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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
GARDEN RIDGE CORPORATION
(NAME OF ISSUER)
GARDEN RIDGE CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
Common Stock, $.01 par value 36541P104
(TITLE OF CLASS OF SECURITIES) (CUSIP NUMBER OF CLASS OF SECURITIES)
JANE L. 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 NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
Copy to:
DAVID F. TAYLOR
LOCKE LIDDELL & SAPP LLP
600 TRAVIS, SUITE 3400
HOUSTON, TEXAS 77002
(713) 226-1200
August 26, 1999
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
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CALCULATION OF FILING FEE
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<CAPTION>
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TRANSACTION VALUE AMOUNT OF FILING FEE
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<S> <C>
$21,000,000.00(1) $4,200.00
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</TABLE>
(1)Calculated solely for purposes of determining the filing fee, based upon the
purchase of 3,000,000 shares at an offer price of $7.00 per share.
[ ]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
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<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The issuer of the securities to which this statement relates is Garden
Ridge Corporation, a Delaware corporation (the "Company"). The Company's
principal executive offices are located at 19411 Atrium Place, Suite 170,
Houston, Texas 77084.
(b) The securities being sought are up to 3,000,000 of the Company's
Common Shares, par value $.01 per shares (the "Shares") (or such lesser number
of shares as are properly tendered), at a price of $7.00 per Share, net to the
sellers in cash (the "Purchase Price"). As of August 25, 1999, 17,100,536 of
the Shares were outstanding. In its Offer to Purchase, dated August 26, 1999
(the "Offer to Purchase"), the Company reserved the right to purchase more
than 3,000,000 Shares, but has no current intention of doing so. The Offer to
Purchase and the related Letter of Transmittal (which, as they may be amended
from time to time, are collectively referred to herein as the "Offer") are
attached hereto as Exhibits (9)(a)(1) and (9)(a)(2).
The information set forth in "Introduction" and Section 1, "Number of
Shares; Proration" in the Offer to Purchase is incorporated herein by
reference. The Offer to Purchase is being made to all holders of Shares,
including executive officers, directors and affiliates of the Company. The
Company has been advised that none of its directors or executive officers
intends to tender any Shares pursuant to the Offer. Reference is hereby made to
Section 10, "Interest of Directors and Officers and Principal Shareholders;
Transactions and Arrangements Concerning Shares," of the Offer to Purchase,
which Section is incorporated herein by reference.
(c) Reference is hereby made to Section 7, "Price Range of Shares," of
the Offer to Purchase, which Section is incorporated by reference herein.
(d) This Statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 8, "Source and Amount of
Funds," of the Offer to Purchase, which Section is incorporated by reference
herein.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a)-(j) Reference is hereby made to the Introduction and Section 2,
"Purpose of the Offer; Certain Effects of the Offer," of the Offer to
Purchase, which Introduction and Section are incorporated by reference herein.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Reference is hereby made to the Introduction and Section 10, "Interest of
Directors and Officers and Principal Shareholders; Transactions and Arrangements
Concerning Shares," of the Offer to Purchase, which Introduction and Section
are incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
Reference is hereby made to Section 10, "Interest of Directors and
Officers and Principal Shareholders; Transactions and Arrangements Concerning
Shares," of the Offer to Purchase, which Section is incorporated herein by
reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Reference is hereby made to the Introduction and Section 15, "Fees and
Expenses," of the Offer to Purchase, which Introduction and Section are
incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in Section 9, "Certain Information
About the Company" in the Offer to Purchase is incorporated herein by
reference. The financial statements filed as a part of the Company's Annual
Report on Form 10-K for the year ended January 31, 1999 filed as exhibit
(9)(g)(1) hereto and the unaudited financial statements filed as a part of the
Company's Quarterly Report on
<PAGE>
Form 10-Q for the quarter ended May 2, 1999 filed as exhibit (9)(g)(2) hereto,
are incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) Reference is hereby made to Section 12, "Certain Legal Matters;
Regulatory Approvals," of the Offer to Purchase, which Section is incorporated
herein by reference.
(c) Reference is hereby made to Section 11, "Effects of the Offer on the
Market for Shares; Registration under the Exchange Act," which Section is
incorporated herein by reference.
(d) Not applicable.
(e) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (9)(a)(1)
and (9)(a)(2), respectively, is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
ITEM DESCRIPTION
---- -----------
(9)(a)(1) -- Form of Offer to Purchase dated
August 26, 1999
(9)(a)(2) -- Form of Letter of Transmittal
(9)(a)(3) -- Form of Notice of Guaranteed Delivery
(9)(a)(4) -- Form of Letter to Brokers, Dealers,
Commercial Banks, Trust Companies and
Other Nominees
(9)(a)(5) -- Form of Letter to Clients for use by
Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
(9)(a)(6) -- Form of Letter to Stockholders dated
August 26, 1999 from the Chief
Executive Officer of the Company
(9)(a)(7) -- Guidelines for Certification of
Taxpayer Identification Number on
Substitute Form W-9
(9)(a)(8) -- Press Release issued by the Company
dated August 26, 1999
(9)(b) -- Third Amended and Restated Credit
Agreement dated August 24, 1999
between Bank of America, N.A. and the
Company
(9)(c) -- Not applicable
(9)(d) -- Not applicable
(9)(e) -- Not applicable
(9)(f) -- Not applicable
(9)(g)(1) -- Financial statements filed as a part
of the Company's Annual Report on
Form 10-K for the year ended January
31, 1999 (incorporated herein by
reference to such Form 10-K).
(9)(g)(2) -- Unaudited financial statements filed
as a part of the Company's Quarterly
Report on Form 10-Q for the quarter
ended May 2, 1999 (incorporated
herein by reference to such Form
10-Q).
<PAGE>
SIGNATURE
After due 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.
GARDEN RIDGE CORPORATION
By: /s/ PAUL T. DAVIES
PAUL T. DAVIES
CHIEF EXECUTIVE OFFICER
Dated: August 26, 1999
[GARDEN RIDGE LOGO]
OFFER TO PURCHASE FOR CASH UP TO
3,000,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE OF $7.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., EASTERN DAYLIGHT SAVINGS TIME,
ON THURSDAY, SEPTEMBER 23, 1999, UNLESS THE OFFER IS EXTENDED.
Garden Ridge Corporation, a Delaware corporation (the "Company"), hereby
invites its stockholders to tender shares of its common stock, par value $.01
per share (the "Shares"), to the Company at $7.00 per Share, net to the seller
in cash (the "Purchase Price"), as specified by tendering stockholders, upon
the terms and subject to the conditions set forth in this Offer to Purchase and
the related Letter of Transmittal (which, as amended or supplemented from time
to time, together constitute the "Offer").
The Company will, upon the terms and subject to the conditions of the
Offer, accept for payment, and thereby purchase, up to 3,000,000 Shares validly
tendered and not withdrawn. All Shares acquired in the Offer will be acquired at
the Purchase Price. The Company reserves the right, in its sole discretion, to
purchase more than 3,000,000 Shares pursuant to the Offer. In the event more
than 3,000,000 Shares are validly tendered and not withdrawn, the Company will
accept for payment, and thereby purchase, Shares, other than Odd Lots, on a pro
rata basis (adjusted downward to avoid acceptance for payment of fractional
Shares) upon the terms and subject to the conditions of the Offer. See Section
1. Shares not purchased because of proration will be returned at the Company's
expense.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NONE
OF THE COMPANY, ITS BOARD OF DIRECTORS OR THE DEALER MANAGER MAKES ANY
RECOMMENDATION TO STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING
THEIR SHARES. STOCKHOLDERS MUST INDIVIDUALLY MAKE THE DECISION WHETHER TO TENDER
THEIR SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED
THAT NONE OF ITS DIRECTORS, EXECUTIVE OFFICERS OR AFFILIATES CONTROLLED BY SUCH
PERSONS INTENDS TO TENDER SHARES PURSUANT TO THE OFFER.
The Shares are traded on Nasdaq National Market ("Nasdaq") under the
symbol "GRDG." On August 25, 1999, the last full trading day prior to the
announcement of the Offer, the closing sales price per Share as reported on
Nasdaq was $5 15/16. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR THE SHARES. See Section 7.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent at its address and telephone
number set forth on the back cover of this Offer to Purchase.
THE INFORMATION AGENT FOR THE OFFER IS:
ChaseMellon Shareholder Services, L.L.C.
THE DEALER MANAGER FOR THE OFFER IS:
The Robinson-Humphrey Company
<PAGE>
IMPORTANT
Any stockholder wishing to tender all or any part of his or her Shares
should either
(a) complete and sign a Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions in the Letter of Transmittal and mail
or deliver such Letter of Transmittal, together with any required
signature guarantee, and any other required documents to ChaseMellon
Shareholder Services, L.L.C. (the "Depositary"), and either mail or
deliver the certificates for such tendered Shares to the Depositary
(together with any other documents required by the Letter of
Transmittal) or tender such Shares pursuant to the procedure for
book-entry transfer set forth in Section 3, or
(b) request a broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for such stockholder.
Holders of Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee should contact such person if they desire
to tender their Shares. Any stockholder who desires to tender Shares and whose
certificates for such Shares are not immediately available or cannot be
delivered to the Depositary or who cannot comply with the procedure for
book-entry transfer or whose other required documents cannot be delivered to the
Depositary, in any case, by the expiration of the Offer must tender such Shares
pursuant to the guaranteed delivery procedure set forth in Section 3.
TO VALIDLY TENDER SHARES, STOCKHOLDERS MUST COMPLETE AND EXECUTE THE LETTER
OF TRANSMITTAL.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER ON BEHALF OF THE COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON ANY SUCH RECOMMENDATION
OR ANY SUCH INFORMATION OR REPRESENTATION, IF GIVEN OR MADE, AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
<PAGE>
TABLE OF CONTENTS
PAGE
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SUMMARY.............................. ii
FACTORS THAT MAY AFFECT FUTURE
RESULTS.............................. iii
INTRODUCTION......................... 1
THE OFFER............................ 3
1. Number of Shares; Proration..... 3
2. Purpose of the Offer; Certain
Effects of the Offer............ 4
3. Procedures for Tendering
Shares........................ 6
4. Withdrawal Rights............... 9
5. Purchase of Shares and Payment
of Purchase Price............. 10
6. Certain Conditions of the
Offer......................... 10
7. Price Range of Shares........... 12
8. Source and Amount of Funds...... 12
9. Certain Information About the
Company....................... 13
10. Interest of Directors and
Officers and Principal
Stockholders; Transactions
and Arrangements Concerning
Shares........................ 16
11. Effects of the Offer on the
Market for Shares; Registration
Under the Exchange Act........ 17
12. Certain Legal Matters;
Regulatory Approvals.......... 17
13. Certain United States Federal
Income Tax Consequences....... 17
14. Extension of the Offer;
Termination; Amendment........ 19
15. Fees and Expenses............... 20
16. Miscellaneous................... 20
FURTHER INFORMATION.................. 21
i
<PAGE>
SUMMARY
This general summary is provided for the convenience of the Company's
stockholders and is qualified in its entirety by reference to the full text and
more specific details of this Offer to Purchase and the related Letter of
Transmittal.
<TABLE>
<S> <C>
Number of Shares to be
Purchased.......................... 3,000,000 Shares (or such lesser number of Shares as are validly
tendered and not withdrawn).
Purchase Price....................... $7.00 per Share, net to the Seller in cash. All Shares acquired in the
Offer will be acquired at the Purchase Price.
Conditions to the Offer.............. The Offer is subject to certain conditions. See Section 6.
How to Tender Shares................. See Section 3. Call the Information Agent or consult your broker for assistance.
Brokerage Commissions................ Tendering stockholders who hold Shares in their own name and who tender
their Shares directly to the Depositary will not be obligated to pay
brokerage commissions. Stockholders holding Shares through brokers or
banks are urged to consult the brokers or banks to determine whether the
transaction costs are applicable if stockholders tender Shares through
the brokers or banks and not directly to the Depositary.
Stock Transfer Tax................... None, if payment is made to the registered holder.
Expiration and Proration Dates....... September 23, 1999 at 5:00 p.m. Eastern Daylight Savings Time, unless
extended by the Company.
Payment Date......................... As soon as practicable after the Expiration Date, as defined in Section
1.
Position of the Company and its
Board of Directors................. Neither the Company nor its Board of Directors makes any recommendation
to any stockholder as to whether to tender or refrain from tendering
Shares.
Withdrawal Rights.................... Tendered Shares may be withdrawn at any time until 5:00 p.m., Eastern
Daylight Savings Time on September 23, 1999 and, unless previously
purchased, after 5:00 p.m., Eastern Daylight Savings Time on October 22,
1999. See Section 4.
Proration............................ In the event more than 3,000,000 Shares are validly tendered and not
withdrawn, the Company will accept for payment, and thereby purchase
Shares, other than Odd Lots, on a pro rata basis (adjusted downward to
avoid acceptance for payment of fractional Shares).
Odd Lots............................. There will be no proration of Shares tendered by any stockholder who
owns beneficially fewer than 100 Shares on August 25, 1999 and on the
Expiration Date, and who tenders all of such Shares prior to the
Expiration Date and who checks the "Odd Lots" box in the Letter of
Transmittal. See Section 1.
</TABLE>
ii
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain sections in this Offer to Purchase, including the "Summary,"
"Introduction" and "Purpose of the Offer; Certain Effects of the Offer,"
"Source and Amount of Funds," "Effects of the Offer on the Market for Shares;
Registration Under the Exchange Act" and "Certain Legal Matters; Regulatory
Approvals" contain certain forward-looking statements based on management's
current beliefs, estimates and assumptions concerning the operations, future
results and prospects of the Company and the retail industry in general. All
statements addressing operating performance, events or developments that
management anticipates will occur in the future, including statements related to
future revenue, profits, expenses, income and earnings per share or statements
expressing general optimism about future events are forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Forward-looking statements are subject to the
safe harbors created in the Exchange Act. In addition, words such as
"expects," "anticipates," "intends," "plans," "believes,"
"estimates," variations of such words, and similar expressions are intended to
identify forward-looking statements.
The statements described in the preceding paragraph constitute
"forward-looking statements" within the meaning of Section 21E of the Exchange
Act. Because these statements are based on a number of beliefs, estimates and
assumptions that could cause actual results to materially differ from those in
the forward-looking statements, there is no assurance that forward-looking
statements will prove to be accurate.
Any number of factors could affect future operations and results, including
the risk factors set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1999.
Forward-looking statements are subject to the safe harbors created in the
Exchange Act. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
iii
<PAGE>
INTRODUCTION
Garden Ridge Corporation, a Delaware corporation (the "Company"), hereby
invites its stockholders to tender shares of its common stock, par value $.01
per share (the "Shares"), to the Company at $7.00 per Share, net to the seller
in cash (the "Purchase Price"), as specified by tendering stockholders, upon
the terms and subject to the conditions set forth in this Offer to Purchase and
the related Letter of Transmittal (which, as amended or supplemented from time
to time, together constitute the "Offer").
The Company will, upon the terms and subject to the conditions of the
Offer, accept for payment, and thereby purchase, up to 3,000,000 Shares validly
tendered and not withdrawn. All Shares acquired in the Offer will be acquired at
the Purchase Price. In the event more than 3,000,000 Shares are validly tendered
and not withdrawn, the Company will accept for payment, and thereby purchase,
Shares, other than Odd Lots, on a pro rata basis (adjusted downward to avoid
acceptance for payment of fractional Shares) upon the terms and subject to the
conditions of the Offer. See Section 1. Shares not purchased because of
proration will be returned at the Company's expense to the stockholders who
tendered such Shares. The Company reserves the right, in its sole discretion, to
purchase more than 3,000,000 Shares pursuant to the Offer. See Section 14.
