Company and (ii)
any other shares of capital stock of the Company entitled to vote generally in
the election of directors or entitled to vote together with the Common Shares
in respect of any merger or consolidation of the Company, any sale of all or
substantially all of the Company's assets or any liquidation, dissolution or
winding up of the Company. Whenever any provision of this Agreement requires a
determination of whether a number of Voting Shares comprising a specified
percentage of such Voting Shares is, was or will be beneficially owned or has
been voted, tendered, acquired, sold or otherwise disposed of, or a
determination of whether a Person has offered or proposed to acquire a number
of Voting Shares comprising such specified percentage, the number of Voting
Shares comprising such specified percentage of Voting Shares shall in every
such case be deemed to be the number of Voting Shares comprising the specified
percentage of all the Company's then outstanding Voting Shares.
"WHOLLY-OWNED SUBSIDIARY" of a Person shall mean any corporation or other
entity all the outstanding capital stock or other equity interests of which
having ordinary voting power in the election of directors or similar officials
are owned, directly or indirectly, by such Person.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co- Rights Agents as it may deem
necessary or desirable upon prior written notice to the Rights Agent. In the
event the Company appoints one or more co-Rights Agents, the respective duties
of the Rights Agent and any co-Rights Agents shall be determined by the Company
with the consent of the Rights Agent, which consent shall not be unreasonably
withheld. The Rights Agent shall have no duty to supervise, and shall in no
event be liable for, the acts or omissions of any such co-Rights Agent.
Section 3. ISSUANCE OF RIGHT CERTIFICATES.
(a) From and after June 17, 1997, until the earliest of the Distribution
Date, the Redemption Date, and the Final Expiration Date (i) outstanding Rights
will be evidenced (subject to the provisions of paragraph (b) of this Section
3)
by the certificates for outstanding Common Shares of
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<PAGE> 9
the Company and not by separate Right Certificates, and (ii) the Rights (and
the right to receive Right Certificates therefore) will be transferable only in
connection with the transfer of Common Shares of the Company. As soon as
practicable after the Distribution Date, the Rights Agent will send, by
first-class, insured, postage-prepaid mail, to each record holder of Common
Shares of the Company as of the Close of Business on the Distribution Date, at
the address of such holder shown on the stock transfer records of the Company,
a Right Certificate evidencing one Right for each Common Share of the Company
so held, subject to adjustment as provided herein. From and after the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On June 17, 1997, or as soon thereafter as practicable, the Company
will send a copy of a Summary of Rights, by first-class, postage-prepaid mail,
to each record holder of Common Shares of the Company as of the Close of
Business on the Record Date, at the address of such holder shown on the stock
transfer records of the Company. With respect to Common Shares of the Company
outstanding on the Record Date, the certificates evidencing such Common Shares
of the Company shall, together with copies of such Summary of Rights,
thereafter also evidence the outstanding Rights (as such Rights may be amended
or supplemented) distributed with respect thereto until the earlier of the
Distribution Date or the date of surrender thereof to the Company's transfer
agent for registration of transfer or exchange of Common Shares of the Company.
Until the Distribution Date (or, if earlier, the Redemption Date or Final
Expiration Date), the surrender for registration of transfer or exchange of any
certificate for Common Shares of the Company in respect of which Rights have
been issued, with or without a copy of the Summary of Rights attached thereto,
shall also constitute the surrender for registration of transfer or exchange of
the outstanding Rights associated with the Common Shares of the Company
represented thereby.
(c) The Company agrees that, at any time after the Record Date and prior
to the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date, at which it issues any of its Common Shares upon original
issue or out of treasury, it will concurrently distribute to the holder of such
Common Shares one Right for each such Common Share.
(d) Certificates for Common Shares of the Company issued after the Record
Date but prior to the earliest of the Distribution Date, the Redemption Date
and the Final Expiration Date, whether upon registration of transfer or
exchange of Common Shares outstanding on the Record Date or upon original issue
or out of treasury thereafter, shall have impressed on, printed on, written on
or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement between Garden Ridge
Corporation and Chase Mellon Shareholder Services, L.L.C. dated as of
June 4, 1997 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of Garden Ridge Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by
this certificate. Garden Ridge Corporation will mail to the holder of
this certificate a copy of the Rights
7
<PAGE> 10
Agreement without charge after receipt of a written request therefor. As
described in the Rights Agreement, Rights issued to or acquired by any
Acquiring Person or any Affiliate or Associate thereof (each as defined
in the Rights Agreement) shall, under certain circumstances, become null
and void.
With respect to certificates containing the foregoing legend, until the
Distribution Date, outstanding Rights associated with the Common Shares of the
Company represented by such certificates shall be evidenced by such
certificates alone and registered holders of Common Shares of the Company shall
also be the registered holders of the associated Rights, and the surrender of
any such certificate for registration of transfer or exchange of the Common
Shares of the Company evidenced thereby shall also constitute surrender for
registration of transfer or exchange of outstanding Rights (as such Rights may
be amended or supplemented) associated with the Common Shares of the Company
represented thereby.
(e) If the Company purchases or acquires any of its Common Shares after
the Record Date prior to the earliest of the Distribution Date, the Redemption
Date, and the Final Expiration Date, any Rights associated with such Common
Shares shall be deemed canceled and retired so that the Company shall not be
entitled to exercise any Rights associated with such Common Shares which are no
longer outstanding.
Section 4. FORM OF RIGHT CERTIFICATES. The form of Right Certificates
(and the forms of election to purchase and of assignment to be printed on the
reverse thereof) shall in form and substance be substantially the same as
EXHIBIT A hereto and may have such marks of identification or designation and
such legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed or as may be
necessary to conform to usage. The Right Certificates shall be in a machine
printable format and in a form reasonably satisfactory to the Rights Agent.
Subject to the provisions of Section 23 hereof, the Right Certificates,
whenever issued, shall be dated as of the date of authentication thereof, but,
regardless of any adjustments of the Purchase Price or the number of Preferred
Shares (or other securities) as to which a Right is exercisable (whether
pursuant to this Agreement or any future amendments or supplements to this
Agreement), or both, occurring after the Record Date and prior to the date of
such authentication, such Right certificates may, on their face, without
invalidating or otherwise affecting any such adjustment, expressly entitle the
holders thereof to purchase such number of Preferred Shares at the Purchase
Price per Unit of a Preferred Share as to which a Right would be exercisable if
the Distribution Date were the Record Date; no adjustment of the Purchase Price
or the number of Preferred Shares (or other securities) as to which a Right is
exercisable, or both, effected subsequent to the date of authentication of any
Right Certificate shall be invalidated or otherwise affected by the fact that
such adjustment is not expressly reflected on the face or in the provisions of
such Right Certificate.
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<PAGE> 11
Pending the preparation of definitive Right Certificates, the Company may
execute, and upon Company Order the Rights Agent shall authenticate and send,
at the Company's expense, by first-class, insured, postage-prepaid mail to each
record holder of Common Shares of the Company as of the Close of Business on
the Distribution Date, temporary Right Certificates which are printed,
lithographed, typewritten, mimeographed or otherwise produced substantially of
the tenor of the definitive Right Certificates in lieu of which they are issued
and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Right Certificates may determine, as
evidenced by their execution of such Right Certificates. If temporary Right
Certificates are issued, the Company will cause definitive Right Certificates
to be prepared without unreasonable delay. After the preparation of definitive
Right Certificates, the temporary Right Certificates shall be exchangeable for
definitive Right Certificates, upon surrender of the temporary Right
Certificates at the Corporate Trust Office of the Rights Agent, without charge
to the holder. Upon surrender for cancellation of any one or more temporary
Right Certificates, the Company shall execute and the Rights Agent shall
authenticate and deliver in exchange therefor one or more definitive Right
Certificates, evidencing a like number of Rights. Until so exchanged, the
temporary Right Certificates shall in all respects be entitled to the same
benefits under this Agreement as definitive Right Certificates.
Section 5. EXECUTION, AUTHENTICATION AND DELIVERY. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, Chief
Executive Officer, President, Chief Operating Officer, Chief Financial Officer,
or one of its Vice Presidents (including any Executive Vice President or Senior
Vice President), under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Right Certificates may be manual or facsimile.
Right Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such Right
Certificates or did not hold such offices at the date of authentication of such
Right Certificates. Any time and from time to time after the execution and
delivery of this Agreement and prior to the Distribution Date, the Company may
deliver Right Certificates executed by the Company to the Rights Agent for
authentication, together with a Company Order for the authentication and
delivery of such Right Certificates; and the Rights Agent in accordance with
such Company Order shall authenticate and deliver such Right Certificates as in
this Agreement provided and not otherwise.
No Right Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there appears on
such Right Certificate a certificate of authentication substantially in the
form provided for herein executed by the Rights Agent by manual signature of an
authorized signatory, which need not be the same authorized signatory for all
of the Right Certificates, and such certificate upon any Right Certificate
shall be conclusive evidence, and the only evidence, that such Right
Certificate has been duly authenticated and delivered hereunder.
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<PAGE> 12
Section 6. REGISTRATION. From and after the Distribution Date and prior
to the earlier of the Redemption Date and the Final Expiration Date, the
Company shall cause to be kept at the Corporate Trust Office of the Rights
Agent a Rights Register (a "Rights Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Right Certificates and of transfers of Rights. The Rights Agent
is hereby appointed the registrar and transfer agent (the "Rights Registrar")
for the purpose of registering Right Certificates and transfers of Rights as
herein provided and the Rights Agent agrees to maintain such Rights Register in
accordance with such regulations so long as it continues to be designated as
Rights Registrar hereunder. Upon surrender to the Rights Agent for registration
of transfer of any Right Certificate, the Company shall execute, and the Rights
Agent shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Right Certificates evidencing a like number of
Rights.
At the option of the holder, Right Certificates may be exchanged for
other Right Certificates upon surrender of the Right Certificates to be
exchanged to the Rights Agent. Whenever any Right Certificates are so
surrendered for exchange, the Company shall execute, and the Rights Agent shall
authenticate and deliver, the Right Certificates which the holder making the
exchange is entitled to receive.