The Offer is not conditioned on any minimum number of shares being
tendered. The Offer is, however, subject to certain other conditions. See
Section 6.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NONE
OF THE COMPANY, ITS BOARD OF DIRECTORS OR THE DEALER MANAGER MAKES ANY
RECOMMENDATION TO STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING
THEIR SHARES. STOCKHOLDERS MUST INDIVIDUALLY MAKE THE DECISION WHETHER TO TENDER
THEIR SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED
THAT NONE OF ITS DIRECTORS, EXECUTIVE OFFICERS OR AFFILIATES CONTROLLED BY SUCH
PERSONS INTENDS TO TENDER SHARES PURSUANT TO THE OFFER. SEE SECTION 10.
Upon the terms and subject to the conditions of the Offer, if at the
Expiration Date more than 3,000,000 Shares (or such greater number of Shares as
the Company may elect to purchase) are validly tendered and not withdrawn, the
Company will accept Shares first from all Odd Lot Holders (as defined in Section
1) who validly tender, and not withdraw, all their Shares and then on a pro rata
basis from all other stockholders who validly tender, and not withdraw, Shares.
See Section 1.
The Purchase Price will be paid net to the tendering stockholder in cash
for all Shares purchased. Tendering stockholders who hold Shares in their own
name and who tender their Shares directly to the Depositary will not be
obligated to pay brokerage commissions, solicitation fees or, subject to
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase
of Shares by the Company pursuant to the Offer. Stockholders holding Shares
registered in the name of brokers or banks are urged to consult the brokers or
banks to determine whether transaction costs are applicable if stockholders
tender Shares through the brokers or banks and not directly to the Depositary.
Any tendering stockholder or other payee who fails to complete, sign and
return to the Depositary the substitute Form W-9 included as part of the Letter
of Transmittal may be subject to required United States federal income tax
back-up withholding of 31% of the gross proceeds payable to the tendering
stockholder or other payee pursuant to the Offer. See Section 3.
The Company will pay all fees and expenses of ChaseMellon Shareholder
Services L.L.C. (the "Depositary"), ChaseMellon Consulting Services, L.L.C.
(the "Information Agent") and The Robinson-Humphrey Company, LLC (the "Dealer
Manager") incurred in connection with the Offer. See Section 15.
The Board of Directors has determined that the Company's financial
condition, outlook and current market conditions make this an attractive time
for the Company to repurchase a significant portion of the issued and
outstanding Shares. In the view of the Board of Directors, the Offer presents an
opportunity to provide stockholders with a return on their investment and
represents an attractive investment for the Company that should benefit the
Company and its stockholders over the long term. In particular, the Board
1
<PAGE>
of Directors believes that the purchase of Shares at this time is consistent
with the Company's long-term corporate goal of seeking to increase stockholder
value.
The Offer provides stockholders who are considering a sale of all or a
portion of their Shares with the opportunity, subject to the terms and
conditions of the Offer, to sell those Shares for cash without, where Shares are
tendered by the registered owner thereof directly to the Depositary, the usual
transaction costs associated with open market sales. In addition, the Offer may
give stockholders the opportunity to sell at prices greater than market prices
prevailing prior to the announcement of the Offer. The Offer also allows
stockholders to sell a portion of their Shares while retaining a continuing
equity interest in the Company. Stockholders who determine not to accept the
Offer will realize a proportionate increase in their relative equity interest in
the Company, and thus in the Company's future earnings and assets (subject to
the Company's right to issue additional Shares and other equity securities in
the future). In determining whether to tender Shares pursuant to the Offer,
stockholders should consider the possibility that they may be able to sell their
Shares in the future on Nasdaq or otherwise at a net price higher than the
Purchase Price. Stockholders should also consider the possibility that,
following completion of the Offer, they may not be able to sell their Shares in
the future at a net price as high as the Purchase Price.
As of the close of business on August 25, 1999, the Company had 17,100,536
issued and outstanding Shares and had granted Options to purchase an aggregate
of 1,434,807 Shares. Of these Options, 853,966 are exercisable and 596,140 of
these Options have an exercise price below the Purchase Price. See Section 10.
The Company is not, in connection with the Offer, offering to cancel for cash
any Options and tenders of Options will not be accepted. See Section 3.
The 3,000,000 Shares that the Company is offering to purchase pursuant to
the Offer represent approximately 17.5% of the Shares outstanding on August 25,
1999 (approximately 16.7% assuming exercise of outstanding exercisable Options).
The Shares are listed and traded on Nasdaq under the symbol "GRDG." On
August 25, 1999, the last full trading day prior to the announcement of the
Offer, the closing sales price per Share as reported on Nasdaq was $5 15/16.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. See
Section 7.
2
<PAGE>
THE OFFER
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions of the Offer, the Company will
purchase 3,000,000 Shares or such lesser number of Shares as are validly
tendered and not withdrawn prior to the Expiration Date (as defined below) at a
price of $7.00 per Share, net to the seller in cash.
The term "Expiration Date" means 5:00 p.m., Eastern Daylight Savings
Time, on Thursday, September 23, 1999, unless and until the Company, in its sole
discretion, shall have extended the period of time during which the Offer will
remain open, in which event the term "Expiration Date" shall refer to the
latest time and date at which the Offer, as so extended by the Company, shall
expire. See Section 14 for a description of the Company's right to extend,
delay, terminate or amend the Offer.
The Company reserves the right, in its sole discretion, to purchase more
than 3,000,000 Shares pursuant to the Offer. In accordance with applicable
regulations of the Securities and Exchange Commission (the "Commission"), the
Company may purchase, pursuant to the Offer, an additional amount of Shares not
to exceed 2% of the outstanding Shares without amending or extending the Offer.
See Section 14. In the event of an over-subscription of the Offer, Shares
tendered prior to the Expiration Date (other than Odd Lots) will be subject to
proration, as described below. The proration period also expires on the
Expiration Date.
If (i) the Company changes the Purchase Price from $7.00 per Share,
materially increases the Dealer Manager fee, increases the number of Shares
being sought in the Offer and such increase in the number of Shares being sought
exceeds 2% of the outstanding Shares, or decreases the number of Shares being
sought and (ii) the Offer is scheduled to expire at any time earlier than the
expiration of the period ending on the tenth business day from, and including,
the date that notice of such increase or decrease is first published, sent or
given in the manner specified in Section 14, then the Offer will be extended
until the expiration of such period of ten business days.
THE OFFER IS NOT CONDITIONED ON THE TENDER OF ANY MINIMUM NUMBER OF SHARES.
HOWEVER, THE OFFER IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 6.
If the number of Shares validly tendered and not withdrawn prior to the
Expiration Date is less than or equal to 3,000,000 Shares (or such greater
number of Shares as the Company may elect to purchase pursuant to the Offer),
the Company will, upon the terms and subject to the conditions of the Offer,
accept for payment and thereby purchase, all Shares so tendered at the Purchase
Price. All Shares tendered and not purchased pursuant to the Offer, including
Shares not purchased because of proration, will be returned to the tendering
stockholders at the Company's expense as promptly as practicable following the
Expiration Date. The Company reserves the right, in its sole discretion to
purchase more than 3,000,000 Shares pursuant to the Offer. See Section 14.
PRIORITY OF PURCHASES. Upon the terms and subject to the conditions of the
Offer, if more than 3,000,000 Shares (or such greater number of Shares as the
Company may elect to purchase) have been validly tendered, and not withdrawn,
prior to the Expiration Date, the Company will accept for payment and therefore
purchase validly tendered Shares on the basis set forth below:
(a) first, all Shares validly tendered and not withdrawn prior to the
Expiration Date by any Odd Lot Holder (as defined below) who:
(1) tenders all Shares owned beneficially or of record by such Odd Lot
Holder (tenders of less than all the Shares owned by such Odd Lot
Holder will not qualify for this preference); and
(2) completes the section entitled "Odd Lots" in the Letter of
Transmittal and, if applicable, in the Notice of Guaranteed
Delivery; and
3
<PAGE>
(b) second, after the purchase of all of the foregoing Shares, all other
Shares validly tendered, and not withdrawn, prior to the Expiration Date, on a
pro rata basis (adjusted downward to avoid acceptance for payment of fractional
Shares), as described below.
ODD LOTS. For purposes of the Offer, the term "Odd Lots" means all
Shares validly tendered prior to the Expiration Date and not withdrawn by any
person (an "Odd Lot Holder") who owned beneficially or of record as of the
close of business on August 25, 1999, and who continues to own beneficially or
of record as of the Expiration Date, an aggregate of fewer than 100 Shares and
so certified in the appropriate place on the Letter of Transmittal and, if
applicable, on the Notice of Guaranteed Delivery. In order to qualify for this
preference, an Odd Lot Holder must tender all Shares owned by the Odd Lot Holder
in accordance with the procedures described in Section 3. As set forth above,
Odd Lots will be accepted for payment before proration, if any, of the purchase
of other tendered Shares. This preference is not available to partial tenders by
an Odd Lot Holder or to beneficial or record holders of an aggregate of 100 or
more Shares, even if these holders have separate accounts or certificates
representing fewer than 100 Shares. By accepting the Offer, an Odd Lot Holder
who holds Shares in its name and tenders its Shares directly to the Depositary
would not only avoid the payment of brokerage commissions, but also would avoid
any applicable odd lot discount in a sale of the holder's Shares. Any Odd Lot
Holder wishing to tender all of such holder's Shares pursuant to the Offer
should complete the section entitled "Odd Lots" in the Letter of Transmittal
and, if applicable, in the Notice of Guaranteed Delivery.
The Company also reserves the right, but will not be obligated, to purchase
all Shares duly tendered by any stockholder who tenders all Shares beneficially
owned and who, as a result of proration, would then beneficially own an
aggregate of fewer than 100 Shares. If the Company exercises this right, it will
increase the number of Shares that it is offering to purchase in the Offer by
the number of Shares purchased through the exercise of such right.
PRORATION. In the event that proration of tendered Shares is required, the
Company will determine the proration factor as soon as practicable following the
Expiration Date. Proration for each stockholder tendering Shares, other than Odd
Lot Holders, will be based on the ratio of the number of Shares validly tendered
and not properly withdrawn by such stockholder to the total number of Shares
validly tendered and not properly withdrawn by all stockholders, other than Odd
Lot Holders. Because of the difficulty in determining the number of Shares
validly tendered (including Shares tendered by guaranteed delivery procedures,
as described in Section 3) and not properly withdrawn, and because of the Odd
Lot procedure, the Company does not expect that it will be able to announce the
final proration factor or commence payment for any Shares purchased pursuant to
the Offer until approximately five business days after the Expiration Date. The
preliminary results of any proration will be announced by press release as
promptly as practicable after the Expiration Date. Stockholders may obtain
preliminary proration information from the Information Agent and may be able to
obtain such information from their brokers.
As described in Section 13, the number of Shares that the Company will
purchase from a stockholder pursuant to the Offer may affect the United States
federal income tax consequences to the stockholder of the purchase and,
therefore, may be relevant to a stockholder's decision whether or not to tender
Shares.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to stockholders who were record holders of Shares as of August 25, 1999, and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the Company's stockholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.
The Offer provides stockholders who are considering a sale of all or a
portion of their Shares with the opportunity, subject to the terms and
conditions of the Offer, to sell such Shares for cash without, where Shares are
tendered by the registered owner directly to the Depositary, the usual
transaction costs associated with open market sales. In addition, Odd Lot
Holders who hold Shares in their names and tender their Shares directly to the
Depositary and whose Shares are purchased pursuant to the Offer not only will
avoid
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the payment of brokerage commissions, but also will avoid any applicable odd lot
discount payable on a sale of their Shares in a transaction on Nasdaq.
The Offer also allows stockholders to sell a portion of their Shares while
retaining a continuing equity interest in the Company. Stockholders who
determine not to accept the Offer will realize a proportionate increase in their
relative equity interest in the Company, and thus in the Company's future
earnings and assets, subject to the Company's right to issue additional Shares
and other equity securities in the future. Stockholders may be able to sell
non-tendered Shares in the future on Nasdaq or otherwise, including in
connection with a sale of the Company, at a net price higher than the Purchase
Price. The Company can give no assurance, however, as to the price at which a
stockholder may be able to sell Shares in the future. Stockholders should also
consider the possibility that, following completion of the Offer, they may not
be able to sell their Shares in the future at a net price as high as the
Purchase Price.
The Board of Directors has determined that the Company's financial
condition, outlook and current market conditions make this an attractive time to
repurchase outstanding Shares. In the view of the Board of Directors, the Offer
represents an attractive investment that should benefit the Company and its
stockholders over the long term by reducing the number of outstanding shares and
by increasing stockholder value by making cash payments to stockholders who
tender outstanding shares. In particular, the Board of Directors believes that
the purchase of Shares at this time is consistent with the Company's long-term
corporate goal of seeking to increase stockholder value. The funds required to
complete the Offer and pay related expenses will be provided from the Company's
line of credit and cash held by the Company. See Section 8.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER, NONE
OF THE COMPANY, ITS BOARD OF DIRECTORS OR THE DEALER MANAGER MAKES ANY
RECOMMENDATION TO STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING
THEIR SHARES AND NONE HAS AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION.
STOCKHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER,
CONSULT WITH THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISIONS
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE COMPANY HAS
BEEN ADVISED THAT NONE OF ITS DIRECTORS, EXECUTIVE OFFICERS OR AFFILIATES
CONTROLLED BY SUCH PERSONS INTENDS TO TENDER SHARES PURSUANT TO THE OFFER. SEE
SECTION 10.
The Company may in the future purchase additional Shares on the open
market, in private transactions, through tender offers or otherwise, subject to
the approval of the Board of Directors. In particular, the Board of Directors
may repurchase Shares in the open market beginning after the expiration of the
period of ten business days after the Expiration Date. Future purchases by the
Company may be on the same terms or on terms that are more or less favorable to
stockholders than the terms of the Offer. Rule 13e-4 under the Exchange Act
prohibits the Company and its affiliates from purchasing any Shares, other than
pursuant to the Offer, until at least ten business days after the Expiration
Date. Any possible future purchases by the Company pursuant to this intention or
otherwise will depend on many factors, including the market price of the Shares,
the results of the Offer, the Company's business and financial position and
general economic and market conditions.
Shares the Company acquires pursuant to the Offer will be held in the
Company's treasury (unless and until the Company determines to retire any such
Shares) and will be available for the Company to issue without further
stockholder action (except as required by applicable law or the rules applicable
to companies with shares traded on Nasdaq or any other securities exchange on
which the Shares may be listed) for purposes including, but not limited to the
raising of additional capital for use in the Company's business and the
satisfaction of obligations under existing or future employee benefit plans. The
Company has no current plans for the issuance of Shares repurchased pursuant to
the Offer by the Company. The repurchased Shares will be authorized but unissued
Shares.