All Right Certificates issued upon any registration of transfer or
exchange of Right Certificates shall be the valid obligations of the Company,
evidencing the same Rights, and entitled to the same benefits under this
Agreement, as the Right Certificates surrendered upon such registration of
transfer or exchange.
Every Right Certificate presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Rights Agent)
be duly endorsed, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Rights Registrar duly executed, by the
holder thereof or his attorney duly authorized in writing. No service charge
shall be made for any registration of transfer or exchange of Right
Certificates, but the Company may require payment by the holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Right Certificates,
other than exchanges not involving any transfer.
The provisions of this Section 6 shall be subject to the provisions of
Section 15.
Section 7. MUTILATED, DESTROYED, LOST AND STOLEN RIGHT CERTIFICATES. If
any mutilated Right Certificate is surrendered to the Rights Agent, along with
a signature guarantee and such other and further documentation as the Rights
Agent may reasonably request, the Company shall execute and the Rights Agent
shall authenticate and deliver in exchange therefor a new Right Certificate of
like tenor, for a like number of Rights and bearing a registration number not
contemporaneously outstanding.
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<PAGE> 13
If there shall be delivered to the Company and the Rights Agent (i)
evidence to their satisfaction of the destruction, loss or theft of a Right
Certificate and (ii) such security or indemnity, if any, as may be required by
them to save each of them and any agent of either of them harmless, then, in
the absence of notice to the Company or the Rights Agent that such Right
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and upon its request the Rights Agent shall authenticate and deliver,
in lieu of any such destroyed, lost or stolen Right Certificate, a new Right
Certificate of like tenor, for a like number of Rights and bearing a
registration number not contemporaneously outstanding.
Upon the issuance of any new Right Certificate under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Rights Agent) connected
therewith.
Every new Right Certificate issued pursuant to this Section in lieu of
any destroyed, lost or stolen Right Certificate shall constitute an additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Right Certificate shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Agreement equally and proportionately
with any and all other Right Certificates duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Right Certificates.
Section 8. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at its Corporate Trust
Office, together with payment of the Purchase Price for each Unit of a
Preferred Share (or other securities) as to which the Rights are exercised,
prior to the earliest of (i) the Close of Business on the Final Expiration
Date, (ii) the time of redemption on the Redemption Date and (iii) the time at
which such Rights are mandatorily redeemed and exchanged as provided in Section
25 hereof.
(b) The Purchase Price for each Unit of a Preferred Share pursuant to the
exercise of a Right shall initially be Fifty Dollars ($50.00), shall be subject
to adjustment from time to time as provided in Sections 12 and 14 hereof and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the securities to be purchased
and an amount equal to any applicable transfer tax required to be
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paid by the holder of such Right Certificate in accordance with Section 10 in
cash, or by certified check or cashier's check payable to the order of the
Company, together with such other and further documentation as the Rights Agent
may reasonably require, the Rights Agent shall thereupon promptly (i)
requisition from any transfer agent of the Preferred Shares (or other
securities) certificates for such number of Units of a Preferred Share (or
other securities) as are to be purchased and registered in such name or names
as may be designated by the registered holder of such Right Certificate or, if
appropriate, in the name of a depositary agent or its nominee, and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, (ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 15, (iii) promptly after receipt of such certificates registered in
such name or names as may be designated by such holder, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate and (iv) when appropriate, after receipt, promptly deliver such
cash to or upon the order of such holder.
(d) If the registered holder of the Right Certificate shall exercise less
than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equal to the Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 15 hereof.
(e) Notwithstanding any other provision of this Agreement, from and after
the occurrence of the Section 12(a)(ii) Event, any Rights that are or were
acquired or beneficially owned by (i) any such Acquiring Person (or any
Associate or Affiliate of such Acquiring Person), (ii) a transferee of any such
Acquiring Person (or of any such Associate or Affiliate of such Acquiring
Person) who becomes a transferee after such Acquiring Person becomes such, or
(iii) a transferee of any such Acquiring Person (or of any such Associate or
Affiliate of such Acquiring Person) who becomes a transferee prior to or
concurrently with such Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement, or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has as a primary purpose or effect
the avoidance of this Section 8(e), shall be null and void and any holder of
such Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement. No Right Certificate shall be issued pursuant to
this Agreement that represents Rights beneficially owned by an Acquiring Person
whose Rights would be null and void pursuant to the preceding sentence or by
any Associate or Affiliate thereof; no Right Certificate shall be issued at any
time upon the transfer of any Rights to an Acquiring Person whose Rights would
be null and void pursuant to the preceding sentence or to any Associate or
Affiliate thereof or to any nominee (acting in its capacity as such) of such
Acquiring Person, Associate or Affiliate; and any Right Certificate delivered
to the Rights Agent for transfer to an Acquiring Person whose Rights would be
null and void pursuant to the preceding sentence or to any Associate or
Affiliate thereof or to any nominee (acting in its capacity as such) of such
Acquiring Person, Associate or Affiliate shall be canceled.
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Section 9. CANCELLATION OF RIGHT CERTIFICATES. All Right Certificates
surrendered for the purpose of exercise, transfer, split up, combination, or
exchange shall, if surrendered to the Company or any of its agents, be
delivered to the Rights Agent for such purpose and for cancellation or, if
surrendered to the Rights Agent for such purpose, shall be canceled by it. No
Right Certificates shall be authenticated in lieu of or in exchange for any
Right Certificates canceled as provided in this Section 9 except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written
request of the Company, destroy such canceled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 10. AUTHORIZATION OF SHARES. The Company covenants and agrees
that it will cause to be reserved and kept available out of its authorized and
unissued Preferred Shares or any Preferred Shares held in its treasury (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Shares and/or other securities or out of its
authorized and issued shares held in its treasury), the number of Preferred
Shares (and, following the occurrence of a Triggering Event, Common Shares
and/or other securities) that will be sufficient to permit the exercise of
outstanding Rights pursuant to the adjustments set forth in Section 12(a)(ii)
or Section 14 or otherwise until such time as the Rights become exercisable.
The Company covenants and agrees that it will take all such action as may
be necessary to ensure that each Unit of a Preferred Share (and, following the
occurrence of a Triggering Event, the Common Shares and/or other securities)
issued upon exercise of Rights shall (subject to payment of the Purchase Price)
be duly authorized, validly issued, fully paid and nonassessable. The Company
further covenants and agrees that it will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of
the issuance or delivery of the Right Certificates or certificates for a number
of Units of a Preferred Share upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable (i) in
respect of any transfer or delivery of Right Certificates to a Person other
than the registered holder of the Right Certificate evidencing Rights
surrendered for transfer or exercise, or (ii) in respect of the issuance or
delivery of certificates for a number of Units of a Preferred Share upon
exercise of Rights evidenced by Right Certificates in a name other than that of
the registered holder of the Right Certificate evidencing Rights surrendered
for transfer or exercise. Neither shall the Company be required to issue or
deliver any certificates for Preferred Shares of the Company upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender
thereof) or until it has been established to the Company's satisfaction that no
such tax is due.
Section 11. RECORD DATE. Each Person in whose name any certificate for a
number of Units of a Preferred Share is issued upon the exercise of, or upon
mandatory redemption and exchange of, Rights shall for all purposes be deemed
to have become the holder of record of the Preferred Shares represented thereby
on, and such certificate shall be dated, (i) in the case of the exercise of
Rights,
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the date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made, or (ii) in the case of the mandatory redemption and exchange
of Rights, the date of such mandatory redemption and exchange; PROVIDED,
HOWEVER, that, if the date of such surrender and payment or mandatory
redemption and exchange is a date upon which the transfer books of the Company
for its Preferred Shares (or Common Shares and/or other securities, as the case
may be) are closed, such Person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which such transfer books of the Company are open.
Prior to the exercise of (or the mandatory redemption and exchange of) the
Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a stockholder of the Company for which the Rights
shall be exercisable, including without limitation, the rights to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 12. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number and kind of shares of capital stock of
the Company covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 12.
(a) (i) If the Company shall at any time (A) declare a dividend on any
outstanding Preferred Shares payable in Preferred Shares, (B) subdivide any
outstanding Preferred Shares, (C) combine any outstanding Preferred Shares into
a smaller number of Preferred Shares or (D) issue any shares of its capital
stock in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 12(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised thereafter shall be entitled to receive, upon
payment of the Purchase Price for which a Right was exercisable immediately
prior to such date, the aggregate number and kind of shares of capital stock
which, if such Right had been duly exercised immediately prior to such date (at
a time when the transfer books of the Company were open), such holder would
have acquired upon such exercise and been entitled to receive upon payment or
effectuation of such dividend, subdivision, combination or reclassification. If
an event occurs which would require an adjustment under both Section 12(a)(i)
and Section 12(a)(ii), the adjustment provided for in this Section 12(a)(i)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 12(a)(ii).
(ii) Subject to action of the Board of Directors of the Company pursuant
to Section 25 of this Agreement, if any Person shall become an Acquiring
Person, each Right will no longer represent the right to purchase Preferred
Shares of the Company, and each holder of a Right shall thereafter only have a
right to receive, upon exercise thereof at a price equal to the then current
Purchase Price, in accordance with the terms of this Agreement, such number of
Common Shares of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of
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<PAGE> 17
Units of a Preferred Share for which a Right is then exercisable, and (y)
dividing that product by fifty percent (50%) of the then current per share
market price of the Common Shares (determined pursuant to Section 12(d)) on the
date such Person became an Acquiring Person. If any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company shall
not take any action which would eliminate or diminish the benefits intended to
be afforded by the Rights.
(iii) In the event that there shall not be sufficient issued but not
outstanding, or authorized but unissued, Common Shares to permit the exercise
or exchange in full of all outstanding Rights in accordance with the foregoing
subparagraph (ii) or Section 25, the Company covenants that it shall take such
action as shall be necessary to ensure and provide, to the extent permitted by
applicable law and any agreements or instruments in effect on the Shares
Acquisition Date to which the Company is a party, that each Right shall
thereafter constitute the right to receive, in the Company's discretion, either
(A) in return for the Purchase Price, debt or equity securities (including, in
the Company's discretion, any available Common Shares) or other assets (or a
combination thereof) having a fair value equal to twice the Purchase Price, or
(B) if the Company elects to exchange the Rights in accordance with Section 25,
debt or equity securities (including, in the Company's discretion, any
available Common Shares) or other assets (or a combination thereof) having a
fair value equal to the product of the current per share market price of a
Preferred Share as of the Shares Acquisition Date (determined pursuant to
Section 12(d)) multiplied by the number of Preferred Shares that the holder of
the Rights would be entitled to receive from the Company in mandatory
redemption of, and in exchange for, the outstanding Rights pursuant to Section
25, where in any case set forth in (A) or (B) above the fair value of such debt
or equity securities or other assets shall be as determined in good faith by
the Board of Directors of the Company, after consultation with a nationally
recognized investment banking firm.
(b) If the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Shares entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe
for or purchase Preferred Shares (or shares having the same rights privileges
and preferences as the Preferred Shares ("equivalent preferred shares")) or
securities convertible into or exchangeable for Preferred Shares or equivalent
preferred shares at a price per Preferred Share or equivalent preferred share
(together with any additional consideration required upon conversion or
exchange in the case of a security convertible into or exchangeable for
Preferred Shares or equivalent preferred shares), less than the then current
per share market price of the Preferred Shares (determined pursuant to Section
12(d) on such record date), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares outstanding on such record date plus
the number of Preferred Shares which the aggregate offering price of the total
number of Preferred Shares and/or equivalent preferred shares so to be offered
(together with the aggregate of any additional consideration required upon
conversion or exchange in the case of any convertible or exchangeable
securities so to be offered) would purchase at such current per share market
price of the Preferred Shares and the denominator of which shall be the number
of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares to be offered
for subscription or
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<PAGE> 18
purchase (or into or for which the convertible or exchangeable securities so to
be offered are initially convertible or exchangeable). In case all or part of
such subscription or purchase price may be paid in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent. Preferred Shares owned by or held for
the account of the Company or any of its Subsidiaries shall not be deemed
outstanding for the purpose of any computation described in this Section 12(b).
The adjustment described in this Section 12(b) shall be made successively
whenever such a record date is fixed; and, if no such rights, options or
warrants are so issued, the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Common Shares) or subscription rights or warrants
(excluding those referred to in Section 12(b)), the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the then current per share market price of the
Preferred Shares (determined pursuant to Section 12(d)) on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares. Such adjustments shall
be made successively whenever such a record date is fixed; and, if such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of the Common Shares on any date shall be deemed to be the
average of the daily Closing Prices per share of such Common Shares for the 30
consecutive Trading Days immediately prior to such date; PROVIDED, HOWEVER,
that, if the issuer of such Common Shares shall announce (A) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares or (B) any subdivision, combination or
reclassification of such Common Shares, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, shall occur during such period of 30 Trading Days, then,
and in each such case, the current per share market price of the Common Shares
shall be appropriately adjusted to reflect the current market price per Common
Share equivalent.
(ii) For the purpose of any computation hereunder, the "current per share
market price" of the Preferred Shares shall be determined in the same manner as
set for the Common Shares in clause (i) of this Section 12(d). If the current
per share market price of the Preferred Shares cannot be determined in the
manner provided above or if the Preferred Shares are not publicly held or
listed
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or traded in a manner described in clause (i) of this Section 12(d), the
"current per share market price" of the Preferred Shares shall be conclusively
deemed to be an amount equal to 1000 (as such number shall be appropriately
adjusted for such events as stock splits, stock dividends, and
recapitalizations with respect to the Common Shares occurring after the date
hereof) multiplied by the current per share market price of the Common Shares.
For all purposes of this Agreement, the current per share market price of one
one-thousandth (1/1000th) of a Preferred Share shall be equal to one Preferred
Share divided by 1000.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; PROVIDED; HOWEVER, that any adjustments which by reason of this Section
12(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 12
shall be made to the nearest cent or to the nearest ten-thousandth of a Common
Share or other share, as the case may be, and references herein to the "number
of Preferred Shares" (or similar phrases) shall be construed to include
fractions of a Preferred Share. Notwithstanding the first sentence of this
Section 12(e), any adjustment required by this Section 12 shall be made no
later than the earlier of (i) three years from the date of the transaction
which requires such adjustment and (ii) the thirtieth day preceding the Final
Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 12(a), the
holder of any Right thereafter exercised shall become entitled to receive any
shares of capital stock of the Company other than Preferred Shares, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares
contained in this Section 12, and the provisions of this Agreement, including
without limitation, Sections 8, 10, 11 and 14, with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall, whether or not the Right
Certificate evidencing such Rights reflects such adjusted Purchase Price,
evidence the right to purchase, at the adjusted Purchase Price, the number of
Units of a Preferred Share purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 12(i), upon each adjustment of the Purchase Price pursuant to Section
12(b) or 12(c), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price per Unit of a Preferred Share, that number of Units of a
Preferred Share obtained by first multiplying the number of Units of a
Preferred Share covered by a Right immediately prior to this adjustment by the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and second, dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price.
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(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights outstanding in lieu of any
adjustment in the number of Units of a Preferred Share purchasable upon the
exercise of a Right. Each Right outstanding after such adjustment of the number
of Rights shall be exercisable for the number of Units of a Preferred Share for
which a Right was exercisable immediately prior to such adjustment of the
Purchase Price. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement, along with simultaneous written notice to the
Rights Agent, of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. Until such record date, however, any adjustment in the number of
Units of a Preferred Share for which a Right shall be exercisable made as
required by this Agreement shall remain in effect. If Right Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 12(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date
Right Certificates evidencing, subject to Section 15 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Right Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Right Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Right Certificates
so to be distributed shall be issued, executed and authenticated in the manner
provided for herein and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of Units of a Preferred Share issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of Units of a Preferred Share which
were expressed in the initial Right Certificates issued hereunder.
(k) In any case in which this Section 12 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date of the
Preferred Shares or other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares or other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
PROVIDED, HOWEVER, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional securities upon the occurrence of the event requiring such
adjustment.
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(l) Anything in this Section 12 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 12, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (i) combination or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of any of the Preferred Shares at less than the
current market price, (iii) issuance wholly for cash of Preferred Shares or
securities which by their terms are convertible into or exchangeable for
Preferred Shares, (iv) dividends payable in Preferred Shares or (iv) issuance
of rights, options or warrants referred to in subsection (b) of this Section
12, hereafter effected by the Company to holders of its Preferred Shares shall
not be taxable to such stockholders.
(m) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time prior to the Distribution Date (i)
declare a dividend on the outstanding Common Shares payable in Common Shares,
(ii) subdivide the outstanding Common Shares, (iii) combine the outstanding
Common Shares into a smaller number of shares or (iv) otherwise reclassify the
outstanding Common Shares, the number of Rights associated with each Common
Share then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionally adjusted so that the number of
Rights thereafter associated with each Common Share following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction (the
"Adjustment Fraction"), the numerator of which shall be the total number of
Common Shares outstanding immediately prior to the occurrence of such event and
the denominator of which shall be the total number of Common Shares outstanding
immediately following the occurrence of such event. In lieu of such adjustment
in the number of Rights associated with one Common Share, the Company may elect
to adjust the number of Units of a Preferred Share purchasable upon the
exercise of one Right and the Purchase Price. If the Company makes such
election, the number of Rights associated with one Common Share shall remain
unchanged, and the number of Units of a Preferred Share purchasable upon
exercise of one Right and the Purchase Price shall be proportionally adjusted
so that (i) the number of Units of a Preferred Share purchasable upon exercise
of a Right following such adjustment shall equal the product of the number of
Units of a Preferred Share purchasable upon exercise of a Right immediately
prior to such adjustment multiplied by the Adjustment Fraction, and (ii) the
Purchase Price following such adjustment shall equal the product of the
Purchase Price immediately prior to such adjustment multiplied by the
Adjustment Fraction.
Section 13. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 12 or 14 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Preferred
Shares of the Company a copy of such certificate and (c) mail a brief summary
thereof to each holder of record of a Right Certificate in accordance with
Section 28 hereof.
Section 14. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. If, directly or indirectly, (a) the Company shall consolidate
with, or merge with and into, any other Person, (b) any Person shall merge with
and into the Company and the Company shall be the continuing or
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<PAGE> 22
surviving corporation of such merger and, in connection with any such merger,
all or part of the Preferred Shares of the Company shall be changed into or
exchanged for stock or other securities of any other Person (or the Company) or
cash or any other property, or (c) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer), in one
or a series of two or more transactions, assets of the Company or its
Subsidiaries which constitute more than 50% of the assets or which produce more
than 50% of the earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or any Affiliate or Associate of such Person other than
the Company or one or more of its Wholly Owned Subsidiaries, then, and in each
such case, the Company agrees that, as a condition to engaging in any such
transaction, it will make or cause to be made proper provision so that (i) each
holder of a Right (except as otherwise provided herein) shall thereafter have
the right to receive, upon the exercise thereof in accordance with the terms of
this Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of such other Person
(including the Company as successor thereto or as the surviving corporation)
or, if such other Person is a Subsidiary of another Person, of the Person or
Persons (other than individuals) which ultimately control such first-mentioned
Person, as shall be equal to the result obtained by first multiplying the then
current Purchase Price by the number of Units of a Preferred Share for which a
Right is then exercisable (without taking into account any adjustment
previously made pursuant to Section 12(a)(ii)), and second dividing that
product by fifty percent (50%) of the current per share market price of the
Common Shares of such other Person (determined pursuant to Section 12(d)) on
the date of consummation of such consolidation, merger, sale or transfer; (ii)
the issuer of such Common Shares shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the
term "Company," as used herein, shall thereafter be deemed to refer to such
issuer; and (iv) such issuer shall take such steps in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
Preferred Shares thereafter deliverable upon the exercise of the Rights. The
Company shall not enter into any transaction of the kind referred to in this
Section 14 if at the time of such transaction there are outstanding any rights,
warrants, instruments or securities or any agreement or arrangements which, as
a result of the consummation of such transaction, would substantially diminish
or otherwise eliminate the benefits intended to be afforded by the Rights. The
Company shall not consummate any such consolidation, merger, sale or transfer
unless prior thereto the Company and such issuer shall have executed and
delivered to the Rights Agent an agreement supplemental to this Agreement
complying with the provisions of this Section 14. The provisions of this
Section 14 shall similarly apply to successive mergers or consolidations or
sales or other transfers. For the purposes of this Section 14, 50% of the
assets of the Company and its Subsidiaries shall be determined by reference to
the book value of such assets as set forth in the most recent consolidated
balance sheet of the Company and its Subsidiaries (which need not be audited)
and 50% of the earning power of the Company and its Subsidiaries shall be
determined by reference to the mathematical average of the operating income
resulting from the operations of the Company and its Subsidiaries for the two
most recent full fiscal years as set forth in the consolidated and
consolidating financial statements of the Company and its Subsidiaries for such
years; PROVIDED; HOWEVER, that if the Company has, during such period, engaged
in one or more transactions to which purchase accounting is applicable, such
determination shall be made by
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reference to the pro forma operating income of the Company and its Subsidiaries
giving effect to such transactions as if they had occurred at the commencement
of such two-year period.