Except as disclosed in this Offer to Purchase, the Company currently has no
plans or proposals that relate to or would result in: (a) the acquisition by any
person of additional securities of the Company or the
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disposition of securities of the Company; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (c) any change in the present Board of
Directors or management of the Company; (d) any material change in the present
dividend rate or policy, or indebtedness or capitalization of the Company; (e)
any other material change in the Company's corporate structure or business; (f)
any change in the Company's Articles of Incorporation or Code of Regulations or
other actions which may impede the acquisition of control of the Company by any
person; (g) a class of equity security of the Company being delisted from a
national securities exchange or ceasing to be authorized for quotation in an
inter-dealer quotation system of a registered national securities association;
(h) a class of equity security of the Company becoming eligible for termination
of registration pursuant to Section 12(g)(4) of the Exchange Act; or (i) the
suspension of the Company's obligation to file reports pursuant to Section 15(d)
of the Exchange Act.
3. PROCEDURES FOR TENDERING SHARES.
VALID TENDER OF SHARES. For Shares to be validly tendered pursuant to the
Offer (a) the certificates for such Shares (or confirmation of receipt of such
Shares pursuant to the procedure for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), including any required signature guarantees,
and any other documents required by the Letter of Transmittal, must be received
prior to 5:00 p.m., Eastern Daylight Savings Time, on the Expiration Date by the
Depositary at its address set forth on the back cover of this Offer to Purchase,
or (b) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
ODD LOT HOLDERS WHO TENDER ALL SHARES MUST COMPLETE THE SECTION CAPTIONED
"ODD LOTS" IN THE LETTER OF TRANSMITTAL AND, IF APPLICABLE, IN THE NOTICE OF
GUARANTEED DELIVERY, TO QUALIFY FOR THE PREFERENTIAL TREATMENT AVAILABLE TO ODD
LOT HOLDERS AS SET FORTH IN SECTION 1.
STOCKHOLDERS WHO HOLD SHARES THROUGH BROKERS OR BANKS ARE URGED TO CONSULT
THE BROKERS OR BANKS TO DETERMINE WHETHER TRANSACTION COSTS ARE APPLICABLE IF
STOCKHOLDERS TENDER SHARES THROUGH THE BROKERS OR BANKS AND NOT DIRECTLY TO THE
DEPOSITARY.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required if: (i) the Letter of Transmittal is signed by the registered holder of
the Shares (which term, for purposes of this Section 3, shall include any
participant in The Depository Trust Company (the "Book-Entry Transfer
Facility") whose name appears on a security position listing as the owner of
the Shares) tendered therewith and such holder has not completed the box
entitled "Special Payment Instructions" on the Letter of Transmittal; or (ii)
the Shares are tendered for the account of a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit
union, savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Exchange Act
(each of the foregoing constituting an "Eligible Institution"). See
Instruction 1 of the Letter of Transmittal. If a certificate for Shares is
registered in the name of a person other than the person executing a Letter of
Transmittal, or if payment is to be made, or Shares not purchased or tendered
are to be issued to a person other than the registered holder, then the
certificate must be endorsed or accompanied by an appropriate stock power, in
either case, signed exactly as the name of the registered holder appears on the
certificate, with the signature guaranteed by an Eligible Institution.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of
certificates for such Shares (or a timely confirmation of the book-entry
transfer of the Shares into the Depositary's account at the Book-Entry Transfer
Facility as described above), a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) and any other documents
required by the Letter of Transmittal.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT
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THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, THEN
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect
to the Shares for purposes of the Offer at the Book-Entry Transfer Facility
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Shares by causing the
Book-Entry Transfer Facility to transfer Shares into the Depositary's account in
accordance with the Book-Entry Transfer Facility's procedures for transfer.
Although delivery of Shares may be effected through a book-entry transfer into
the Depositary's account at the Book-Entry Transfer Facility, either (i) a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with any required signature guarantees and any other required
documents must, in any case, be transmitted to and received by the Depositary at
its address set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or (ii) the guaranteed delivery procedure described below must
be followed. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING. Under the United
States federal income tax backup withholding rules, unless an exemption applies
under the applicable law and regulations, 31% of the gross proceeds payable to a
stockholder or other payee pursuant to the Offer must be withheld and remitted
to the United States Internal Revenue Service (the "IRS"), unless the
stockholder or other payee provides its taxpayer identification number (employer
identification number or social security number) to the Depositary (as payor)
and certifies under penalties of perjury that such number is correct. Therefore,
each tendering stockholder should complete and sign the Substitute Form W-9
included as part of the Letter of Transmittal so as to provide the information
and certification necessary to avoid backup withholding. If the Depositary is
not provided with the correct taxpayer identification number, the United States
Holder (as defined in Section 13 herein) also may be subject to a penalty
imposed by the IRS. If withholding results in an overpayment of taxes, a refund
may be obtained. Certain "exempt recipients" (including, among others, all
corporations and certain Non-United States Holders (as defined in Section 13
herein)) are not subject to these backup withholding and information reporting
requirements. In order for a Non-United States Holder to qualify as an exempt
recipient, that stockholder must submit an IRS Form W-8 or a Substitute Form
W-8, signed under penalties of perjury, attesting to that stockholder's exempt
status. Such statements can be obtained from the Depositary. See Instruction 12
of the Letter of Transmittal.
WITHHOLDING FOR NON-UNITED STATES HOLDERS. Even if a Non-United States
Holder has provided the required certification to avoid backup withholding, the
Depositary will withhold United States federal income taxes equal to 31% of the
gross payments payable to a Non-United States Holder or such Holder's agent
unless the Depositary determines that a reduced rate of withholding is available
pursuant to a tax treaty or that an exemption from withholding is applicable
because the gross proceeds are effectively connected with the conduct of a trade
or business within the United States. In order to obtain a reduced rate of
withholding pursuant to a tax treaty, a Non-United States Holder must deliver to
the Depositary before the payment a properly completed and executed IRS Form
1001. In order to obtain an exemption from withholding on the grounds that the
gross proceeds paid pursuant to the Offer are effectively connected with the
conduct of a trade or business within the United States, a Non-United States
Holder must deliver to the Depositary a properly completed and executed IRS Form
4224. The Depositary will determine a stockholder's status as a Non-United
States Holder and eligibility for a reduced rate of, or exemption from,
withholding by reference to any outstanding certificates or statements
concerning eligibility for a reduced rate of, or exemption from, withholding
(e.g., IRS Form 1001 or IRS Form 4224) unless facts and circumstances indicate
that such reliance is not warranted. A Non-United States Holder may be eligible
to obtain a refund of all or a portion of any tax withheld if such Non-United
States Holder meets those tests described in Section 13 that would characterize
the exchange as a sale (as opposed to a dividend) or is otherwise able to
establish that no tax or a reduced amount of tax is due.
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NON-UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX WITHHOLDING,
INCLUDING ELIGIBILITY FOR A WITHHOLDING TAX REDUCTION OR EXEMPTION, AND THE
REFUND PROCEDURE.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and the stockholder's Share certificates are not immediately available
or cannot be delivered to the Depositary prior to the Expiration Date (or the
procedure for book-entry transfer cannot be completed on a timely basis) or if
time will not permit all required documents to reach the Depositary prior to the
Expiration Date, the Shares may nevertheless be tendered, provided that all of
the following conditions are satisfied:
(a) the tender is made by or through an Eligible Institution;
(b) the Depositary receives by hand, mail, overnight courier, telegram
or facsimile transmission, on or prior to the Expiration Date, a
properly completed and duly executed Notice of Guaranteed Delivery
in the form the Company has provided with this Offer to Purchase,
including (where required) a signature guarantee by an Eligible
Institution in the form set forth in such Notice of Guaranteed
Delivery; and
(c) the certificates for all tendered Shares, in proper form for
transfer (or confirmation of book-entry transfer of such Shares
into the Depositary's account at the Book-Entry Transfer Facility),
together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) and any
required signature guarantees or other documents required by the
Letter of Transmittal, are received by the Depositary within three
Nasdaq trading days after the date of receipt by the Depositary of
the Notice of Guaranteed Delivery.
RETURN OF TENDERED SHARES. If any tendered Shares are not purchased, or if
less than all Shares evidenced by a stockholder's certificates are tendered,
certificates for unpurchased Shares will be returned as promptly as practicable
after the expiration or termination of the Offer or, in the case of Shares
tendered by book-entry transfer at the Book-Entry Transfer Facility, the Shares
will be credited to the appropriate account maintained by the tendering
stockholder at the Book-Entry Transfer Facility, in each case without expense to
the stockholder.
COMPANY OPTION PLANS. The Company is not offering, as part of the Offer,
to cancel for cash any Options outstanding under the Company's Option Plans, and
tenders of Options will not be accepted. Holders of Options who wish to
participate in the Offer must exercise their Options and purchase Shares subject
to the Option and then tender the Shares pursuant to the Offer; provided that,
any exercise of an Option and tender of Shares is in accordance with the terms
of the Option Plans and the Options and is in compliance with all applicable
federal and state securities laws. In no event are any Options to be delivered
to the Depositary in connection with a tender of Shares hereunder. An exercise
of an Option cannot be revoked even if Shares received upon the exercise and
tendered in the Offer are not purchased in the Offer for any reason.
DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. Questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Company in its reasonable judgment, and its
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any or all tenders of any Shares that it determines
are not in proper form or the acceptance for payment of or payment for which
may, in the opinion of the Company's counsel, be unlawful. The Company also
reserves the absolute right to waive any of the conditions of the Offer or any
defect or irregularity in any tender with respect to any particular Shares or
any particular stockholder. The Company's interpretation of the terms of the
Offer will be final and binding on all parties. No tender of Shares will be
deemed to have been properly made until all defects or irregularities have been
cured by the tendering stockholder or waived by the Company. None of the
Company, the Dealer Manager, the Depositary or any other person shall be
obligated to give notice of any defects or irregularities in tenders, nor shall
any of them incur any liability for failure to give any notice.
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TENDERING SHAREHOLDER'S REPRESENTATION AND WARRANTY; COMPANY'S ACCEPTANCE
CONSTITUTES AN AGREEMENT. A tender of Shares pursuant to any of the procedures
described above will constitute the tendering stockholder's acceptance of the
terms and conditions of the Offer, as well as the tendering stockholder's
representation and warranty to the Company that, among other things, (a) the
stockholder has a "net long position" (as defined in Rule 14e-4 promulgated by
the Commission under the Exchange Act) in the Shares or equivalent securities at
least equal to the Shares tendered within the meaning of Rule 14e-4 and (b) the
tender of Shares complies with Rule 14e-4. It is a violation of Rule 14e-4 for a
person, directly or indirectly, to tender Shares for that person's own account
unless, at the time of tender and at the end of the proration period or period
during which Shares are accepted by lot (including any extensions thereof), the
person so tendering both (i) has a net long position equal to or greater than
the amount of (x) Shares tendered or (y) other securities immediately
convertible into or exchangeable or exercisable for the Shares tendered and will
acquire the Shares for tender by conversion, exchange or exercise and (ii) will
deliver or cause to be delivered the Shares in accordance with the terms of the
Offer. Rule 14e-4 provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person. The Company's acceptance for
payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and the Company upon the terms and
conditions of the Offer.
CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST
BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY. ANY SUCH DOCUMENTS
DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE
WILL NOT BE DEEMED TO BE VALIDLY TENDERED.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Company pursuant to the Offer, may also be withdrawn
at any time after 5:00 p.m., Eastern Daylight Savings Time, on October 22, 1999
which is forty business days after the commencement of the Offer.
For a withdrawal to be effective, a notice of withdrawal must be in written
form and transmitted by mail, overnight courier, hand-delivery, telegraph, telex
or facsimile and must be received in a timely manner by the Depositary at the
address set forth on the back cover of this Offer to Purchase. Any such notice
of withdrawal must specify the name of the tendering stockholder, the number of
Shares to be withdrawn and the name of the registered holder of such Shares. If
the certificates for Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the release of such certificates,
the tendering stockholder must also submit the serial numbers shown on the
particular certificates for Shares to be withdrawn and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution (except in
the case of Shares tendered for the account of an Eligible Institution). If
Shares have been tendered pursuant to the procedure for book-entry transfer set
forth in Section 3, the notice of withdrawal also must specify the name and the
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares and must otherwise comply with the Book-Entry Transfer
Facility's procedures. All questions as to the form and validity (including the
time of receipt) of any notice of withdrawal will be determined by the Company,
in its sole discretion, which determination will be final and binding. None of
the Company, the Dealer Manager, the Depositary or any other person shall be
obligated to give notice of any defects or irregularities in any notice of
withdrawal, nor shall any of them incur liability for failure to give any
notice. Withdrawals may not be rescinded and any Shares properly withdrawn will
thereafter be deemed not validly tendered for purposes of the Offer unless the
withdrawn Shares are validly retendered prior to the Expiration Date by
following one of the procedures described in Section 3.
If the Company extends the Offer, is delayed in its purchase of Shares or
is unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain tendered Shares on behalf of the Company, and such
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Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in this Section 4.
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, as promptly as
practicable following the Expiration Date, the Company will accept for payment
and thereby purchase Shares validly tendered, and not withdrawn, prior to the
Expiration Date at the Purchase Price. For purposes of the Offer, the Company
will be deemed to have accepted for payment, and therefore purchased, Shares
that are validly tendered and not withdrawn (subject to the proration provisions
of the Offer) only when and if it gives written notice to the Depositary of its
acceptance of the Shares for payment pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, promptly
following the Expiration Date the Company will accept for payment and pay the
Purchase Price per Share for 3,000,000 Shares (subject to increase or decrease
as provided in Section 14) validly tendered, or such lesser number of Shares as
are validly tendered and not withdrawn as permitted in Section 4.
The Company will pay for Shares purchased pursuant to the Offer by
depositing the aggregate Purchase Price therefore with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payment from the Company and transmitting payment to the tendering stockholders.
In the event of proration, the Company will determine the proration factor
and pay for those tendered Shares accepted for payment as soon as practicable
after the Expiration Date; however, the Company does not expect to be able to
announce the final results of any proration and commence payment for Shares
purchased until approximately five business days after the Expiration Date.