Section 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue or distribute Right
Certificates which evidence fractional Rights. If, on the Distribution Date or
thereafter, as a result of any adjustment effected pursuant to Section 12(i) or
otherwise hereunder, a Person would otherwise be entitled to receive a Right
Certificate evidencing a fractional Right, the Company shall, in lieu thereof,
pay or cause to be paid to such Person an amount in cash equal to the same
fraction of the current market value of a whole Right. For the purposes of this
Section 15(a), the current market value of a whole Right shall be the Closing
Price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-thousandth
(1/1000th) of a Preferred Share) upon exercise of the Rights or to distribute
scrip or certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-thousandth (1/1000th) of a
Preferred Share). If, on the Distribution Date or thereafter, a Person would
otherwise be entitled to receive a fractional Preferred Share (other than
fractions which are integral multiples of one one-thousandth (1/1000th) of a
Preferred Share), the Company shall, in lieu thereof, pay to such Person at the
time such Right is exercised as herein provided an amount in cash equal to the
same fraction (which is not an integral multiple of one one-thousandth
(1/1000th) of a Preferred Share) of the current market value of one Preferred
Share. For purposes of this Section 15(b), the current market value of a
Preferred Share shall be Closing Price of a Common Share for the Trading Day
immediately prior to the date of such exercise.
(c) Should any adjustment contemplated by Section 12(a)(ii) or any
mandatory redemption and exchange contemplated by Section 25 occur, the Company
shall not be required to issue fractions of Preferred Shares upon exercise of
the Rights or to distribute scrip or certificates which evidence fractional
Preferred Shares. If after any such adjustment or mandatory redemption and
exchange, a Person would otherwise be entitled to receive a fractional
Preferred Share of the Company upon exercise of any Right Certificate or upon
mandatory redemption and exchange as contemplated by Section 25, the Company
shall, in lieu thereof, pay to such Person at the time such Right is exercised
as herein provided or upon such mandatory redemption and exchange an amount in
cash equal to the same fraction of the Closing Price of a Common Share for the
Trading Day immediately prior to the date of such exercise or the date of such
mandatory redemption and exchange.
(d) The holder of a Right by the acceptance thereof expressly waives his
right to receive any fractional Rights or any fractional shares upon exercise
or mandatory redemption and exchange of a Right (except as provided above).
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Section 16. RIGHTS OF ACTION.
(a) All rights of action in respect of the obligations and duties owed to
the holders of the Rights under this Agreement are vested in the registered
holders of the Rights; and, without the consent of the Rights Agent or of the
holder of any other Rights, any registered holder of any Rights may, in his own
behalf and for his own benefit, enforce, and may institute and maintain any
suit, action or proceeding, judicial or otherwise, against the Company to
enforce, or otherwise to act in respect of, such holder's right to exercise
such Rights in the manner provided in the Right Certificate evidencing such
Rights and in this Agreement. Without limiting the foregoing or any remedies
available to the holders of Rights, it is specifically acknowledged that the
holders of Rights would not have an adequate remedy at law for any breach of
this Agreement and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened violations of, the
obligations of any Person subject to this Agreement.
(b) No right or remedy herein conferred upon or reserved to the
registered holder of Rights is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy, whether hereunder or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate right
or remedy.
(c) No delay or omission of any registered holder of Rights to exercise
any right or remedy accruing hereunder shall impair any such right or remedy or
constitute a waiver of any default hereunder or an acquiescence therein. Every
right and remedy given hereunder or by law, to such holders may be exercised
from time to time, and as often as may be deemed expedient, by such holders.
Section 17. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Shares of the Company;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the Corporate
Trust Office of the Rights Agent duly endorsed or accompanied by a proper
instrument of transfer, along with such other and further documentation as the
Rights Agent may reasonably request;
(c) the Company and the Rights Agent may deem and treat the Person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
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<PAGE> 25
certificate made by anyone other than the Company or the Rights Agent) for all
purposes, and neither the Company nor the Rights Agent shall be affected by any
notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation; PROVIDED that the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder,
as such, of any Right (whether or not then evidenced by a Right Certificate)
shall be entitled to vote, receive dividends or be deemed for any purpose the
holder of Preferred Shares of the Company or any other securities of the
Company which may at any time be issuable on the exercise (or mandatory
redemption and exchange) of the Rights represented thereby, nor shall anything
contained herein or in any Right Certificate be construed to confer upon any
such holder, as such, any of the rights of a stockholder of the Company,
including without limitation, any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, to give or
withhold consent to any corporate action, to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 26) or to
receive dividends or subscription rights until the Right or Rights evidenced by
such Right Certificate shall have been exercised (or mandatorily redeemed and
exchanged) in accordance with the provisions hereof.
Section 19. CONCERNING THE RIGHTS AGENT. The Company agrees to pay to the
Rights Agent such compensation as shall be agreed to in writing between the
Company and the Rights Agent for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and expenses and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability or expense, incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises. In no
case will the Rights Agent be liable for special, indirect, incidental or
consequential loss or damage of any kind whatsoever (including, but not limited
to, lost profits), even if the Rights Agent has been advised of the possibility
of such loss or damage.
The Rights Agent shall be protected and shall incur no liability for, or
in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for Common Shares of the Company or other securities of the
Company, Company Order, instrument of assignment or transfer, power of
attorney,
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endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
executed by the proper Person or Persons and, where necessary, verified or
acknowledged, or otherwise upon the advice of its counsel as set forth in
Section 20 hereof.
The provisions of this Section 19 shall survive the expiration of the
Rights and the termination of this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations expressly imposed by this Agreement, and no implied
duties or obligations shall be read into this Agreement against the Rights
Agent, upon the following terms and conditions, by all of which the Company and
the holders of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its selection (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent, and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company or any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its authentication thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not have any responsibility with respect to
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or with respect to the validity or
execution of any Right Certificate (except its authentication thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including
the Rights becoming void pursuant to Section 12(a)(ii) hereof) or any
adjustment in the terms of the Rights (including the manner, method or amount
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thereof) provided for in Sections 3, 12, 14, 24 and 25, or the ascertainment of
the existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Right Certificates after
actual notice that such change or adjustment is required); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares, Common Shares, or other
securities to be issued pursuant to this Agreement or any Right Certificate or
as to whether any Preferred Shares, Common Shares, or other securities will,
when issued, be duly authorized, validly issued, fully paid and nonassessable;
nor shall the Rights Agent be responsible for the legality of the terms hereof
in its capacity as an administrative agent.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
such officer or for any delay in acting while waiting for those instructions.
Any application by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Agreement and
the date on and/or after which such action shall be taken or such omission
shall be effective. The Rights Agent shall not be liable for any action taken
by, or omission of, the Rights Agent in accordance with a proposal included in
such application on or after the date specified in such application (which date
shall not be less than three Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, omission, default, neglect or misconduct of any
such attorneys or agents or for any loss of the Company resulting from any such
act, omission,
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default, neglect or misconduct provided reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the portion of the form of assignment or form
of election to purchase (as the case may be) certifying that the Rights are not
beneficially owned by an Acquiring Person or an Affiliate or Associate thereof
has not been completed or indicates that such Rights are beneficially owned by
such Person, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without the written consent of the Company.
(l) In addition to the foregoing, the Rights Agent shall be protected and
shall incur no liability for, or in respect of, any action taken or omitted by
it in connection with its administration of this Agreement if such acts or
omissions are in reliance upon (i) the proper execution of the certification
concerning beneficial ownership appended to the form of assignment and the form
of election to exercise attached to any Right Certificate unless the Rights
Agent shall have actual knowledge that, as executed, such certification is
untrue, or (ii) the non-execution of such certification including, without
limitation, any refusal to honor any otherwise permissible assignment or
election by reason of such non-execution.
(m) The Company agrees to give the Rights Agent prompt written notice of
any event or ownership which would prohibit the exercise or transfer of the
Right Certificates.
Section 21. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
Any corporation into which the Rights Agent or any successor Rights Agent may
be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 22. If at the time such
successor Rights Agent shall succeed to the agency created by this Agreement
any of the Right Certificates shall have been authenticated but not delivered,
any such successor Rights Agent may adopt the authentication of the predecessor
Rights Agent and deliver such Right Certificates so authenticated, and, if at
that time any of the Right Certificates shall not have been authenticated, any
successor Rights Agent may authenticate such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
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If at any time the name of the Rights Agent shall be changed and at such
time any of the Right Certificates shall have been authenticated but not
delivered, the Rights Agent may adopt the authentication under its prior name
and deliver Right Certificates so authenticated; and, in case at that time any
of the Right Certificates shall not have been authenticated, the Rights Agent
may authenticate such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 22. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days notice in writing mailed to the Company by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon 30 days
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. Notwithstanding the foregoing
provisions of this Section 22, in no event shall the resignation or removal of
a Rights Agent be effective until a successor Rights Agent shall have been
appointed and accepted such appointment. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the registered holder of a Right
Certificate (or, prior to the Distribution Date, of Common Shares), then the
Rights Agent or any registered holder of a Right Certificate (or, prior to the
Distribution Date, of Common Shares) may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be either (A)
a corporation organized and doing business under the laws of the United States
or of any state of the United States, in good standing, authorized under such
laws to exercise corporate trust or stock transfer powers, and subject to
supervision or examination by federal or state authority and which has at the
time of its appointment a Rights Agent as combined capital and surplus of at
least $50 million or (B) an affiliate of such a corporation. After appointment,
the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent for the Company and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 22, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 23. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or
change in the Purchase Price per share and the number or kind or class of
shares
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or other securities purchasable under the Right Certificates made in accordance
with the provisions of this Agreement.
Section 24. REDEMPTION.
(a) The Rights may be redeemed by action of the Board of Directors of the
Company pursuant to paragraph (b) of this Section 24, or may be redeemed and
exchanged by action of the Board of Directors of the Company pursuant to
Section 25 herein, but shall not be redeemed in any other manner.
(b) The Board of Directors of the Company may at its option, at any time
prior to the time any Person becomes an Acquiring Person redeem all but not
less than all the then outstanding Rights at a redemption price of one cent
($0.01) per Right then outstanding, appropriately adjusted to reflect any
adjustment in the number of Rights outstanding pursuant to Section 12(i) herein
(such redemption price being hereinafter referred to as the "Redemption
Price"). Any such redemption of the Rights by the Board of Directors may be
made effective at such time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish, PROVIDED, however that
no such authorization may occur for a period of ninety (90) days after the date
of a change (resulting from a proxy or consent solicitation) in a majority of
the Directors in office at the commencement of such solicitation, PROVIDED,
FURTHER, that if any Person who is or was a participant in such solicitation
has stated (or if upon the commencement of such solicitation, a majority of the
Board of Directors of the Company has determined in good faith) that such
Person (or any of its Affiliates or Associates) has taken or intends to take,
or may consider taking, any action that would result in such Person becoming an
Acquiring Person, then the Rights may be so redeemed only if there are
Continuing Directors (as hereinafter defined) in office and such redemption is
authorized by a majority of such Continuing Directors. "Continuing Director"
shall mean (i) any member of the Board of Directors of the Company who, while
such Person is a member of the Board is not an Acquiring Person, or an
Affiliate or an Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, and was a member of the
Board prior to the Record Date, or (ii) any Person who subsequently becomes a
member of the Board who, while such Person is a member of the Board, is not an
Acquiring Person, or an Affiliate or an Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, if
such Person's nomination for election or election to the Board is recommended
or approved by a majority of the Continuing Directors.
(c) The right of the registered holders of Right Certificates to exercise
the Right evidenced thereby or, if the Distribution Date has not theretofore
occurred, the inchoate right of the registered holders of Rights to exercise
the same shall, without notice to such holders or to the Rights Agent and
without further action, terminate and be of no further force or effect
effective as of the time of adoption by the Board of Directors of the Company
of a resolution authorizing and directing the redemption of the Rights pursuant
to paragraph (b) of this Section 24 (or, alternatively, if the Board of
Directors qualified such action as to time, basis or conditions, then at such
time, on such basis and with such conditions as the Board of Directors may have
established pursuant to such paragraph (b));
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thereafter, the only right of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public notice of any
redemption resolution pursuant to paragraph (b) of this Section 24; PROVIDED;
HOWEVER, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within 10 days after the adoption of
any redemption resolution pursuant to paragraph (b) of this Section 24, the
Company shall give notice of such redemption to the Rights Agent and to the
holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agents for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption shall state the method by which the
payment of the Redemption Price will be made.
(d) Neither the Company nor any of its Affiliates or Associates may
acquire (other than, in the case of such Affiliates and Associates, in their
capacity as holders of Common Shares of the Company), redeem or purchase for
value any Rights at any time in any manner other than as specifically set forth
in this Section 24 or in Section 25 herein, and other than in connection with
the purchase of Common Shares prior to the Distribution Date.
Section 25. MANDATORY REDEMPTION AND EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person, issue Preferred Shares or
Common Shares of the Company in mandatory redemption of, and in exchange for,
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become null and void pursuant to the provisions of
Section 12(a)(ii) hereof) at an exchange ratio of one Unit of a Preferred Share
or one Common Share for each Right which is then exercisable pursuant to the
provisions of Section 12(a)(ii) hereof. Notwithstanding the foregoing, the
Board of Directors shall not be empowered to effect such redemption and
exchange at any time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any such
Subsidiary, or any trustee of or fiduciary with respect to any such plan when
acting in such capacity), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Voting Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the mandatory redemption and exchange of any Rights pursuant to
subsection (a) of this Section 25, (which action may be conditioned on the
occurrence of one or more events or on the existence of one or more facts or
may be effective at some future time) and without any further action and
without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall be to receive such
number of Preferred Shares or Common Shares as is provided in paragraph (a) of
this Section 25. The Company shall promptly give public notice of any such
redemption and exchange; PROVIDED, HOWEVER, that the failure to give, or any
defect in, such notice shall not affect the validity of such redemption and
exchange. The Company promptly shall mail a notice of any such redemption and
exchange to the Rights Agent and to all the holders of such Rights
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at their last addresses as they appear upon the registry books of the Rights
Agent. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
mandatory redemption and exchange shall state the method by which the
redemption and exchange of the Preferred Shares or Common Shares for Rights
will be effected and, in the event of any partial redemption and exchange, the
number of Rights which will be redeemed and exchanged. Any partial redemption
and exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become null and void pursuant to the provisions of
Section 12(a)(ii) hereof) held by each holder of Rights.
Section 26. NOTICE OF CERTAIN EVENTS. If the Company shall, on or after
the Distribution Date, propose (a) to pay any dividend or other distribution
payable in stock of any class of the Company or any Subsidiary of the Company
to the holders of its Preferred Shares, (b) to offer to the holders of its
Preferred Shares rights, options or warrants to subscribe for or to purchase
any additional Preferred Shares or shares of stock of any class or any other
securities, rights, options or warrants, (c) to make any other distribution to
the holders of its Preferred Shares (other than a regular quarterly cash
dividend), (d) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (e) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of more than
50% of the assets or earning power of the Company and its Subsidiaries
(determined as provided in Section 14 herein) to, any other Person (other than
the Company or a Wholly-Owned Subsidiary or Wholly-Owned Subsidiaries), (f) to
effect the liquidation, dissolution or winding up of the Company or (g) if the
Rights have theretofore become exercisable with respect to Common Shares
pursuant to Section 12(a)(ii) herein, to declare or pay any dividend or other
distribution on the Common Shares payable in Common Shares or in stock of any
other class of the Company or any Subsidiary of the Company or to effect a
subdivision or combination of the Preferred Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) then, in each such
case, the Company shall give to the Rights Agent and to each holder of a Right
Certificate, in accordance with Section 28 hereof, notice of such proposed
action, which shall specify the date of authorization by the Board of Directors
of the Company of, and record date for, such stock dividend or such
distribution of rights or warrants or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, winding up,
subdivision or combination is to take place and the date of participation
therein by the holders of the Preferred Shares of the Company if any such date
is to be fixed. Such notice shall be so given in the case of any action covered
by clause (a), (b), (c) or (g) above at least 20 days prior to the record date
for determining holders of the Preferred Shares of the Company, for purposes of
such action, and in the case of any such other action, at least 20 days prior
to the date of the taking of such proposed action or the date of participation
therein by the holders of the Preferred Shares of the Company, whichever shall
be the earlier.
If any of the events set forth in Section 12(a)(ii) of this Agreement
shall occur, then, in any such case, the Company shall as soon as practicable
thereafter give to the Rights Agent and to each holder of a Right Certificate,
in accordance with Section 28 hereof, a notice of the occurrence of such
30
<PAGE> 33
event, which shall specify the event and the consequences of the event to
holders of Rights under Section l2(a)(ii) hereof.
Section 27. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
Garden Ridge Corporation
19411 Atrium Place, Suite 170
Houston, Texas 77084-6094
Attn: Secretary
Any notice or demand authorized by this Agreement to be given or made by the
Company or by the holder of any Right Certificate to or on the Rights Agent
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Company)
as follows:
Chase Mellon Shareholder Services, L.L.C.
2323 Bryan Street, Suite 2300
Dallas, Texas 75201
Attn: David Cary
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the Rights
Register of the Company or, prior to the Distribution Date, on the stock
transfer records for the Common Shares of the Company.
Section 29. SUPPLEMENTS AND AMENDMENTS. The Company may from time to time
supplement or amend this Agreement (which supplement or amendment shall be
evidenced by a writing signed by the Company and the Rights Agent) without the
approval of any holders of Right Certificates in order to cure any ambiguity,
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, to make any other provisions
in regard to matters or questions arising hereunder, or to add, delete, modify
or otherwise amend any provision, which the Company may deem necessary or
desirable, including without limitation, extending the Final Expiration Date
and, provided that at the time of such amendment or supplement the Distribution
Date has not occurred, the period during which the Rights may be redeemed;
PROVIDED, HOWEVER, that, from and after such time as any Person becomes an
Acquiring Person, any such amendment shall not materially and adversely affect
the interests of the holders of Right Certificates. Without limiting the
foregoing, the Board of Directors of the Company may by resolution, adopted at
any time prior to such time as any Person becomes an Acquiring Person, amend
this Agreement to lower the threshold set forth in the definitions of Acquiring
Person and
31
<PAGE> 34
Distribution Date herein to a percentage not less than the greater of (i) any
percentage greater than the largest percentage of the outstanding Voting Shares
then known to the Company to be beneficially owned by any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any trustee of or fiduciary
with respect to any such plan when acting in such capacity), and (ii) 10%.
Notwithstanding any other provision hereof, the Rights Agent's consent
must be obtained regarding any amendment or supplement pursuant to this Section
29 which alters the Rights Agent's rights or duties.
Section 30. SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 31. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders
of the Rights.
Section 32. SEVERABILITY. If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 33. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State, provided, however, that the rights and
obligations of the Rights Agent shall be governed by and construed in
accordance with the State of New York.