Certificates for all Shares tendered and not purchased due to proration, will be
returned (or, in the case of Shares tendered by book-entry transfer, will be
credited to the account maintained with the Book-Entry Transfer Facility by the
participant therein who so delivered the Shares) to the tendering stockholder at
the Company's expense as promptly as practicable after the Expiration Date or
termination of the Offer without expense to the tendering stockholders. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE BE PAID BY THE COMPANY BY
REASON OF ANY DELAY IN MAKING PAYMENT. In addition, if certain events occur, the
Company may not be obligated to purchase Shares pursuant to the Offer. See
Section 6.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer. If, however, payment
of the Purchase Price is to be made to, or (in the circumstances permitted by
the Offer) if unpurchased Shares are to be registered in the name of, any person
other than the registered holder, or if tendered certificates are registered in
the name of any person other than the person signing the Letter of Transmittal,
the amount of all stock transfer taxes, if any (whether imposed on the
registered holder or the other person), payable on account of the transfer to
the person will be deducted from the Purchase Price unless satisfactory evidence
of the payment of the stock transfer taxes, or exemption therefrom, is
submitted. See Instruction 6 of the Letter of Transmittal.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Company will not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, or
the purchase of and the payment for Shares tendered, subject to Rule 13e-4(f)
under the Exchange Act, if at any time on or after August 25, 1999, and prior to
the Expiration Date, any of the following events shall have occurred (or shall
have been determined by the Company to have occurred) that, in the Company's
reasonable judgment and regardless of the circumstances giving rise thereto
(including any action or omission to act by the Company), makes it inadvisable
to proceed with the Offer or with acceptance for payment:
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person,
domestic or foreign, before any court, authority, agency or
tribunal that
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directly or indirectly (i) challenges the making of the Offer, the
acquisition of some or all of the Shares pursuant to the Offer or
otherwise relates in any manner to the Offer, or (ii) in the
Company's reasonable judgment, could materially and adversely
affect the business, condition (financial or otherwise), income,
operations or prospects of the Company and its subsidiaries, taken
as a whole, or otherwise materially impair in any way the
contemplated future conduct of the business of the Company or any
of its subsidiaries or materially impair the contemplated benefits
of the Offer to the Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment,
order or injunction threatened, proposed, sought, promulgated,
enacted, entered, amended, enforced or deemed to be applicable to
the Offer or the Company or any of its subsidiaries, by any court
or any authority, agency or tribunal that, in the Company's
reasonable judgment, would or might directly or indirectly (i)
make the acceptance for payment of, or payment for, some or all of
the Shares illegal or otherwise restrict or prohibit consummation
of the Offer, (ii) delay or restrict the ability of the Company,
or render the Company unable, to accept for payment or pay for
some or all of the Shares, (iii) materially impair the
contemplated benefits of the Offer to the Company, (iv) materially
and adversely affect the business, condition (financial or other),
income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in
any way the contemplated future conduct of the business of the
Company or any of its subsidiaries, or (v) make it likely that the
Shares would be delisted from trading on Nasdaq following the
Offer;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market, (ii) the
declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States, (iii) the commencement
of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv)
any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event
that, in the Company's reasonable judgment, might affect, the
extension of credit by banks or other lending institutions in the
United States, (v) any significant decrease in the market price of
the Shares or any change in the general political, market,
economic or financial conditions in the United States or abroad
that could, in the reasonable judgment of the Company, have a
material adverse effect on the Company's business, operations or
prospects or the trading in the Shares, (vi) in the case of any of
the foregoing existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof, or (vii) any
decline in either the Dow Jones Industrial Average or the Standard
and Poor's Index of 500 Industrial Companies by an amount in
excess of 10% measured from the close of business on August 25,
1999;
(d) a tender or exchange offer for any or all of the Shares (other
than the Offer), or any merger, business combination or other
similar transaction with or involving the Company or any
subsidiary, shall have been proposed, announced or made by any
person;
(e) (i) any entity, person or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act) shall have acquired or
proposed to acquire beneficial ownership of more than 5% of the
outstanding Shares (other than any such person, entity or group
who has filed a Schedule 13D or Schedule 13G with the Commission
on or before August 25, 1999), (ii) any such entity, group or
person who has filed a Schedule 13D or Schedule 13G with the
Commission on or before the Expiration Date shall have acquired or
proposed to acquire beneficial ownership of an additional 2% or
more of the outstanding Shares, or (iii) any person, entity or
group shall have filed a Notification and Report Form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
or made a public announcement reflecting an intent to acquire the
Company or any of its subsidiaries or any of their respective
11
<PAGE>
assets or securities other than in connection with a transaction
authorized by the Board of Directors; or
(f) any change or changes shall have occurred in the business,
financial condition, assets, income, operations, prospects or stock
ownership of the Company or its subsidiaries that, in the Company's
reasonable judgment, is or may have a material adverse significance
to the Company or its subsidiaries.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action or
omission by the Company) giving rise to any such condition, and may be waived by
the Company, in whole or in part, at any time and from time to time in its
reasonable judgment. The Company's failure at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by the Company concerning the events
described above will be final and binding.
7. PRICE RANGE OF SHARES.
The Company's Common Stock is traded on the Nasdaq under the symbol
"GRDG." As of August 25, 1999, there were approximately 17,100,536 holders of
record of the Company's Common Stock. The following table shows the range of
reported high and low closing prices per share as reported in published
financial sources for the periods indicated.
HIGH LOW
--------- -----------
Year Ended January 25, 1998
First quarter................... $ 9 15/16 $ 6 1/4
Second quarter.................. 14 3/4 7 3/4
Third quarter................... 15 7/8 11 3/4
Fourth quarter.................. 16 1/2 13 1/8
Year Ended January 31, 1999
First quarter................... 21 15/16 14 13/16
Second quarter.................. 22 1/2 13 3/4
Third quarter................... 14 5/8 4 7/8
Fourth quarter.................. 9 1/16 6 13/32
Year Ended January 30, 2000
First quarter................... 7 3/4 5 1/16
Second quarter.................. 7 7/16 4 3/4
Third quarter (through August
25, 1999)..................... 6 1/8 5 3/4
On August 25, 1999, the last trading day prior to the announcement and
commencement of the Offer, the closing per Share sales price as reported on the
Nasdaq was $5 15/16. The Company has not declared or paid any cash dividends on
its Common Stock. The Company currently intends to retain any earnings for use
in its business and therefore does not anticipate paying any cash dividends in
the foreseeable future. Any future determination to pay cash dividends will be
made by the Board of Directors in light of the Company's earnings, financial
condition, cash requirements, compliance with covenants in agreements to which
the Company is or may be subject, future prospects and other factors as the
Board of Directors deems relevant. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
8. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases 3,000,000 Shares pursuant to the Offer
at the specified purchase price of $7.00 per Share, the Company expects the
maximum aggregate cost, including all fees and expenses applicable to the Offer,
to be approximately $21.3 million. The Company anticipates that the
12
<PAGE>
funds necessary to pay such amounts will be provided through borrowings under
its $30 million unsecured line of credit with Bank of America (the "Line of
Credit") and from cash held by the Company.
The Line of Credit bears interest at an annual rate equal to the lending
bank's base rate or LIBOR plus 1.50% and matures June 30, 2001. At August 25,
1999, the Company had no borrowings outstanding under its Line of Credit. A copy
of the Line of Credit has been filed with the Commission as an exhibit to the
Company's Schedule 13E-4 which was filed in connection with this Offer.
The Company expects to repay indebtedness incurred under the Line of Credit
as a result of the Offer through cash flow from operations and/or future
borrowings.
9. CERTAIN INFORMATION ABOUT THE COMPANY.
The Company is a megastore retailer offering dominant assortments of
products related to its central merchandise theme of decorative home
accessories, seasonal products and crafts. The Company's ten complementary
product categories are:
o floral (silk and dried flowers) o home accents
o party supplies o pictures and frames
o housewares o crafts
o pottery o candles
o seasonal o baskets
The Company's strategy of clustering dominant assortments of merchandise
from related categories in a single retail location differentiates the Company
from traditional single category superstores. The Company believes that
combining these related product categories in one store creates significant
cross-merchandising opportunities which fulfill, at a single destination, most
product requirements for the customer seeking decorative home accessories,
seasonal products and crafts. The Company uses an everyday low pricing strategy
and emphasizes customer service in its stores. The Company currently operates 32
megastores in twelve states, primarily in the southern United States.
On August 26, 1999, the Company announced that its net sales in the fiscal
2000 second quarter increased 32% to $91,518,000 compared to $69,585,000 in the
fiscal 1999 second quarter. Sales at comparable stores remained even with the
same period of the prior year. Net income (loss) for the second fiscal quarter
amounted to ($7,173,000), compared to $168,000 in the same period of the prior
year. Net income (loss) per share for the quarter was ($0.42) compared to $0.01
for the same quarter of the prior year.
Net sales for the first half of fiscal 2000 increased 27% to $176,053,000
compared to $138,268,000 in the same period of the prior year. Sales at
comparable stores decreased 2% over the same period of the prior year. Net
income (loss) for the first half of fiscal 2000 was ($7,025,000) compared to
$1,213,000 in the same period of the prior year. Net income (loss) per share for
the first half of fiscal 2000 was ($0.40) compared to $0.07 in the same period
of the prior year.
INCLUDED IN THE LOSS FOR THE QUARTER WERE ONE TIME PRETAX CHARGES TOTALING
$10.3 MILLION ($6.6 MILLION AFTER TAX). SUCH CHARGES RELATE TO A $3.0 MILLION
INVENTORY PRODUCTIVITY CHARGE AND A $750,000 CHARGE FOR THE RECRUITMENT EXPENSE
OF A NEW CHIEF EXECUTIVE OFFICER. IN ADDITION, THE Company has decided to
replace certain proprietary MIS systems WITH an industry standard integrated
business solution. The Company recorded a PRETAX charge of $6.6 million, or
$0.25 per share, in the second quarter of fiscal 2000 which represents the book
value of these MIS systems at the anticipated date of conversion.
13
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
HISTORICAL FINANCIAL INFORMATION. The following table presents certain
summary consolidated historical financial information concerning the Company and
its subsidiaries. The historical information at and for fiscal years 1998 and
1999 has been summarized from the Company's audited consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended January 31, 1999. The historical financial information at and for the
quarter ended May 2, 1999 and April 26, 1998 has been summarized from the
Company's unaudited consolidated financial statements included in the Company's
Quarterly Report on Form 10-Q for the quarter ended May 2, 1999. The following
summary historical financial information should be read in conjunction with, and
is qualified in its entirety by reference to, such audited and unaudited
consolidated financial statements and their related notes.
<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-THREE
WEEK PERIOD WEEK PERIOD
ENDED ENDED THIRTEEN WEEK PERIOD ENDED
----------- ------------ --------------------------
JANUARY 25, JANUARY 31, APRIL 26,
1998 1999 1998 MAY 2, 1999
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SALES................................ $ 304,732 $ 364,742 $ 68,683 $ 84,535
COST OF SALES........................ 195,290 232,441 44,392 53,929
----------- ------------ ----------- -----------
Gross profit.................... 109,442 132,301 24,291 30,606
OPERATING EXPENSES:
Store operating................. 80,912 100,282 20,518 25,472
General and administrative...... 10,280 14,451 2,599 4,289
Amortization of intangibles and
deferred charges.............. 735 599 144 149
Preopening costs................ 1,122 2,219 -- 795
----------- ------------ ----------- -----------
Total operating expenses... 93,049 117,551 23,261 30,705
----------- ------------ ----------- -----------
Income (loss) from
operations................. 16,393 14,750 1,030 (99)
INTEREST EXPENSE..................... (59) (44) (14) (12)
INTEREST INCOME...................... 1,478 1,694 618 341
----------- ------------ ----------- -----------
Income before income taxes...... 17,812 16,400 1,634 230
INCOME TAXES......................... 6,379 5,904 589 82
----------- ------------ ----------- -----------
Net income........................... $ 11,433 $ 10,496 $ 1,045 $ 148
=========== ============ =========== ===========
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Net income, basic............... $ .64 $ .58 $ .06 $ .01
----------- ------------ ----------- -----------
Net income, diluted............. $ .62 $ .57 $ .06 $ .01
=========== ============ =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING,
BASIC.............................. 17,904,447 18,062,727 17,995,156 17,639,929
=========== ============ =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING,
DILUTED............................ 18,472,759 18,564,776 18,625,411 17,973,707
=========== ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT JANUARY 25, AT JANUARY 31, AT APRIL 26, AT MAY 2,
1998 1999 1998 1999
--------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
SELECTED BALANCE SHEET INFORMATION:
Working capital................. $ 77,527 $ 79,481 $ 78,801 $ 72,746
Total assets.................... 160,212 170,524 161,571 173,030
Current and long term debt...... 200 100 200 100
Stockholders' equity............ 125,953 137,197 127,103 131,727
</TABLE>
14
<PAGE>
PRO FORMA FINANCIAL INFORMATION. THE FOLLOWING TABLE PRESENTS CERTAIN
UNAUDITED PRO FORMA SUMMARY FINANCIAL INFORMATION BASED ON HISTORICAL
INFORMATION WHICH HAS BEEN ADJUSTED: (A) FOR THE REPURCHASE OF 3,000,000 SHARES
AT A PRICE OF $7.00 PER SHARE AND (B) AS IF THE TRANSACTION HAD TAKEN PLACE (I)
AT THE BEGINNING OF THE PERIODS PRESENTED FOR INCOME STATEMENT ITEMS AND (II) AT
THE END OF THE PERIODS PRESENTED FOR BALANCE SHEET ITEMS BUT, IN EACH CASE, SUCH
INFORMATION DOES NOT PURPORT TO BE INDICATIVE OF THE RESULTS WHICH WOULD
ACTUALLY HAVE BEEN ACHIEVED IF THE OFFER HAD BEEN COMPLETED AS OF THE PERIODS
INDICATED OR WHICH MAY BE ACHIEVED IN THE FUTURE.
THE PRO FORMA SUMMARY FINANCIAL INFORMATION SHOULD BE READ IN CONJUNCTION
WITH THE AUDITED AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AND RELATED
NOTES SET FORTH IN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1999
AND FORM 10-Q FOR THE QUARTER ENDED MAY 2, 1999.
<TABLE>
<CAPTION>
FIFTY-THREE WEEK PERIOD THIRTEEN WEEK PERIOD
ENDED ENDED
-------------------------- --------------------------
JANUARY 31, 1999 MAY 2, 1999
-------------------------- --------------------------
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
SALES................................ $ 364,742 $ 364,742 $ 84,535 $ 84,535
COST OF SALES........................ 232,441 232,441 53,929 53,929
------------ ------------ ------------ ------------
Gross profit.................... 132,301 132,301 30,606 30,606
TOTAL OPERATING...................... 117,551 117,551 30,705 30,705
Income (loss) from operations... 14,750 14,750 (99) (99)
INTEREST EXPENSE..................... (44) (44) (12) (12)
INTEREST INCOME...................... 1,694 644 341 79
------------ ------------ ------------ ------------
Income (loss) before income
taxes......................... 16,400 15,350 230 (32)
INCOME TAXES......................... 5,904 5,526 82 (12)
------------ ------------ ------------ ------------
Net income (loss)............... $ 10,496 $ 9,824 $ 148 $ (20)
============ ============ ============ ============
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Net income, basic............... $ .58 $ .65 $ .01 $ .00
------------ ------------ ------------ ------------
Net income, diluted............. $ .57 $ .63 $ .01 $ .00
------------ ------------ ------------ ------------
WEIGHTED AVERAGE SHARES OUTSTANDING,
BASIC.............................. 18,062,727 15,062,727 17,639,929 14,639,929
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING,
DILUTED............................ 18,564,776 15,564,776 17,973,707 14,639,929
============ ============ ============ ============
<CAPTION>
JANUARY 31, 1999 MAY 2, 1999
-------------------------- --------------------------
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PRO FORMA SELECTED BALANCE SHEET
INFORMATION:
Working capital................. $ 79,481 $ 57,809 $ 72,746 $ 51,577
Total assets.................... 170,524 148,852 173,030 151,861
Current and long term debt...... 100 100 100 100
Stockholders equity............. 137,197 115,525 131,727 110,558
</TABLE>
- ------------
(1) The pro forma selected consolidated financial information assumes 3,000,000
shares are purchased pursuant to the OFFER at $7.00 per share.
15
<PAGE>
ADDITIONAL INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549; at its regional offices located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material may also
be obtained by mail, upon payment of the Commission's customary charges, from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a Web site
on the World Wide Web at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission (which the Company does). Reports, proxy
statements and other information concerning the Company also can be inspected at
the offices of the Nasdaq National Market, 1735 K Street N.W., Washington, D.C.
20006-1500, on which the Shares are listed.
10. INTEREST OF DIRECTORS AND OFFICERS AND PRINCIPAL STOCKHOLDERS; TRANSACTIONS
AND ARRANGEMENTS CONCERNING SHARES.
As of the close of business on August 25, 1999, the Company had 17,100,536
issued and outstanding Shares and had granted Options to purchase an aggregate
of 1,434,807 Shares. Of these Options, 853,966 are exercisable and 596,140 of
these Options have an exercise price below the Purchase Price. The Company is
not, in connection with the Offer, offering to cancel for cash any Options and
tenders of Options will not be accepted. See Section 3.
Each outstanding Share is entitled to one vote. The 3,000,000 Shares that
the Company is offering to purchase pursuant to the Offer represent
approximately 17.5% of the Shares outstanding on August 25, 1999 (approximately
16.7% assuming exercise of outstanding exercisable Options).
As of August 25, 1999, the Company's directors and executive officers as a
group (14 persons) beneficially owned an aggregate of 1,839,886 Shares
representing approximately 10.3% of the outstanding Shares, assuming the
exercise by such persons of options that are currently exercisable or that are
exercisable within 60 days.
During the period beginning July 20, 1999 and ending July 30, 1999, the
Company purchased from its stockholders an aggregate of 90,000 Shares at prices
ranging from $6.00 to $6.25 per Share. On June 30, 1999, Jane Arbuthnot, the
Company's Chief Financial Officer, exercised options to purchase an aggregate of
10,000 Shares at an exercise price of $.11 per Share.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of the Company's directors or executive
officers, nor any affiliates of any of the foregoing, had any transactions
involving the Shares during the 40 business days prior to the date hereof.
Executive officers and directors of the Company may participate in the
Offer on the same basis as the Company's other stockholders. The Company has
been advised that none of its directors and executive officers intends to tender
Shares pursuant to the Offer.
Except for outstanding options to purchase shares granted to directors and
executive officers and as otherwise described herein, neither the Company nor,
to the best of the Company's knowledge, any of its affiliates, directors or
executive officers, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
Offer with respect to any securities of the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or the
giving or withholding of proxies, consents or authorizations.
16
<PAGE>
11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise be traded publicly and may reduce the
number of stockholders. Nonetheless, the Company anticipates there will be a
sufficient number of Shares outstanding and publicly traded following
consummation of the Offer to ensure a continued trading market for the Shares.
Based upon published guidelines of Nasdaq, the Company does not believe its
purchase of Shares pursuant to the Offer will cause the Company's remaining
Shares to be delisted from Nasdaq. Such a delisting of the Shares, together with
the substantial decrease in the percentage of Shares held by stockholders, could
result in a substantial decrease in the liquidity of the Shares, even if the
Company continues to be a reporting company under the Exchange Act and continues
to file the periodic reports (including annual and quarterly reports) required
to be filed thereunder. If the Shares are delisted from Nasdaq, the Shares may
only be able to trade in the over-the-counter market. Although prices in respect
of trades may be published by the National Association of Securities Dealers,
Inc. on its electronic bulletin board and "pink sheets," quotes for such
shares would not be as readily available; accordingly, the Shares could trade
much less frequently than the Shares traded prior to any such delisting, which
could have a material adverse effect on the market value of the Shares.
The Shares are registered under the Exchange Act, which requires, among
other things, that the Company furnish certain information to its stockholders
and the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's stockholders. The Company believes its purchase
of Shares pursuant to the Offer will not result in the Shares becoming eligible
for deregistration under the Exchange Act.
12. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
The Company is not aware of any license or regulatory permit material to
the Company's business that might be adversely affected by the Company's
acquisition of Shares as contemplated herein or of any approval or other action
by any government or governmental, administrative or regulatory authority or
agency, domestic or foreign, that would be required for the acquisition or
ownership of Shares by the Company as contemplated herein. Should any such
approval or other action be required, the Company presently contemplates that
such approval or other action will be sought. The Company is unable to predict
whether it will be required to delay the acceptance for payment of or payment
for Shares tendered pursuant to the Offer pending the outcome of any such
matter. There can be no assurance that any such approval or other action, if
needed, would be obtained or would be obtained without substantial conditions or
that the failure to obtain any such approval or other action might not result in
adverse consequences to the Company's business. The Company's obligations under
the Offer to accept for payment and pay for Shares is subject to certain
conditions. See Section 6.
13. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following summary describes the principal United States federal income
tax consequences to United States Holders (as defined below) of a sale of Shares
pursuant to the Offer. Those stockholders who do not participate in the Offer
should not incur any United States federal income tax liability from the Offer.
This summary is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), existing United States Treasury Regulations promulgated thereunder,
published rulings, administrative pronouncements and judicial decisions, changes
to which could affect the tax consequences described herein (possibly on a
retroactive basis).
This summary addresses only Shares held as capital assets. It does not
address all of the United States federal tax consequences that may be relevant
to particular stockholders in light of their personal circumstances, or to
certain types of stockholders (such as certain financial institutions, dealers
or traders in securities or commodities, insurance companies, tax-exempt
organizations or persons who hold Shares as a position in a "straddle" or as
part of a "hedging" or "conversion" transaction or that have a functional
currency other than the United States dollar). This summary may not be
applicable with respect to Shares acquired as compensation (including Shares
acquired upon the exercise of options or which were or are
17
<PAGE>
subject to forfeiture restrictions). This summary does not address the state,
local or foreign tax consequences of participating in the Offer. EACH HOLDER OF
SHARES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE PARTICULAR
CONSEQUENCES TO SUCH HOLDER OF PARTICIPATION IN THE OFFER.
A "United States Holder" is a holder of Shares that for United States
federal income tax purposes is (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized in or under the laws of
the United States or any State or division thereof (including the District of
Columbia), (iii) an estate the income of which is subject to United States
federal income taxation regardless of its source, or (iv) a trust (a) the
administration over which a United States court can exercise primary supervision
and (b) all of the substantial decisions of which one or more United States
persons have the authority to control, and certain other trusts considered
United States Holders for federal income tax purposes. A "Non-United States
Holder" is a holder of Shares other than a United States Holder.
A United States Holder participating in the Offer will be treated either as
having sold Shares or as having received a dividend distribution from the
Company. In that regard, under Section 302 of the Code, a United States Holder
whose Shares are sold pursuant to the Offer will be treated as having sold
Shares if the sale (i) results in a "complete termination" of all of such
holder's equity interest in the Company, (ii) is a "substantially
disproportionate" redemption with respect to such holder or (iii) is "not
essentially equivalent to a dividend" with respect to such holder. In applying
each of the Section 302 tests, a United States Holder will be treated as owning
Shares actually or constructively owned by certain related individuals and
entities.
The receipt of cash by a stockholder will result in a "complete
termination" of the stockholder's interest if either (i) all of the Shares that
are actually and constructively owned by the stockholder are transferred
pursuant to the Offer or (ii) all of the Shares actually owned by the
stockholder are sold pursuant to the Offer and the stockholder is eligible to
waive, and effectively waives, the attribution of the Shares constructively
owned by the stockholder in accordance with the procedures described in the
Code. A sale of Shares will be "substantially disproportionate" with respect
to a United States Holder if the percentage of the then outstanding Shares
actually and constructively owned by such holder immediately after the sale of
Shares pursuant to the Offer is less than 80% of the percentage of the Shares
actually and constructively owned by such holder immediately before the sale
(treating Shares sold pursuant to the Offer as outstanding). A United States
Holder will satisfy the "not essentially equivalent to a dividend" test if the
reduction in such holder's proportionate interest in the Company constitutes a
"meaningful reduction" given such holder's particular facts and circumstances.
The IRS has concluded in a published ruling that even a minor reduction in the
percentage interest of a stockholder whose relative stock interest in a publicly
held corporation is minimal and who exercises no control over corporate affairs
constitutes such a "meaningful reduction."
If a United States Holder is treated as having sold Shares, such holder
will recognize capital gain or loss equal to the difference between the amount
of cash received and such holder's adjusted tax basis in the Shares sold to the
Company. In the case of an individual United States Holder whose holding period
for such Shares exceeds one year, the maximum marginal United States federal
income tax rate of 20% applicable to such gain will be lower than the maximum
marginal United States federal income tax rate applicable to ordinary income of
39.6%.
If a United States Holder who participates in the Offer is not treated as
having sold Shares, such holder will be treated as receiving a dividend to the
extent of such holder's ratable share of the Company's earnings and profits.
Such a dividend will be includible in the United States Holder's gross income as
ordinary income without reduction for the adjusted tax basis of the Shares sold.
In such event, the United States Holder's adjusted tax basis in its Shares sold
in the Offer generally will be added to such holder's adjusted tax basis in the
remaining Shares. A dividend received by a corporate United States Holder may be
(i) eligible for a dividends-received deduction (subject to applicable
limitations) and (ii) subject to the "extraordinary dividend" provisions of
the Code. To the extent, if any, that the cash received by a United States
Holder exceeds the Company's earnings and profits, it will be treated first as a
tax-free return of such
18
<PAGE>
United States Holder's tax basis in the Shares and thereafter as capital gain.
See Section 3 with respect to the application of United States federal income
tax withholding to payments made to Non-United States Holders and the backup
withholding tax requirements.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY. EACH SHAREHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE OFFER, INCLUDING
THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS, AND OF
CERTAIN FEDERAL TAX LAWS.
14. EXTENSION OF THE OFFER; TERMINATION; AMENDMENT.
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 6 shall have occurred or shall be deemed by the Company to
have occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and payment for, any Shares by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. During any such extension, all Shares previously tendered
and not properly withdrawn will remain subject to the Offer and to the rights of
a tendering stockholder to withdraw such stockholder's Shares. The Company also
expressly reserves the right, in its reasonable discretion, to terminate the
Offer and not accept for payment or pay for any Shares not theretofore accepted
for payment or paid for or, subject to applicable law, to postpone payment for
Shares upon the occurrence of any of the conditions specified in Section 6
hereof by giving oral or written notice of such termination or postponement to
the Depositary and making a public announcement thereof. The Company's
reservation of the right to delay payment for Shares which it has accepted for
payment is limited by Rule 13e-4(f)(5) promulgated under the Exchange Act, which
requires that the Company must pay the consideration offered or return the
Shares tendered promptly after termination or withdrawal of a tender offer.
Subject to compliance with applicable law, the Company further reserves the
right, in its reasonable discretion, and regardless of whether any of the events
set forth in Section 6 shall have occurred or shall be deemed by the Company to
have occurred, to amend the Offer in any respect (including, without limitation,
by decreasing or increasing the consideration offered in the Offer to holders of
Shares or by decreasing or increasing the number of Shares being sought in the
Offer). Amendments to the Offer may be made at any time and from time to time
effected by public announcement thereof, such announcement, in the case of an
extension, to be issued no later than 9:00 a.m., Eastern Daylight Savings Time,
on the next business day after the last previously scheduled or announced
Expiration Date. Any public announcement made pursuant to the Offer will be
disseminated promptly to stockholders in a manner reasonably designed to inform
stockholders of such change. Without limiting the manner in which the Company
may choose to make a public announcement, except as required by applicable law,
the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to the
Dow Jones News Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules provide that the
minimum period during which an offer must remain open following material changes
in the terms of the Offer or information concerning the Offer (other than a
change in price or a change in percentage of securities sought) will depend on
the facts and circumstances, including the relative materiality of such terms or
information. If (i)(a) the Company increases or decreases the price to be paid
for Shares, (b) materially increases the Dealer Manager fee, (c) increases the
number of Shares being sought in the Offer and, in the event of an increase in
the number of Shares being sought, such increase exceeds 2% of the outstanding
Shares, or (d) decreases the number of Shares being sought, and (ii) the Offer
is scheduled to expire at any time earlier than the expiration of a period
ending on the tenth business day from, and including, the date that such notice
of an increase or decrease is first published, sent or given in the manner
specified in this Section 14, the Offer will be extended until the expiration of
such period of ten business days. For the purposes of the Offer, a "business
day" means any day other than a Saturday, Sunday or
19
<PAGE>
Federal holiday and consists of the time period from 12:01 a.m. through 12:00
Midnight, Eastern Daylight Savings Time.
15. FEES AND EXPENSES.
The Company has retained The Robinson-Humphrey Company, LLC as Dealer
Manager in connection with the Offer. The Dealer Manager will receive CUSTOMARY
COMPENSATION FOR ITS SERVICES. The Company will also reimburse the Dealer
Manager for its out-of-pocket expenses relating to the Offer, including fees and
expenses of counsel. The Company has agreed to indemnify the Dealer MANAGER
against certain liabilities under the federal securities laws.
The Company has retained ChaseMellon Shareholder Services, L.L.C. and
CHASEMELLON CONSULTING SERVICES, L.L.C. (TOGETHER "ChaseMellon") to act as the
Information Agent and the Depositary respectively, in connection with the Offer.
ChaseMellon may contact stockholders by mail, telephone, telex, telegraph and
personal interview, and may request brokers, dealers and other nominee
stockholders to forward materials relating to the Offer to beneficial owners.
ChaseMellon will receive reasonable and customary compensation for their
services. The Company will also reimburse ChaseMellon for out-of-pocket
expenses, including reasonable attorneys' fees, and has agreed to indemnify the
Information Agent against certain liabilities in connection with the Offer,
including certain liabilities under the federal securities laws.
NONE OF THE INFORMATION AGENT, THE DEPOSITARY AND THE DEALER MANAGER HAS
BEEN RETAINED TO MAKE SOLICITATIONS OR RECOMMENDATIONS IN CONNECTION WITH THE
OFFER.
No fees or commissions will be payable by the Company to brokers, dealers
or other persons (other than fees to the Dealer Manager as described above) for
soliciting tenders of Shares pursuant to the Offer. Stockholders holding Shares
through brokers or banks are urged to consult the brokers or banks to determine
whether transaction costs are applicable if stockholders tender Shares through
such brokers or banks and not directly to the Depositary. The Company, however,
upon request through the Dealer Manager or the Information Agent, will reimburse
brokers, dealers and commercial banks for customary mailing and handling
expenses incurred by them in forwarding the Offer and related materials to the
beneficial owners of Shares held by them as a nominee or in a fiduciary
capacity. No broker, dealer, commercial bank or trust company has been
authorized to act as the agent of the Company, the Dealer Manager or the
Depositary for purposes of the Offer. The Company will pay or cause to be paid
all stock transfer taxes, if any, on its purchase of Shares except as otherwise
provided in Instruction 6 in the Letter of Transmittal.
16. MISCELLANEOUS.
The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer or the acceptance of Shares pursuant
thereto is not in compliance with any valid applicable law, the Company will
make a good faith effort to comply with the applicable law. If, after such good
faith effort, the Company cannot comply with the applicable law, the Offer will
not be made to (nor will tenders be accepted from or on behalf of) the holders
of Shares in such jurisdiction. In any jurisdiction the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on the Company's behalf by the Dealer Manager
or by one or more registered brokers or dealers licensed under the laws of the
jurisdiction.
20
<PAGE>
FURTHER INFORMATION
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED
LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY.
Pursuant to Rule 13e-4 of the General Rules and Regulations of the
Commission under the Exchange Act, the Company has filed with the Commission a
Schedule 13E-4 that contains additional information with respect to the Offer.
Such Schedule 13E-4, including the exhibits and any amendments thereto, may be
examined, and copies may be obtained, at the same places and in the same manner
as is set forth in Section 9 with respect to information concerning the Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY OR THE DEALER MANAGER IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED
LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE DEALER
MANAGER.
GARDEN RIDGE CORPORATION
August 26, 1999
21
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and certificates for the Shares and any
other required documents should be sent or delivered by each stockholder or such
stockholder's broker, dealer, commercial bank, trust company or other nominee to
the Depositary at its address set forth below:
<TABLE>
<CAPTION>
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Drop-Reorg.