Section 34. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 35. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
32
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
GARDEN RIDGE CORPORATION
Attest:
By: /s/ TAMI WALLACE By: /s/ JANE L. ARBUTHNOT
Title: Executive Assistant Title: Chief Financial Officer
CHASE MELLON SHAREHOLDER
SERVICES, L.L.C., As Rights Agent
Attest:
By: /s/ BARBARA J. ROBBINS By: /s/ DAVID M. CARY
Title: Vice President Title: Assistant Vice President
33
<PAGE> 36
EXHIBIT A
[Form of Right Certificate]
Certificate No. R- _______________ Rights
NOT EXERCISABLE AFTER JUNE 3, 2007 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.01 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS DEFINED
IN SECTION 1 OF THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID.
GARDEN RIDGE CORPORATION
This certifies that ______________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of June 4, 1997 (the "Rights
Agreement"), between Garden Ridge Corporation, a Delaware corporation (the
"Company"), and Chase Mellon Shareholder Services, L.L.C. (the "Rights Agent"),
to purchase from the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to the Final Expiration Date
(as such term is defined in the Rights Agreement), at the Corporate Trust
Office of the Rights Agent (or at the office of its successor as Rights Agent),
one Unit (as that term is defined in the Rights Agreement, initially being one
one-thousandth (1/1000th)) of a fully paid nonassessable Series A Junior
Participating Preferred Share, having a par value of $0.01 (the "Preferred
Shares"), of the Company, at a purchase price of Fifty Dollars ($50.00) per
Unit of a Preferred Share (the "Purchase Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of Units of a Preferred Share which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of June 17, 1997, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of Units of a Preferred Share which may be purchased upon
the exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and
<PAGE> 37
made a part hereof and to which Rights Agreement reference is hereby made for a
full description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Rights Agreement are on file at the principal
executive offices of the Company and the Corporate Trust Office of the Rights
Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the Corporate Trust office of the Rights Agent, may be exchanged
for another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price of
$0.01 per Right or (ii) may be exchanged by the Company in whole or in part for
Preferred Shares or Common Shares of the Company.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth (1/1000th) of a Preferred Share), but in lieu
thereof a cash payment will be made as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any manner submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be entitled to any benefit under the
Rights Agreement or be valid or obligatory for any purpose until it shall have
been authenticated by the Rights Agent.
<PAGE> 38
WITNESS the facsimile signatures of the proper officers of the Company
and is corporate seal.
Dated as of
ATTEST: GARDEN RIDGE CORPORATION
_______________________ By: __________________________________
Secretary President
Date of Authentication:
This is one of the Right Certificates referred to in the within-mentioned
Rights Agreement.
Chase Mellon Shareholder Services, L.L.C., as Rights Agent
By: ______________________________
Authorized Signatory
<PAGE> 39
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Right Certificate)
FOR VALUE RECEIVED, ________________________________ hereby sells, assigns
and transfers unto _____________________________________________________________
- --------------------------------------------------------------------------------
(Please print name and address of transferee) this Right
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint Attorney, to transfer the Right
Certificate on the books of the within-named Company, with full power of
substitution.
Dated as of ____________, _______.
-----------------------------------
Signature
Signature Guarantee:
Signatures must be guaranteed.
- --------------------------------------------------------------------------------
[To be executed if statement is correct]
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement).
-----------------------------------
Signature
<PAGE> 40
[Form of Reverse Side of Right Certificate--continued]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate)
TO GARDEN RIDGE CORPORATION:
The undersigned hereby irrevocably elects to exercise Rights represented
by this Right Certificate to purchase the Preferred Shares (or other securities
issuable upon the exercise of such Rights) and requests that certificates for
such Preferred Shares (or other securities) be issued in the name of:
Please insert social security
or other identifying number: ___________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number: ___________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Date as of ______, _____.
----------------------------------------
Signature
<PAGE> 41
[Form of Reverse Side of Right Certificate - continued]
Signature Guaranteed:
Signatures must be guaranteed.
- --------------------------------------------------------------------------------
[To be executed if statement is correct]
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement).
----------------------------------------
Signature
The signature in the foregoing Form of Assignment or Form of Election to
Purchase must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in the Form of Assignment
or the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and such Assignment
or Election to Purchase will not be honored.
<PAGE> 42
EXHIBIT B
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
GARDEN RIDGE CORPORATION
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware
GARDEN RIDGE CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Restated Certificate of Incorporation of
the said Corporation, the said Board of Directors on June 3, 1997 adopted the
following resolution creating a series of 100,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Restated Certificate of Incorporation, a series of Preferred Stock, par
value $.01 per share, of the Corporation be and hereby is created, and
that the designation and number of shares thereof and the voting and
other powers, preferences and relative, participating, optional or other
rights of the shares of such series and the qualifications, limitations
and restrictions thereof are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. DESIGNATION AND AMOUNT. There shall be a series of Preferred Stock
that shall be designated as "Series A Junior Participating Preferred Stock,"
and the number of shares constituting such series shall be 100,000. Such number
of shares may be increased or decreased by resolution of the Board of
Directors; provided, however, that no decrease shall reduce the number of
shares of Series A Junior Participating Preferred Stock to less than the number
of shares then issued and outstanding plus the number of shares issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
2. DIVIDENDS AND DISTRIBUTIONS.
a. Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating
<PAGE> 43
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Series A Junior Participating
Preferred Stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the 15th day of March, June, September and
December of each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a share of Series A
Junior Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $10 or (b) the Adjustment Number (as
defined below) times the aggregate per share amount of all cash dividends, and
the Adjustment Number times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. The
"Adjustment Number" shall initially be 1,000. In the event the Corporation
shall at any time after June 3, 1997 (the "Rights Declaration Date") (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
b. The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in Paragraph A above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in
the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the net
subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
c. Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly
<PAGE> 44
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Junior Participating Preferred Stock
in an amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of Directors may
fix a record date for the determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
a. Each share of Series A Junior Participating Preferred Stock
shall entitled the holder thereof to a number of votes equal to the Adjustment
Number on all matters submitted to a vote of the stockholders of the
Corporation.
b. Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
c. i. If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of period (herein called a "default period") that shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each such default period, all holders
of Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) upon which these or like voting rights have been conferred and
are exercisable (the "Voting Preferred Stock") with dividends in arrears in an
amount equal to six quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two Directors.
ii. During any default period, such voting rights of the
holders of Series A Junior Participating Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph (iii) of this
Section 3.C or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting right nor the right
of the holders of any other series of Voting Preferred Stock, if any, to
increase, in certain cases, the authorized number of Directors shall be
exercised unless the holders of ten percent in number of shares of Voting
Preferred Stock outstanding shall be present in person or by proxy. The absence
of a quorum of the holders of Common Stock shall not affect the exercise by the
holders of Voting Preferred Stock of such voting right. At any meeting at which
the holders of Voting Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right, voting
as a class, to elect Directors to fill such vacancies, if any, in the Board of
Directors as may then exist up to two Directors, or, if such right is exercised
at an annual meeting, to elect two Directors. If the
<PAGE> 45
number that may be so elected at any special meeting does not amount to the
required number, the holders of the Voting Preferred Stock shall have the right
to make such increase in the number of Directors as shall be necessary to
permit the election of them of the required number. After the holders of the
Voting Preferred Stock shall have exercised their right to elect Directors in
any default period and during the continuance of such period, the number of
Directors shall not e increased or decreased except by vote of the holders of
Voting Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or PARI PASSU with the Series A Junior
Participating Preferred Stock.
iii. Unless the holders of Voting Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent of the total
number of shares of Voting Preferred Stock outstanding, irrespective of series,
may request the calling of a special meeting of the holders of Voting Preferred
Stock, which meeting shall thereupon be called by the Chairman of the Board,
the President, a Vice President or the Secretary of the Corporation. Notice of
such meeting and of any annual meeting at which holders of Voting Preferred
Stock are entitled to vote pursuant to this paragraph C(iii) shall be given to
each holder of record of Voting Preferred Stock by mailing a copy of such
notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20 days
and not later than 60 days after such order or request or, in default of the
calling of such meeting within 60 days after such order or request, such
meeting may be called on similar notice by any stockholder or stockholders
owning in the aggregate not less than ten percent of the total number of shares
of Voting Preferred Stock outstanding. Notwithstanding the provisions of this
paragraph C(iii), no such special meeting shall be called during the period
within 60 days immediately preceding the date fixed for the next annual meeting
of the stockholders.
iv. In any default period, the holders of Common Stock, and
other classes of stock of the Corporation, if applicable, shall continue to be
entitled to elect the whole number of Directors until the holders of Voting
Preferred Stock shall have exercised their right to elect two Directors voting
as a class, after the exercise of which right (x) the Directors so elected by
the holders of Voting Preferred Stock shall continue in office until their
successors shall have been elected by such holders or until the expiration of
the default period, and (y) any vacancy in the Board of Directors may (except
as provided in paragraph C(ii) of this Section 3) be filled by vote of a
majority of the remaining Directors theretofore elected by the holders of the
class of stock which elected the Director whose office shall have become
vacant. References in this paragraph C to Directors elected by the holders of a
particular class of stock shall include Directors elected by such Directors to
fill vacancies as provided in clause (y) of the foregoing sentence.
v. Immediately upon the expiration of a default period, (x)
the right of the holders of Voting Preferred Stock as a class to elect
Directors shall cease, (y) the term of any Directors elected by the holders of
Voting Preferred Stock as a class shall terminate, and (z) the number of
Directors shall be such number as may be provided for in the Restated
Certificate of Incorporation or Bylaws irrespective of any increase made
pursuant to the provisions of paragraph
<PAGE> 46
C(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the Restated Certificate of
Incorporation of Bylaws). Any vacancies in the Board of Directors effected by
the provisions of clauses (y) and (z) in the preceding sentence may be filled
by a majority of the remaining Directors.
d. Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
4. CERTAIN RESTRICTIONS
a. Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
i. declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Junior Participating Preferred Stock;
ii. declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Junior Participating Preferred Stock, except dividends paid ratably on the
Series A Junior Participating Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
iii. redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking junior (both as to
dividends and upon dissolution, liquidation or winding up) to the Series A
Junior Participating Preferred Stock; or
iv. redeem or purchase or otherwise acquire for consideration
any shares of Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
<PAGE> 47
b. The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph A of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. REACQUIRED SHARES. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to any conditions and restrictions on issuance set forth
herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
a. Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Series A Junior Participating
Preferred Stock shall have received $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A Liquidation
Preference, no additional distributions shall be made to the holders of shares
of Series A Junior Participating Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i) the Series
A Liquidation Preference by (ii) the Adjustment Number. Following the payment
of the full amount of the Series A Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series A Junior
Participating Preferred Stock and Common Stock, respectively, holders of Series
A Junior Participating Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate shares of the remaining assets to
be distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
b. In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
that rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In the
event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratable to the holders of Common Stock.