New York, NY 10271 Ridgefield Park, NJ 07660
BY FACSIMILE TRANSMISSION:
(201) 296-4293
(For Eligible Institutions Only)
CONFIRM FACSIMILE BY TELEPHONE:
(201) 296-4860
THE INFORMATION AGENT FOR THE OFFER IS:
CHASEMELLON CONSULTING SERVICES, L.L.C.
450 West 33rd Street
14th Floor
New York, NY 10001
BANKS OR BROKERS CALL: (212) 273-8083 FOR INFORMATION CALL TOLLFREE: (877) 698-6865
THE DEALER MANAGER FOR THE OFFER IS:
THE ROBINSON-HUMPHREY COMPANY
3333 Peachtree Road, N.E.
Atlanta, Georgia 30326
</TABLE>
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent at the above address and phone
number. Stockholders may also contact their broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
22
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
GARDEN RIDGE CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 26, 1999
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
EASTERN DAYLIGHT SAVINGS TIME, ON THURSDAY, SEPTEMBER 23, 1999 UNLESS THE OFFER
IS EXTENDED.
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Drop-Reorg.
New York, NY 10271 Ridgefield Park, NJ 07660
FACSIMILE TRANSMISSION:
(201) 296-4293
(For Eligible Institutions Only)
CONFIRM FACSIMILE BY TELEPHONE:
(201) 296-4860
THE INFORMATION AGENT FOR THE OFFER IS:
CHASEMELLON CONSULTING SERVICES, L.L.C.
450 West 33rd Street
14th Floor
New York, NY 10001
BANKS OR BROKERS CALL: (212) 273-8083 FOR INFORMATION CALL TOLLFREE: (877) 698-6865
THE DEALER MANAGER FOR THE OFFER IS:
THE ROBINSON-HUMPHREY COMPANY
3333 Peachtree Road, N.E.
Atlanta, Georgia 30326
</TABLE>
DELIVERY OF THIS INSTRUMENT AND ALL OTHER DOCUMENTS TO ANY ADDRESS OR
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY. DELIVERIES TO THE COMPANY WILL NOT BE
FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT CONSTITUTE VALID DELIVERY.
DELIVERIES TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE VALID
DELIVERY TO THE DEPOSITARY.
THIS LETTER OF TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS, SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed only if (a) certificates for
Shares (as defined below) are being forwarded herewith or (b) a tender of Shares
is being made concurrently by book-entry transfer to the account maintained by
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to Section 3 of
the Offer to Purchase. Stockholders who cannot deliver the certificates for
their Shares to the Depositary prior to the Expiration Date (as defined in the
Offer to Purchase) or who cannot complete the procedure for book-entry transfer
on a timely basis or who cannot deliver a Letter of Transmittal and all other
required documents to the Depositary prior to the Expiration Date (as defined
below) must, in each case, tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase (as defined
below). See Instruction 2.
<PAGE>
Stockholders who cannot deliver their Share certificates and any other
required documents to the Depositary by the Expiration Date (as defined in the
Offer to Purchase) must tender their Shares using the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2.
NAME(S) AND ADDRESSES OF REGISTERED HOLDERS(S)
(Please fill in, if blank, exactly as name(s) appear(s) on Share certificate(s))
DESCRIPTION OF SHARES TENDERED
(See Instructions 3 and 4)
SHARES TENDERED
(ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
TOTAL NUMBER OF
SHARE CERTIFICATE SHARES REPRESENTED NUMBER OF
NUMBER(S)* BY CERTIFICATE(S)* SHARES TENDERED**
- ---------------------- ---------------------------------- ----------------------
- ---------------------- ---------------------------------- ----------------------
- ---------------------- ---------------------------------- ----------------------
- ---------------------- ---------------------------------- ----------------------
- ---------------------- ---------------------------------- ----------------------
- ---------------------- ---------------------------------- ----------------------
- ---------------------- ---------------------------------- ----------------------
- ---------------------- ---------------------------------- ----------------------
- ---------------------- ---------------------------------- ----------------------
- ---------------------- ---------------------------------- ----------------------
Total Shares Tendered:
- ---------------------- ---------------------------------- ----------------------
- --------------------------------------------------------------------------------
Indicate in this box the order (by certificate number) in which Shares are
to be purchased in event of proration. (Attach additional list if
necessary)*** See Instruction 8.
Shares: 1st:_____ 2nd:_____ 3rd:_____ 4th:_____
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* DOES NOT need to be completed if Shares are tendered by book-entry
transfer.
** If you desire to tender less than all Shares evidenced by any certificates
listed above, please indicate in this column the number of Shares you wish
to tender. Otherwise, all Shares evidenced by such certificates will be
deemed to have been tendered. See Instruction 4.
*** If you do not designate an order, in the event less than all Shares
tendered are purchased due to proration, Shares will be selected for
purchase by the Depositary. See Instruction 8.
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN
HAVE BEEN LOST OR DESTROYED. NUMBER OF SHARES REPRESENTED BY LOST OR
DESTROYED CERTIFICATES: ____________. TO PROPERLY TENDER SUCH SHARES IN
THIS OFFER, YOU MUST RECEIVE A REPLACEMENT CERTIFICATE FOR SUCH SHARES AND
DELIVER THAT CERTIFICATE TO THE DEPOSITARY. TO RECEIVE A REPLACEMENT
CERTIFICATE, CALL THE COMPANY'S TRANSFER AGENT, CHASEMELLON SHAREHOLDER
SERVICES, LLC, AT (800) 635-9270.
2
<PAGE>
THIS BOX IS FOR USE BY ELIGIBLE INSTITUTIONS ONLY:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ________________________________________
DTC Account Number: ___________________________________________________
Transaction Code Number: ______________________________________________
[ ] CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): _______________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________________
Name of Institution that Guaranteed Delivery: _________________________
DTC Account Number: ___________________________________________________
Transaction Code Number: ______________________________________________
- --------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
To ChaseMellon Shareholder Services, L.L.C.:
The undersigned hereby tenders to Garden Ridge Corporation, a Delaware
corporation (the "Company"), the above described shares of the Company's
common stock, $.01 par value per share (the "Shares"), represented by the
above described certificates for Shares at a price of $7.00 per Share, net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Company's Offer to Purchase, dated August 26, 1999 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of
such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to all the Shares that are being tendered hereby and orders the registration
of all such Shares if tendered by book-entry transfer and hereby irrevocably
constitutes and appoints the Depositary as the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Depositary
also acts as the agent of the Company) with respect to such Shares with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to: (i) deliver certificate(s) for such Shares
or transfer ownership of such Shares on the account books maintained by the
Book-Entry Transfer Facility, together in either such case with all accompanying
evidences of transfer and authenticity, to, or upon the order of, the Company
upon receipt by the Depositary, as the undersigned's agent, of the aggregate
Purchase Price (as defined below) with respect to such Shares; (ii) present
certificates for such Shares for cancellation and transfer on the Company's
books; and (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, subject to the next paragraph, all in
accordance with the terms of the Offer.
The undersigned has full power and authority to tender, sell, assign and
transfer the Shares tendered hereby and further represents and warrants to the
Company that:
(a) the undersigned understands that tenders of Shares pursuant to any one
of the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer, including the undersigned's representation and
warranty that: (i) the undersigned has
3
<PAGE>
a "net long position" in Shares or equivalent securities at least equal to the
Shares tendered within the meaning of Rule 14e-4 under the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and (ii) such tender of Shares
complies with Rule 14e-4 under the 1934 Act;
(b) when and to the extent the Company accepts such Shares for purchase,
the Company will acquire good, marketable and unencumbered title to them, free
and clear of all security interests, liens, charges, encumbrances, conditional
sales agreements or other obligations relating to their sale or transfer, and
not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any additional
documents the Depositary or the Company deems necessary or desirable to complete
the assignment, transfer and purchase of the Shares tendered hereby;
(d) the undersigned has read and agrees to all of the terms of the Offer;
and
(e) the Company's acceptance for payment of Shares tendered pursuant to
the Offer will constitute a binding agreement between the undersigned and the
Company upon terms and subject to the conditions of the Offer.
All authorities conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, executors, administrators, successors, assigns,
trustees in bankruptcy, and legal representatives of the undersigned. Except as
stated in the Offer to Purchase, this tender is irrevocable.
The name(s) and address(es) of the registered holder(s) should be printed
above, if they are not already printed above, exactly as they appear on the
certificates representing Shares tendered hereby. The certificate numbers, the
number of Shares represented by such certificates and the number of Shares that
the undersigned wishes to tender, should be set forth in the appropriate boxes
above. Any order (by certificate number) in which the tendered Shares must be
purchased should also be indicated above. The price at which Shares are being
tendered should be indicated in the boxes below.
The undersigned understands that the Company has, upon the terms and
subject to the conditions of the Offer, determined a single per Share price of
$7.00 per Share, net to the seller in cash, without interest thereon (the
"Purchase Price"), that it will pay for Shares properly tendered and not
withdrawn prior to the Expiration Date pursuant to the Offer. The undersigned
understands that (i) all Shares properly tendered and not properly withdrawn
prior to the Expiration Date will be purchased at such Purchase Price, net to
the Seller in cash, upon the terms and subject to the conditions of the Offer,
including its proration provisions, and (ii) the Company will return all other
Shares not purchased pursuant to the Offer, including Shares not purchased
because of proration.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may accept for payment less than all of the Shares tendered hereby. In any such
event, the undersigned understands that certificate(s) for any Shares delivered
herewith but not tendered or not purchased will be returned to the undersigned
at the address indicated above, unless otherwise indicated under the "Special
Payment Instructions" or "Special Delivery Instructions" boxes below. The
undersigned recognizes that the Company has no obligation, pursuant to the
Special Payment Instructions, to transfer any certificate for Shares from the
name of its registered holder, or to order the registration or transfer of
Shares tendered by book-entry transfer, if the Company purchases none of the
Shares represented by such certificate or tendered by such book-entry transfer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the Purchase Price of any Shares purchased, and/or return
any Shares not tendered or not purchased, in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the Purchase Price of any Shares purchased and/or any
certificates for Shares not tendered or not purchased (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature(s). In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the check for the Purchase Price of any Shares purchased and/or return any
Shares not tendered or not purchased in the name(s) of, and mail such check
and/or any certificates to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation, pursuant to the "Special Payment
Instructions," to transfer any Shares from the name of the registered holder(s)
thereof if the Company does not accept for payment any of the Shares so
tendered.
4
<PAGE>
- --------------------------------------------------------------------------------
ODD LOTS
(SEE INSTRUCTION 7)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially or of record as of the close of business on August
25, 1999 and who continues to own, beneficially or of record, as of the
Expiration Date, an aggregate of fewer than 100 Shares. The undersigned either
(check one box):
[ ] was the beneficial or record owner of, as of the close of business on
August 25, 1999, and continues to own beneficially or of record as of
the Expiration Date, an aggregate of fewer than 100 Shares, all of which
are being tendered; or
[ ] is a broker, dealer, commercial bank, trust company, or other nominee
that (a) is tendering, for the beneficial owner(s) thereof, Shares with
respect to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person was the beneficial or record owner of, as of the close of
business on August 25, 1999, and continues to own beneficially or of
record as of the Expiration Date, an aggregate of fewer than 100 Shares
and is tendering all of such Shares.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY.
-----------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 9)
To be completed ONLY if certificates for Shares not
tendered or not purchased and/or any check for the
aggregate Purchase Price of Shares purchased are to
be issued in the name of and sent to someone other
than the undersigned.
Issue:
[ ]CHECK TO: [ ]CERTIFICATES TO:
Name(s):.............................................
(PLEASE PRINT)
Address:.............................................
.....................................................
.....................................................
(INCLUDE ZIP CODE)
.....................................................
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
-----------------------------------------------------
-----------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 9)
To be completed ONLY if certificatesfor Shares not
tendered or not purchased and/or any check for the
aggregate Purchase Price of Shares purchased, issued
in the name of the undersigned, are to be mailed to
someone other than the undersigned or to the
undersigned at an address other than that shown
above.
Mail:
[ ]CHECK TO: [ ]CERTIFICATES TO:
Name(s):.............................................
(PLEASE PRINT)
Address:.............................................
.....................................................
.....................................................
(INCLUDE ZIP CODE)
-----------------------------------------------------
5
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL STOCKHOLDERS)
(PLEASE ALSO COMPLETE AND RETURN THE ENCLOSED SUBSTITUTE FORM W-9)
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and documents transmitted with
this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or another
person acting in a fiduciary or representative capacity, please set forth full
title and see Instruction 5.)
-----------------------------------------------------------------
SIGNATURES OF OWNER(S)
Dated:____, 1999
Name(s):_________________________________________________________
(PLEASE PRINT)
Capacity (Full Title):___________________________________________
Address:_________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.:_____________________________________
Taxpayer Identification or Social Security No.:__________________
(SEE SUBSTITUTE FORM W-9)
-----------------------------------------------------------------
-----------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Name of Firm:____________________________________________________
Authorized Signature:____________________________________________
Name:____________________________________________________________
(PLEASE PRINT)
Title:___________________________________________________________
Address:_________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number:__________________________________
Dated:____, 1999
-----------------------------------------------------------------
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including commercial banks, savings and loan associations, and
brokerage houses) that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") (an "Eligible Institution") unless:
(i) this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered (which term, for purposes of this document, shall include any
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Shares) exactly as the name of the registered
holder appears on the certificate tendered with this Letter of Transmittal and
payment and delivery are to be made directly to such owner, unless such holder
has completed either the box entitled "Special Delivery Instructions" or the
box entitled "Special Payment Instructions" included herein; or (ii) if such
Shares are tendered for the account of an Eligible Institution. See Instructions
5 and 9.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates for
Shares are delivered with it to the Depositary (or such certificates will be
delivered pursuant to a Notice of Guaranteed Delivery previously sent to the
Depositary) or if a tender for Shares is being made concurrently pursuant to the
procedure for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. The Depositary must receive (a) a properly completed and duly
executed Letter of Transmittal or a facsimile thereof in accordance with the
instructions of the Letter of Transmittal, including any required signature
guarantees, certificates, and any other documents required by the Letter of
Transmittal, on or prior to the Expiration Date at one of its addresses set
forth on the back cover of the Offer to Purchase, (b) such Shares delivered
pursuant to the procedures for book-entry transfer described in Section 3 of the
Offer to Purchase (and a confirmation of such delivery is received by the
Depositary, including an Agent's Message, if the tendering stockholder has not
delivered a Letter of Transmittal) or (c) such Shares validly tendered through
the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP"),
prior to the Expiration Date. The term "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility to, and received by the
Depositary and forming a part of the Book-Entry Confirmation (as defined in
Section 3 of the Offer to Purchase), which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce such agreement against the participant. If
certificates are to be forwarded to the Depositary in multiple deliveries, a
properly completed and duly executed Letter of Transmittal must accompany each
such delivery.
Participants in the Book-Entry Transfer Facility may tender their Shares in
accordance with ATOP, to the extent it is available to such participants for the
Shares they wish to tender. A stockholder tendering through ATOP must expressly
acknowledge that the stockholder has reviewed and agreed to be bound by the
Letter of Transmittal and that the Letter of Transmittal may be enforced against
such stockholder.
Stockholders whose certificates are not immediately available or who cannot
deliver certificates for their Shares and all other required documents to the
Depositary before the Expiration Date, or whose Shares cannot be delivered on a
timely basis pursuant to the procedures for book-entry transfer, must, in any
case, tender their Shares by or through any Eligible Institution by properly
completing and duly executing and delivering a Notice of Guaranteed Delivery (or
facsimile of it) and by otherwise complying with the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedure: (a) such tender must be made by or through an Eligible Institution,
(b) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Company (with any required signature
guarantees) must be received by the Depositary prior to the Expiration Date, and
(c) certificates for all physically delivered Shares in proper form for transfer
by delivery, or in the case of Shares by confirmation of a book-entry transfer,
into Depositary's account at the Book-Entry Transfer Facility of all Shares
delivered electronically, in each case together with a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile thereof) with
any required signature guarantees (or, in the case of book-entry transfer an
Agent's Message or, in the case of a tender through ATOP, the specified
acknowledgment), and all other documents required by this Letter of Transmittal,
must be received by the Depositary within three NASDAQ trading days after
receipt by the Depositary of such Notice of Guaranteed Delivery, all as provided
in Section 3 of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
7
<PAGE>
Notice. For Shares to be tendered validly pursuant to the guaranteed delivery
procedure, the Depositary must receive the Notice of Guaranteed Delivery on or
before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION
AND RISK OF THE TENDERING STOCKHOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders, nor will it purchase any fractional Shares, except as expressly
provided in the Offer to Purchase. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile of it), waive any right to receive
any notice of the acceptance of their tender. DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
3. INADEQUATE SPACE. If the space provided in the boxes captioned
"Description of Shares Tendered" is inadequate, then the certificate numbers
and/or the number of Shares should be listed on a separate signed schedule and
attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to
stockholders who tender by book-entry transfer.) If less than all of the Shares
evidenced by any certificate are to be tendered, fill in the number of Shares
that are to be tendered in the column entitled "Number of Shares Tendered," in
the box captioned "Description of Shares Tendered." In such case, if any
tendered Shares are purchased, a new certificate for the remainder of the Shares
(including any Shares not purchased) evidenced by the old certificate(s) will be
issued and sent to the registered holder(s), unless otherwise specified in
either the "Special Payment Instructions" or "Special Delivery Instructions"
box on this Letter of Transmittal, as soon as practicable after the Expiration
Date. Unless otherwise indicated, all Shares represented by the certificates(s)
listed and delivered to the Depositary will be deemed to have been tendered.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the certificate(s)
without any change whatsoever.
(b) If any tendered Shares are registered in the names of two or more
joint holders, each such holder must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles of it) as there are
different registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered
holder(s) of the Shares listed and transmitted hereby, no endorsement(s) of
certificate(s) representing such Shares or separate stock power(s) are
required unless payment is to the made or the certificate(s) for the Shares
not tendered or not purchased are to be issued to a person other than the
registered holder(s). If this Letter of Transmittal is signed by a person
other than the registered holder(s) of the certificate(s) listed, or if
payment is to be made or certificate(s) not tendered or not purchased are
to be issued to a person other than the registered holder(s), the
certificate(s) must be endorsed or accompanied by appropriate stock
power(s), in either case signed exactly as the name(s) of the registered
holder(s) appears on the certificate(s). SIGNATURE(S) ON SUCH
CERTIFICATE(S) OR STOCK POWER(S) MUST BE GUARANTEED BY AN ELIGIBLE
INSTITUTION. See Instruction 1.
(e) If this Letter of Transmittal or any certificate(s) or stock
powers(s) are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing
and must submit proper evidence satisfactory to the Company of their
authority to so act.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, no
stock transfer tax stamps or funds to cover such stamps need accompany this
Letter of Transmittal. The Company will pay or cause to be paid any stock
transfer taxes payable on the transfer to it of Shares purchased pursuant to the
Offer. If, however:
8
<PAGE>
(a) payment of the aggregate Purchase Price for Shares tendered
hereby and accepted for purchase is to be made to any person other than the
registered holder(s);
(b) certificates not tendered or not accepted for purchase are to be
registered in the name(s) of any person(s) other than the registered
holder(s); or
(c) tendered certificates are registered in the name(s) of any
person(s) other than the person(s) signing this Letter of Transmittal; then
the Depositary will deduct from such aggregate Purchase Price the amount of
any stock transfer taxes (whether imposed on the registered holder, such
other person or otherwise) payable on account of the transfer to such
person, unless satisfactory evidence of the payment of such taxes or any
exemption from them is submitted. See Section 5 of the Offer to Purchase.
7. ODD LOTS. As described in Section 2 of the Offer to Purchase, if the
Company is to purchase less than all Shares tendered before the Expiration Date
and not properly withdrawn, then the Shares purchased first will consist of all
Shares tendered by any stockholders who owns of record or own beneficially an
aggregate of less than 100 Shares, and who tenders all of his or her Shares at
or below the Purchase Price (an "Odd Lot Holder"). This preference will not be
available unless the box captioned "Odd Lots" is completed.
8. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in Section 1 of
the Offer to Purchase stockholders may designate the order in which their Shares
are to be purchased in the event of proration. The order of purchase may have an
effect on the Federal income tax treatment of the Purchase Price for the Shares
purchased. If you do not designate an order, in the event that less than all
Shares tendered are purchased due to proration, Shares will be selected for
purchase by the Depositary. See Sections 1, 3 and 14 of the Offer to Purchase.
9. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the Purchase
Price of any Shares tendered hereby is to be issued in the name of, and/or any
certificates not tendered or not accepted for purchase are to be returned to, a
person other than the signer of the Letter of Transmittal or if such
certificates and/or checks are to be mailed to someone other than the person
signing the Letter of Transmittal or to the signer at a different address, the
boxes captioned "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed as applicable
and signatures must be guaranteed as described in Instruction 1. Stockholders
tendering Shares by book-entry transfer will have any Shares not accepted for
payment returned by crediting the account maintained by such stockholder at the
Book-Entry Transfer Facility.
10. IRREGULARITIES. All questions as to the number of Shares to be
accepted, the price to be paid therefor and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Company in its sole discretion, which determinations
shall be final and binding on all parties. The Company reserves the absolute
right to reject any or all tenders of Shares it determines not to be in proper
form or the acceptance of which or payment for which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares, and the Company's interpretation of the terms
of the Offer (including these instructions) will be final and binding on all
parties. No tender of Shares will be deemed to be properly made until all
defects and irregularities have been cured or waived. Unless waived, any defects
or irregularities in connection with tenders must be cured within such time as
the Company shall determine. None of the Company, the Dealer Manager (as defined
in the Offer to Purchase), the Depositary, or any other person, is or will be
obligated to give notice of any defects or irregularities in tenders and none of
them will incur any liability for failure to give any such notice.
11. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent at the address and
telephone number set forth in this Letter of Transmittal or from your broker,
dealer, commercial bank or trust company.
12. FORM W-9 AND FORM W-8. Under the federal income tax backup
withholding rules, unless an exemption applies under the applicable law and
regulations, 31% of the gross proceeds payable to a stockholder or other payee
pursuant to the Offer must be withheld and remitted to the United States
Treasury, unless the stockholder or other payee provides his or her taxpayer
identification number (employer identification number or social security number)
to the Depositary and certifies that such number is correct. Therefore, each
tendering stockholder should complete and sign the Substitute Form W-9 included
as part of the Letter of Transmittal so as to provide the information and
certification necessary to avoid backup withholding, unless such stockholder
otherwise establishes to the satisfaction of the Depositary that it is not
subject to backup withholding. Certain stockholders (including, among
9
<PAGE>
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, that individual must submit an IRS
Form W-8 or a Substitute Form W-8, signed under penalties of perjury, attesting
to that individual's exempt status. Such statements can be obtained from the
Depositary.
13. WITHHOLDING ON FOREIGN STOCKHOLDERS. Even if a foreign stockholder
has provided the required certification to avoid backup withholding, the
Depositary will withhold federal income taxes equal to 30% of the gross payments
payable to a foreign stockholder or his agent unless the Depositary determines
that an exemption from or a reduced rate of withholding is available pursuant to
a tax treaty or that an exemption from withholding is applicable because such
gross proceeds are effectively connected with the conduct of a trade or business
in the United States. For this purpose, a foreign stockholder is a stockholder
that is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States, any State or any political subdivision thereof or (iii) any
estate the income of which is subject to United States federal income taxation
regardless of the source of such income, or (iv) a trust whose administration is
subject to the primary supervision of a United States court and which has one or
more United States fiduciaries who have the authority to control all substantial
decisions of the trust. In order to obtain a reduced rate of withholding
pursuant to a tax treaty, a foreign stockholder must deliver to the Depositary a
properly completed Form 1001. In order to obtain an exemption from withholding
on the grounds that the gross proceeds paid pursuant to the Offer are
effectively connected with the conduct of a trade or business within the United
States, a foreign stockholder must deliver to the Depositary a properly
completed Form 4224. The Depositary will determine a stockholder's status as a
foreign stockholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to outstanding certificates or statements concerning
eligibility for a reduced rate of, or exemption from, withholding (e.g., Form
1001 or Form 4224) unless facts and circumstances indicate that such reliance is
not warranted. A foreign stockholder may be eligible to obtain a refund of all
or a portion of any tax withheld if such stockholder meets the "complete
redemption," "substantially disproportionate" or "not essentially equivalent
to a dividend" test described in Section 14 of the Offer to Purchase or is
otherwise able to establish that no tax or a reduced amount of tax is due.
Backup withholding generally will not apply to amounts subject to the 30% or
treaty-reduced rate of withholding. Foreign stockholders are urged to consult
their tax advisors regarding the application of federal income tax withholding,
including eligibility for a withholding tax reduction or exemption and refund
procedures.
14. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost or destroyed, the stockholder should promptly
notify the Depositary of the number of Shares represented by the certificate so
lost or destroyed. To properly tender such Shares in this Offer, you must
receive a replacement certificate for such Shares and deliver that certificate
to the Depositary. To receive a replacement certificate, call the Company's
transfer agent, ChaseMellon Shareholder Services, LLC, at (800) 635-9270. This
Letter of Transmittal and related documents cannot be processed until the
transfer agent's procedures for replacing lost or destroyed certificates have
been followed. Please allow at least ten to fourteen business days to complete
such procedures.
10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
SUBSTITUTE PART 1- Taxpayer Identification TIN:
FORM W-9 Number -- for all accounts, enter Social Security Number
taxpayer identification number in the or Employer
box at right and certify by signing Identification Number
Department of the Treasury and dating below. (If awaiting TIN,
Internal Revenue Service write"Applied For")
Note: If the account is in more than
one name, see the chart in the
enclosed Guidelines to determine
which number to give the payer.
--------------------------------------------------------------------------------
PART 2 -- For payees exempt from backup withholding, please write TAXPAY-
ER "EXEMPT" here (see the enclosed Guidelines):
PAYER'S REQUEST FOR
IDENTIFICATION NUMBER
("TIN")
PART 3 -- Certification -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT: (1) The number shown on this
form is my correct TIN (or I am waiting for a TIN to be issued to me), and (2) I am not subject to
backup withholding because (a) I am exempt from withholding, or (b) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding. Certification Instructions -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding because of under
reporting interest or dividends on your tax return and you have not been notified by the IRS that
you are no longer subject to backup withholding. (Also see instructions in the enclosed
Guidelines.)
SIGNATURE:____________________________________________________________________________________________________
DATE:_________________________________________________________________________________________________________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE
THE FOLLOWING CERTIFICATE IF YOU ARE WAITING (OR SOON WILL APPLY FOR) A
TAXPAYER IDENTIFICATION NUMBER
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office, or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld; but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within sixty
(60) days.
_________________________________ ________________________________
Signature Date
Name: ______________________________________________________________________
(Please Print)
Address:______________________________________________________________________
(Include Zip Code)
- --------------------------------------------------------------------------------
11
NOTICE OF GUARANTEED DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
OF
SHARES OF COMMON STOCK OF
GARDEN RIDGE CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 26, 1999
This form or a facsimile hereof must be used to accept the Offer (as
defined below) if:
(a) certificates for shares of Common Stock, $.01 par value per share
(the "Shares"), of Garden Ridge Corporation (the "Company") are not
immediately available, if the procedure for book-entry transfer cannot be
completed on a timely basis; or
(b) the procedure for book-entry transfer (set forth in Section 3 of
the Company's Offer to Purchase dated August 26, 1999 (the "Offer to
Purchase")) cannot be completed on a timely basis; or
(c) the Letter of Transmittal (or a facsimile thereof) and all other
required documents cannot be delivered to the Depositary prior to the
Expiration Date.
This form, properly completed and duly executed, may be delivered by hand,
mail or facsimile transmission to the Depositary. See Section 3 of the Offer to
Purchase.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY HAND: BY OVERNIGHT DELIVERY:
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 120 Broadway 85 Challenger Road
South Hackensack, NJ 07606 13th Floor Mail Drop-Reorg.
New York, NY 10271 Ridgefield Park, NJ 07660
</TABLE>
BY FACSIMILE TRANSMISSION:
(201) 296-4293
(For Eligible Institutions Only)
CONFIRM FACSIMILE BY TELEPHONE:
(201) 296-4860
THE INFORMATION AGENT FOR THE OFFER IS:
CHASEMELLON CONSULTING SERVICES, L.L.C.
450 West 33rd Street
14th Floor
New York, NY 10001
<TABLE>
<S> <C>
BANKS OR BROKERS CALL: (212) 273-8083 FOR INFORMATION CALL TOLLFREE: (877) 698-6865
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE
INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST
APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF
TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Offer to Purchase and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the number of Shares
specified below pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase.
- --------------------------------------------------------------------------------
ODD LOTS
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially or of record as of the close of business on August
25, 1999 and who continues to own, beneficially or of record, as of the
Expiration Date, an aggregate of fewer than 100 Shares. The undersigned either
(check one box):
[ ] was the beneficial or record owner of, as of the close of business on
August 25, 1999, and continues to own beneficially or of record as of
the Expiration Date, an aggregate of fewer than 100 Shares, all of which
are being tendered; or
[ ] is a broker, dealer, commercial bank, trust company, or other nominee
that (a) is tendering, for the beneficial owner(s) thereof, Shares with
respect to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person was the beneficial or record owner of, as of the close of
business on August 25, 1999, and continues to own beneficially or of
record as of the Expiration Date, an aggregate of fewer than 100 Shares
and is tendering all of such Shares.
- --------------------------------------------------------------------------------
(Please type or print)
Certificate Nos. (if available): ______________________________________________
________________________________________________________________________________
________________________________________________________________________________
Name(s): _______________________________________________________________________
________________________________________________________________________________
Address(es): ___________________________________________________________________
________________________________________________________________________________
Area Code(s) and Telephone Number(s): __________________________________________
________________________________________________________________________________
________________________________________________________________________________
Signature(s): __________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Dated: _________________________________________________________________________
- --------------------------------------------------------------------------------
If Shares will be tendered by
book-entry transfer, fill in the
applicable account number, below:
The Depository Trust Company
DTC Account Number:____________________
Transaction Code Number:_______________
- --------------------------------------------------------------------------------
2
<PAGE>
DELIVERY GUARANTEE
(NOT TO BE USED FOR A SIGNATURE GUARANTEE)
THE UNDERSIGNED, A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION
OR OTHER ENTITY WHICH IS A MEMBER IN GOOD STANDING OF THE SECURITIES TRANSFER
AGENTS MEDALLION PROGRAM OR A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS
ASSOCIATION OR OTHER ENTITY WHICH IS AN "ELIGIBLE GUARANTOR INSTITUTION," AS
SUCH TERM IS DEFINED IN RULE 17AD-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED (EACH OF THE FOREGOING CONSTITUTING AN "ELIGIBLE INSTITUTION"),
GUARANTEES THE DELIVERY TO THE DEPOSITARY OF THE SHARES TENDERED HEREBY, IN
PROPER FORM FOR TRANSFER, OR A CONFIRMATION THAT THE SHARES TENDERED HEREBY HAVE
BEEN DELIVERED PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN
THE OFFER TO PURCHASE INTO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER
FACILITY, TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL (OR FACSIMILE THEREOF) AND ANY OTHER REQUIRED DOCUMENTS, ALL WITHIN
THREE (3) NEW YORK STOCK EXCHANGE, INC. TRADING DAYS OF THE DATE HEREOF.