7. CONSOLIDATION, MERGER, ETC. In the case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any
<PAGE> 48
such case the shares of Series A Junior Participating Preferred Stock shall at
the same time be similarly exchanged or changed in an amount per share equal to
the Adjustment Number times the aggregate amount of stock, securities, cash/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged.
8. REDEMPTION. The shares of the Series A Junior Participating Preferred
Stock shall not be redeemable.
9. RANKING. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
10. AMENDMENT. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
11. FRACTIONAL SHARES. Series A Junior Participating Preferred Stock may
be issued in fractions of a share that shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this 9th day of June, 1997.
GARDEN RIDGE CORPORATION
By: /s/ JACK E. LEWIS
Jack E. Lewis
President
Attest:
/s/ JANE L. ARBUTHNOT
Jane L. Arbuthnot
Secretary
<PAGE> 49
EXHIBIT C
GARDEN RIDGE CORPORATION
STOCKHOLDER RIGHTS PLAN
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On June 3, 1997, the Board of Directors of Garden Ridge Corporation (the
"Company"), authorized the issuance of one preferred share purchase right (a
"Right") with respect to each outstanding share of common stock, par value of
one cent ($0.01) (the "Common Shares"), of the Company to stockholders of
record at the close of business on June 17, 1997. Each Right entitles the
registered holder to purchase from the Company one Unit (as such term is
defined in the Rights Agreement, initially being one one-thousandth (1/1000th))
of a Preferred Share at a price of $50.00 per Unit of a Preferred Share (the
"Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement dated June 4, 1997, as amended and
restated on July 14, 1999 (as amended and restated, the "Rights Agreement"),
between the Company and Chase Mellon Shareholder Services, L.L.C., as Rights
Agent (the "Rights Agent").
DETACHMENT OF RIGHTS; EXERCISE. Initially, the Rights will attach to all
Common Share certificates representing outstanding shares and no separate Right
Certificate will be distributed. The Rights will separate from the Common
Shares and a Distribution Date (as defined in the Rights Agreement) will occur
upon the earlier of (i) 10 Business Days following a public announcement that a
Person or group of affiliated or associated Persons (an "Acquiring Person") has
acquired beneficial ownership of 25% or more of the outstanding Voting Shares
(as defined in the Rights Agreement) of the Company, or (ii) 10 Business Days
following the commencement or announcement of an intention to commence a tender
offer or exchange offer the consummation of which would result in the
beneficial ownership by a Person or group of 25% or more of such outstanding
Voting Shares.
Until the Distribution Date (or earlier redemption or expiration of the
Rights) (i) the Rights will be evidenced by the certificates representing
Common Shares, (ii) the Rights will be transferred with and only with the
Common Shares, (iii) new Common Share certificates issued after June 17, 1997,
upon transfer or new issuance of the Common Shares will contain a notation
incorporating the Rights Agreement by reference, and (iv) the surrender for
transfer of any certificates for Common Shares outstanding as of June 17, 1997,
even without such notation, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (the "Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will thereafter
evidence the Rights.
<PAGE> 50
The Rights are not exercisable until the Distribution Date. The Rights
will expire on June 3, 2007 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or the Rights are earlier redeemed or exchanged by
the Company as described below.
If an Acquiring Person were to acquire 25% or more of the Voting Shares
of the Company, each Right then outstanding (other than Rights beneficially
owned by the Acquiring Person which would become null and void) would become a
right to buy that number of Preferred Shares that at the time of such
acquisition would have a market value of two times the Purchase Price of the
Right. If, however, the Board of Directors of the Company determines in good
faith that a Person who would otherwise be an Acquiring Person, has become such
inadvertently, and such Person divests a sufficient number of Voting Shares by
such deadline as the Board of Directors shall set, then such Person shall not
be deemed to be an Acquiring Person for any purposes of this Agreement.
If the Company were acquired in a merger or other business combination
transaction or more than 50% of its consolidated assets or earning power were
sold, proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction would have a market
value of two times the Purchase Price of the Right.
Upon exercise of a Right, the Company will have the option to sell Common
Shares of the Company having a market value equal to the Preferred Shares that
would be purchased upon exercise of a Right, instead of selling Preferred
Shares of the Company.
REGISTRATION AND LISTING OF COMMON SHARES. The offer and sale of the
Preferred Shares or other securities issuable upon exercise of the Rights will
be registered with the Securities and Exchange Commission but such registration
will not be effective until the Rights become exercisable. As described above,
however, the Rights will not be transferable separately from the Common Shares
until the Distribution Date.
ANTIDILUTION AND OTHER ADJUSTMENTS. The number of Preferred Shares or
other securities or property issuable upon exercise of the Rights, and the
Purchase Price payable, are subject to customary adjustments from time to time
to prevent dilution.
The number of outstanding Rights and the number of Preferred Shares or
other securities issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
EXCHANGE OPTION. At any time after the acquisition by a Person or group
of affiliated or associated Persons of beneficial ownership of 25% or more of
the outstanding Voting Shares of the Company and before the acquisition by a
Person or group of 50% or more of the outstanding Voting
<PAGE> 51
Shares of the Company, the Board of Directors may, at its option, issue Common
Shares of the Company in mandatory redemption of, or in exchange for, all or
part of the then outstanding exercisable Rights (other than Rights owned by
such Acquiring Person or group which would become null and void) at an exchange
ratio of one Common Share for each Preferred Share for which each Right is then
exercisable, subject to adjustment.
REDEMPTION OF RIGHTS. At any time prior to the first public announcement
that a Person or group has become the beneficial owner of 25% or more of the
outstanding Voting Shares, the Board of Directors of the Company may redeem
all, but not less than all, of the then outstanding Rights at a price of $0.01
per Right (the "Redemption Price"). The redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish. Immediately upon the action of
the Board of Directors ordering redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be
to receive the Redemption Price.
NO RIGHTS AS STOCKHOLDER. Until a Right is exercised, the holder thereof,
as such, will have no rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.
AMENDMENT OF RIGHTS. The terms of the Rights may be amended by the Board
of Directors of the Company without the consent of the holders of the Rights,
including amendment to extend the Final Expiration Date, and, provided a
Distribution Date has occurred, to extend the period during which the Rights
may be redeemed, except that after the Distribution Date no such amendment may
materially and adversely affect the interests of holders of the Rights.
THIS SUMMARY DESCRIPTION OF THE RIGHTS DOES NOT PURPORT TO BE COMPLETE AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RIGHTS AGREEMENT, WHICH IS
HEREBY INCORPORATED HEREIN BY REFERENCE.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
June 10, 1997. A copy of the Rights Agreement is available free of charge from
the Company.
<PAGE> 52
LEGEND FOR STOCK CERTIFICATES
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN GARDEN RIDGE CORPORATION AND
CHASE MELLON SHAREHOLDER SERVICES, L.L.C., DATED AS OF JUNE 4, 1997 (THE
"RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF
GARDEN RIDGE CORPORATION. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND
WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. GARDEN RIDGE CORPORATION WILL
MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT
CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. AS DESCRIBED IN THE RIGHTS
AGREEMENT, RIGHTS ISSUED TO OR ACQUIRED BY ANY ACQUIRING PERSON OR ANY
AFFILIATE OR ASSOCIATE THEREOF (EACH AS DEFINED IN THE RIGHTS AGREEMENT) SHALL,
UNDER CERTAIN CIRCUMSTANCES, BECOME NULL AND VOID.
<PAGE> 1
EXHIBIT 6
AMENDMENT TO RIGHTS AGREEMENT
This amendment to Rights Agreement (this "Amendment") is entered into
by Garden Ridge Corporation, a Delaware corporation ("Garden Ridge"), and Chase
Mellon Shareholder Services, L.L.C. (the "Rights Agent") effective as of
November 22, 1999.
WHEREAS, Garden Ridge and the Rights Agent desire to amend that certain
Rights Agreement dated as of June 4, 1997, as amended (the "Agreement"), as
provided therein pursuant to Section 29 of the Agreement, which authorizes
Garden Ridge to supplement or amend the Agreement without the approval of any
holders of Rights Certificates (as defined in the Agreement).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. All capitalized terms used herein shall have the meaning set forth
in the Agreement.
2. The definition of "Acquiring Person" in Section 1 of the Agreement
is hereby amended and restated in its entirety to read as follows:
"Acquiring Person" shall mean:
(i) any Person who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of 25% or more
of the Voting Shares of the Company then outstanding, but shall not
include (A) the Company, (B) any Subsidiary of the Company, (C) any
employee benefit plan of the Company or of any Subsidiary of the
Company or (D) any trustee of or fiduciary with respect to any such
plan when acting in such capacity. Notwithstanding anything in this
Agreement to the contrary, so long as that certain Plan and Agreement
of Merger dated as of November 22, 1999 by and between the Company and
GR Acquisition Corporation (the "Merger Agreement"), has not been
terminated pursuant to the terms thereof, neither GRDG Holdings, LLC,
GR Acquisition Corporation, Three Cities Fund III, L.P. nor any of
their respective Affiliates shall be deemed to be an Acquiring Person
solely by reason of the execution, delivery and performance of the
Merger Agreement, including the Offer (as such term is defined in the
Merger Agreement) or the announcement, making or consummation of the
Offer,
<PAGE> 2
the consummation of the Merger (as defined in the Merger Agreement) or
any other transactions contemplated by the Merger Agreement. If any of
these exceptions to the definition of an Acquiring Person apply, then
the Person to whom the exception pertains shall not be an Acquiring
Person for any purpose under this Agreement, including, without
limitation, with respect to the definitions of Distribution Date,
Section 12(a)(ii) Event, Section 14 Event, Stock Acquisition Date and
Triggering Event.
(ii) notwithstanding any provision of the Agreement to the
contrary, (A) no Distribution Date, Section 12(a)(ii) Event, Section 14
Event, Stock Acquisition Date or Triggering Event shall be deemed to
have occurred, (B) neither GRDG Holdings, LLC, GR Acquisition
Corporation, Three Cities Fund III, L.P. nor any of their respective
Affiliates shall be deemed to have become an Acquiring Person, and (C)
no holder of Rights shall be entitled to exercise such Rights under, or
be entitled to any other rights pursuant to, this Agreement solely by
reason of (A) the approval, execution or delivery of the Merger
Agreement, (B) the acquisition of Common Shares pursuant to the Offer,
or (C) the consummation of the Merger.
(iii) notwithstanding the foregoing parts of this definition,
no Person shall become an "Acquiring Person" as the result of an
acquisition of Voting Shares by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 25% or more of the Voting
Shares of the Company then outstanding; provided, however, that, if a
Person shall become the Beneficial Owner of 25% or more of the Voting
Shares of the Company then outstanding by reason of share purchases by
the Company and shall after such share purchases by the Company and at
a time when such Person is the Beneficial Owner of 25% or more of the
Voting Shares of the Company then outstanding, become the Beneficial
Owner of any additional Voting Shares of the Company, then such Person
shall be deemed to be an "Acquiring Person."
(iv) notwithstanding the foregoing parts of this definition,
if the Board of Directors of the Company determines in good faith that
a Person who would otherwise be an "Acquiring Person," as defined
pursuant to parts (i) and (ii) of this definition has become such
inadvertently, and such Person divests a sufficient number of Voting
Shares so that such Person would no longer be an "Acquiring Person," by
such deadline as the Board of Directors shall set, then such Person
shall not be deemed to be an "Acquiring Person" for any purposes of
this Agreement.
3. A new Section 26 shall be added (and the numbering of subsequent
sections altered accordingly) as follows:
Section 26. Termination. Upon the acquisition of shares of
Common Shares pursuant to the Offer (as defined in the Merger
Agreement), and without any further action and without any notice, the
right to exercise the Rights will terminate and the holders of Rights
will have no further rights under this Agreement.
2
<PAGE> 3
4. Except as specifically provided herein, the Agreement shall continue
in full force and effect in accordance with its terms without amendment or
modification.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned parties hereby execute and agree to
be bound by this Amendment, effective as of the date first written above.
GARDEN RIDGE CORPORATION
By: /s/ Jane Arbuthnot
------------------------------
Name: Jane Arbuthnot
-----------------------------
Title: Chief Financial Officer
----------------------------
Countersigned:
CHASE MELLON SHAREHOLDER
SERVICES, L.L.C.
By: /s/ Cindy Bennett
-----------------------------------
Name: Cindy Bennett
---------------------------------
Title: Relationship Manager
--------------------------------
4
<PAGE> 1
EXHIBIT 7
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> 2
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
2
<PAGE> 3
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.
3
<PAGE> 4
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;
4
<PAGE> 5
(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.
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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.
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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.
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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
<PAGE> 1
EXHIBIT 8
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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<PAGE> 3
(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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<PAGE> 5
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
<PAGE> 1
THE ROBINSON-HUMPHREY COMPANY, LLC
CORPORATE FINANCE INVESTMENT BANKERS
DEPARTMENT SINCE 1894
November 22, 1999
Board of Directors
Garden Ridge Corporation
19411 Atrium Place
Suite 170
Houston, Texas 77084-6099
Ladies and Gentlemen:
We understand that Garden Ridge Corporation (the "Company") proposes to
enter into a Plan and Agreement of Merger (the "Merger Agreement") between GR
Acquisition Corporation and the Company. Pursuant to the terms of the Merger
Agreement, each share of Company common stock issued and outstanding immediately
prior to the effective time of the merger (excluding shares owned by Three
Cities Research and its affiliates, Quilvest American Equity, Ltd. and Armand
Shapiro) will be purchased at a price of $11.50 per share, net to the seller, in
cash (the "Merger Consideration"). The terms and conditions of the proposed
transaction are set forth in more detail in the Plan and Agreement of Merger
dated November 22, 1999.
We have been requested by the Special Committee of the Board of Directors
of the Company to render our opinion with respect to the fairness, from a
financial point of view, to the Company's stockholders (other than Three Cities
Research and its affiliates, Quilvest American Equity, Ltd. and Armand Shapiro)
of the Merger Consideration.
In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement dated November 22, 1999, (2) publicly available information concerning
the Company which we believe to be relevant to our inquiry, (3) financial and
operating information with respect to the business, operations and prospects of
the Company furnished to us by the Company, (4) a trading history of the
Company's Common Stock from May 9, 1995 to the present and a comparison of that
trading history with those of other companies which we deemed relevant, (5) a
comparison of the historical financial results and present financial condition
of the Company with those of other companies which we deemed relevant, (6) a
comparison of the financial terms of the proposed transaction with the financial
terms of certain other recent transactions which we deemed relevant, and (7)
certain historical data relating to acquisitions of publicly traded companies,
including percentage premiums paid in such acquisitions. We have also had
discussions with the management of the Company
ATLANTA FINANCIAL CENTER
3333 PEACHTREE ROAD, NE - ATLANTA, GEORGIA 30328
(404) 266-6000
<PAGE> 2
Board of Directors
Garden Ridge Corporation
November 22, 1999
concerning its business, operations, assets, present condition and future
prospects and undertook such other studies, analyses and investigations as we
deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial projections provided by
the Company, we have assumed that such projections have been reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
In arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company and have not made nor obtained any
evaluations or appraisals of the assets or liabilities of the Company. In
addition, we have not solicited any indications of interest from any third party
with respect to the purchase of all or a part of the Company's business. Our
opinion is necessarily based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of this letter.
We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company in connection with the proposed transaction and will
receive a fee for our services which is in part contingent upon the consummation
of the proposed transaction. In addition, the Company has agreed to indemnify us
for certain liabilities arising out of our engagement. We have also performed
various investment banking services for the Company in the past, and have
received customary fees for such services. In the ordinary course of our
business, we actively trade in the common stock of the Company for our own
account and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Merger Consideration to be
received in the proposed transaction is fair to the stockholders of the Company.
Very truly yours,
/s/ THE ROBINSON-HUMPHREY COMPANY, LLC
THE ROBINSON-HUMPHREY COMPANY, LLC
<PAGE> 1
[GARDEN RIDGE LOGO]
FOR IMMEDIATE RELEASE
GR ACQUISITION CORPORATION TO ACQUIRE
GARDEN RIDGE CORPORATION
IN A CASH TENDER OFFER FOR $11.50 PER SHARE
Houston - November 22, 1999 - GR Acquisition Corporation and Garden Ridge
Corporation (NASDAQ: GRDG) today jointly announced that they have executed a
definitive merger agreement under which GR Acquisition Corporation will commence
a cash tender offer to acquire all of the outstanding shares of Garden Ridge,
other than those owned by GR Acquisition or its affiliates, for $11.50 per
share. The tender offer is scheduled to expire at midnight, New York City time,
on December 22, 1999.
GR Acquisition is wholly owned by GRDG Holdings LLC. GRDG Holdings is majority
owned by two investment funds advised by Three Cities Research, Inc.
If at least 51% of the Garden Ridge shares which neither GR Acquisition or GRDG
Holdings owns are tendered in response to the tender offer, GR Acquisition will
be merged into Garden Ridge in a cash merger in which shareholders will receive
$11.50 per share, and GRDG Holdings will become the sole stockholder of Garden
Ridge. GRDG Holdings currently owns approximately 30.9% of the outstanding
Garden Ridge shares.
The merger agreement has been unanimously approved by the Board of Directors of
each company.
The cash tender offer of $11.50 for each Garden Ridge share represents a total
value for Garden Ridge of approximately $185 million. The tender offer is not
conditioned upon financing.
Paul T. Davies, Garden Ridge President and CEO, stated "Our Board of Directors
believes this transaction to be in the best interest of our stockholders and
that this move significantly improves our ability to position the Company at the
forefront of retailers."
The Three Cities funds are principally engaged in investing in securities
selected by its investment committee.
Garden Ridge Corporation is The Home Decor Marketplace. Its product categories
include floral (silk and dried flowers), housewares, seasonal, pictures and
frames, candles, party supplies, pottery, crafts, home accents and baskets.
Garden Ridge currently operates 33 megastores in Texas, Florida, Georgia,
Illinois, Kentucky, Missouri, North Carolina, Ohio, Oklahoma, South Carolina,
Tennessee and Virginia.
THIS PRESS RELEASE MAY CONTAIN FORWARD-LOOKING STATEMENTS, AS THAT TERM IS
DEFINED IN THE PRIVATE SECURITIES REFORM ACT OF 1995, INCLUDING WITHOUT
LIMITATION, STATEMENTS CONCERNING EACH COMPANY'S EXPECTATIONS, BELIEFS,
INTENTIONS OR STRATEGIES REGARDING THE FUTURE. BECAUSE SUCH STATEMENTS DEAL WITH
FUTURE EVENTS, THEY ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES AND ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM EACH COMPANY'S CURRENT EXPECTATIONS. ALL
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE BASED ON INFORMATION
AVAILABLE TO EACH COMPANY AT THE DATE HEREOF, AND EACH COMPANY ASSUMES NO
OBLIGATIONS TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. FURTHER RISKS ARE
DETAILED IN GARDEN RIDGE'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING THOSE SET FORTH IN GARDEN RIDGE'S MOST RECENT FORM 10-K AND QUARTERLY
REPORTS ON FORM 10-Q.
For more information contact: Jane Arbuthnot, CFO
(281) 579-7901, ext. 205