THE ELIGIBLE INSTITUTION THAT COMPLETES THIS FORM MUST COMMUNICATE THE
GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL AND
CERTIFICATES REPRESENTING SHARES TO THE DEPOSITARY WITHIN THE TIME PERIOD SET
FORTH HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE
INSTITUTION.
Authorized Signature: _________________________________________
Name: _________________________________________________________
(PLEASE PRINT)
Title: ________________________________________________________
Name of Firm: _________________________________________________
Address: ______________________________________________________
________________________________________________________________
(INCLUDING ZIP CODE)
Area Code and Telephone Number: __________________
Date: __________________, 1999
NOTE: DO NOT SEND NOT SEND CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES
MUST BE SENT WITH THE LETTER OF TRANSMITTAL.
3
GARDEN RIDGE CORPORATION
OFFER TO PURCHASE FOR CASH UP TO 3,000,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE OF $7.00 PER SHARE.
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00
P.M., EASTERN DAYLIGHT SAVINGS TIME, ON THURSDAY, SEPTEMBER 23,
1999, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Garden Ridge Corporation, a Delaware corporation (the "Company"), has made
an offer to purchase up to 3,000,000 shares (or such lesser number of shares as
are validly tendered) of its common shares, par value $.01 per share (the
"Shares"), at $7.00 per Share, net to the seller in cash, without interest
thereon, as specified by tendering shareholders, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated August 26, 1999 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer").
The Company will, upon the terms and subject to the conditions of the
Offer, accept for payment, and thereby purchase, up to 3,000,000 Shares validly
tendered and not withdrawn. All Shares acquired in the Offer will be acquired at
the Purchase Price. In the event more than 3,000,000 Shares are validly tendered
and not withdrawn, the Company will accept for payment, and thereby purchase,
Shares, other than Odd Lots, on a pro rata basis (adjusted downward to avoid
acceptance for payment of fractional shares) upon the terms and subject to the
conditions of the Offer. Shares not purchased because of proration, will be
returned at the Company's expense to the shareholders who tendered such Shares.
The Company reserves the right, in its sole discretion, to purchase more than
3,000,000 Shares pursuant to the Offer.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS.
Upon the terms and subject to the conditions of the Offer, if at the
Expiration Date more than 3,000,000 Shares (or such greater number of Shares as
the Company may elect to purchase) are validly tendered and not withdrawn, the
Company will buy Shares first from any person (an "Odd Lot Holder") who owned
beneficially or of record as of the close of business on August 25, 1999 and who
continues to own beneficially or of record as of the Expiration Date, an
aggregate of fewer than 100 Shares and so certified in the appropriate place in
the Letter of Transmittal (and, if applicable, on a Notice of Guaranteed
Delivery), who validly tender all their Shares, and then on a pro rata basis
from all other shareholders who validly tender Shares (and do not withdraw such
Shares prior to the Expiration Date).
For your information and for forwarding to those of your clients for whom
you hold Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. The Offer to Purchase dated August 26, 1999;
2. The Letter of Transmittal for your use and for the information of
your clients (together with the accompanying Substitute Form W-9).
Facsimile copies of the Letter of Transmittal may be used to tender
Shares;
3. A letter to the shareholders of the Company dated August 26, 1999
from Paul T. Davies, Chief Executive Officer of the Company;
<PAGE>
4. The Notice of Guaranteed Delivery to be used to accept the Offer and
tender Shares pursuant to the Offer if none of the procedures for
tendering Shares set forth in the Offer to Purchase can be completed
on a timely basis; and
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN DAYLIGHT SAVINGS TIME, ON
THURSDAY, SEPTEMBER 23, 1999, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof) including any required
signature guarantees and any other required documents should be sent to the
Depositary together with either certificate(s) representing tendered Shares or
timely confirmation of their book-entry transfer, in accordance with the
instructions set forth in the Offer to Purchase and the related Letter of
Transmittal.
Holders of Shares whose certificate(s) for such Shares are not immediately
available or who cannot deliver such certificate(s) and all other required
documents to the Depositary, or complete the procedures for book-entry transfer,
prior to the Expiration Date must tender their Shares according to the procedure
for guaranteed delivery set forth in Section 3 of the Offer to Purchase.
No fees or commissions will be payable by the Company or any officer,
director, shareholder, agent or other representative of the Company to any
broker, dealer or other person for soliciting tenders of Shares pursuant to the
Offer (other than fees paid to the Dealer Manager, the Information Agent and the
Depositary as described in the Offer to Purchase). The Company will, however,
upon request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding any of the enclosed materials to your clients whose Shares
held by you as a nominee or in a fiduciary capacity. The Company will pay any
stock transfer taxes applicable to its purchase of Shares, except as otherwise
provided in the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
ChaseMellon Consulting Services, L.L.C., the Information Agent for the Offer, at
450 West 33rd Street, 14th Floor, New York, New York 10001; Phone Tollfree
(877) 698-6865. Additional copies of the enclosed materials may be obtained from
the Information Agent at the same address and telephone number.
Very truly yours,
Garden Ridge Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS AN AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION
AGENT OR THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE
YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF
ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED
HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
2
GARDEN RIDGE CORPORATION
OFFER TO PURCHASE FOR CASH UP TO 3,000,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE OF $7.00 PER SHARE.
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
EASTERN DAYLIGHT SAVINGS TIME, ON THURSDAY, SEPTEMBER 23, 1999, UNLESS
THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated August 26,
1999 (the "Offer to Purchase") and the related Letter of Transmittal (which,
as amended or supplemented from time to time, together constitute the "Offer")
in connection with the offer by Garden Ridge Corporation, a Delaware corporation
(the "Company"), to purchase up to 3,000,000 (or such lesser number of Common
Shares as are validly tendered) of its Common Shares, par value $.01 per share
(the "Shares"), at $7.00 per Share (the "Purchase Price"), net to the seller
in cash, without interest thereon, as specified by tendering shareholders, upon
the terms and subject to the conditions of the Offer.
The Company will, upon the terms and subject to the conditions of the
Offer, accept for payment, and thereby purchase, up to 3,000,000 Shares validly
tendered and not withdrawn. All Shares acquired in the Offer will be acquired at
the Purchase Price. In the event more than 3,000,000 Shares are validly tendered
and not withdrawn, the Company will accept for payment, and thereby purchase,
Shares, other than Odd Lots, on a pro rata basis (adjusted downward to avoid
acceptance for payment of fractional shares) upon the terms and subject to the
conditions of the Offer. Shares not purchased because of proration will be
returned at the Company's expense to the shareholders who tendered such Shares.
The Company reserves the right, in its sole discretion, to purchase more than
3,000,000 Shares pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, if at the
Expiration Date more than 3,000,000 Shares (or such greater number of Shares as
the Company may elect to purchase) are validly tendered and not withdrawn, the
Company will buy Shares first from any person (an "Odd Lot Holder") who owned
beneficially or of record as of the close of business on August 25, 1999, and
who continue to own beneficially or of record as of the Expiration Date, an
aggregate of fewer than 100 Shares and so certified in the appropriate place in
the attached Instruction Form (and, if applicable, on a Notice of Guaranteed
Delivery), who validly tender all their Shares and then on a pro rata basis from
all other shareholders who validly tender Shares (and do not withdraw such
Shares prior to the Expiration Date).
A TENDER OF YOUR SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD
THEREOF AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
YOUR SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any
or all of the Shares held by us for your account, upon the terms and subject to
the conditions of the Offer.
Please note the following:
1. Shares will be tendered at $7.00 per Share, as indicated in the
attached Instruction Form, net to the seller in cash, without
interest thereon.
2. The Offer is not conditioned on any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions
set forth in the Offer to Purchase.
3. The Offer, proration period and withdrawal rights will expire at
5:00 p.m., Eastern Daylight Savings Time, on Thursday, September 23,
1999, unless the Offer is extended.
4. The Offer is for 3,000,000 Shares, constituting approximately 17.5%
of the Shares outstanding as of August 25, 1999.
<PAGE>
5. The Board of Directors of the Company has approved the Offer.
However, none of the Company, its Board of Directors or the Dealer
Manager makes any recommendation to shareholders as to whether to
tender or refrain from tendering their Shares. Shareholders must
individually make the decision whether to tender such shareholder's
Shares and, if so, how many Shares to tender.
6. Tendering shareholders will not be obligated to pay any brokerage
fees or commissions or solicitation fees to the Dealer Manager, the
Depositary or the Company or, except as set forth in the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant
to the Offer.
If (i) you owned beneficially or of record as of the close of business on
August 25, 1999, and continue to own beneficially or of record as of the
Expiration Date, an aggregate of fewer than 100 Shares; (ii) you instruct us to
tender on your behalf all such Shares prior to the Expiration Date; and (iii)
you complete the section entitled "Odd Lots" in the attached Instruction Form,
the Company, upon the terms and subject to the conditions of the Offer, will
accept all such Shares for purchase before proration, if any, of the purchase of
other Shares validly tendered.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the attached
Instruction Form. An envelope to return your Instruction Form to us is enclosed.
If you authorize us to tender your Shares, all such Shares will be tendered
unless otherwise indicated on the attached Instruction Form.
PLEASE FORWARD YOUR INSTRUCTION FORM TO US AS SOON AS POSSIBLE TO ALLOW US
AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
As described in the Offer to Purchase, if more than 3,000,000 Shares (or
such greater number of Shares as the Company may elect to purchase) have been
validly tendered and not withdrawn prior to the Expiration Date, the Company
will accept for payment and therefore purchase tendered Shares on the basis set
forth below:
1. First, all Shares validly tendered and not withdrawn prior to the
Expiration Date by any Odd Lot Holder who:
(a) tenders all Shares owned beneficially or of record by such Odd
Lot Holder (tenders of less than all Shares owned by such Odd
Lot Holder will not qualify for this preference); and
(b) completes the box captioned "Odd Lots" in the attached
Instruction Form and, if applicable, on the Notice of
Guaranteed Delivery; and
2. Second, after purchase of all of the foregoing Shares, all other
Shares validly tendered at prices and not withdrawn prior to the
Expiration Date, on a pro rata basis (adjusted downward to avoid
acceptance for payment of fractional Shares) as described in the
Offer to Purchase.
The Offer is being made solely pursuant to the Offer to Purchase and the
related Letter of Transmittal and is being made to all holders of Shares. The
Offer is not being made to, nor will tenders be accepted from or on behalf of,
holders of Shares residing in any jurisdiction in which the making of the Offer
or acceptance thereof would not be in compliance with the securities laws of
such jurisdiction.
2
<PAGE>
INSTRUCTION FORM
INSTRUCTION FOR TENDER OF SHARES OF
GARDEN RIDGE CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated August 26, 1996 (the "Offer to Purchase") and the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer") in connection with the offer by Garden
Ridge Corporation, a Delaware corporation (the "Company"), to purchase up to
3,000,000 (or such lesser number of shares as are validly tendered) of its
common shares, par value $.01 per share (the "Shares"), at $7.00 per Share,
net to the seller in cash, without interest thereon, as specified by tendering
shareholders, upon the terms and subject to the conditions of the Offer.
This will instruct you to tender to the Company, on (our) (my) behalf, the
number of Shares indicated below (or if no number is indicated below, all
Shares) which are beneficially owned by (us) (me) and registered in your name,
upon terms and subject to the conditions of Offer.
- --------------------------------------------------------------------------------
NUMBER OF SHARES TO BE TENDERED: ____________________ SHARES*
- --------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us in
your account are to be tendered.
ODD LOTS
[ ]By checking this box the undersigned represents that the undersigned owned
beneficially or of record as of the close of business on August 25, 1999 and
continues to own beneficially or of record as of the Expiration Date, an
aggregate of fewer than 100 Shares and is tendering all of such Shares.
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
[ ] Indicate in this box the order (by certificate number) in which Shares are to be purchased in event of
proration. (Attach additional list if necessary.)* See Instruction 9 to the Letter of Transmittal.
Shares: _____ 1st: _____ 2nd: _____ 3rd: _____ 4th: _____ 5th:
* If you do not designate an order, in the event less than all Shares tendered are purchased due to
proration, Shares will be selected for purchase by the Depositary. See Instruction 9 to the Letter of
Transmittal.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE OPTION AND RISK OF THE
TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
SIGN HERE
Signature(s):__________________________________________________________________________
(Print Name(s)):_______________________________________________________________________
(Print Address(es)):___________________________________________________________________
(Area Code and Telephone Number):______________________________________________________
(Taxpayer Identification or Social Security Numbers(s)):_______________________________
Date:__________________________________________________________________________________
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
[GARDEN RIDGE LOGO]
August 26, 1999
Dear Stockholder:
Garden Ridge Corporation (the "Company") is offering (the "Offer") to
purchase up to 3,000,000 shares of its common stock, or approximately 17.5% of
the currently outstanding common stock, at a price of $7.00 per share, net to
the sellers in cash.
The tender offer provides shareholders the opportunity to sell shares for
cash without the usual transaction costs and, in the case of those holders who
own less than 100 shares, without incurring any applicable odd lot discounts.
If you do not wish to participate in this Offer, you do not need to take
any action.
This Offer is explained in detail in the enclosed Offer to Purchase and
Letter of Transmittal. If you wish to tender your shares, instructions are
provided in the enclosed materials. I encourage you to read these materials
carefully before making any decision with respect to this Offer. Neither the
Company nor its Board of Directors makes any recommendation to any stockholder
whether or not to tender any or all shares. Each stockholder must make the
decision whether to tender shares and, if so, how many shares. Neither I nor any
other director or executive officer intends to tender shares pursuant to the
Offer.
Please note that this offer is scheduled to expire at 5:00 p.m., Eastern
Daylight Savings Time, on Thursday, September 23, 1999, unless extended by the
Company. Questions regarding this offer should be directed to ChaseMellon
Shareholder Services, L.L.C., the Information Agent for the Offer, toll free at
(877) 698-6865.
Sincerely,
Paul T. Davies
Chief Executive Officer
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF --
- ----------------------------------------------------------------------------------------------------------
1. Individual The individual
2. Two or more individuals (joint The account owner of the account or, if combined funds,
account) the first individual on the account (1)
3. Custodian account of a minor (Uniform The minor (2)
Gift to Minors Act)
4a. The usual revocable savings trust The grantor-trusted (1)
account (grantor is also trustee)
b. So-called trust account that is not a The actual owner (1)
legal or valid trust under State Law
5. Sole proprietorship The owner (3)
6. Sole proprietorship The owner (3)
7. A valid trust, estate, or pension The legal entity (4)
trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the public entity name
of a public entity (such as a State
or local government, school district,
or prison) that receives agricultural
program payments.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number
or your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding include the following:
o An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), an individual retirement
account or a custodial account under section 403(b)(7), if the account
satisfies the requirements of section 401(f)(2).
o The United States or any agency or instrumentality thereof.
o A state, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
o A foreign government or any political subdivision, agency or
instrumentality thereof.
o An international organization or any agency or instrumentality thereof.
Other payees that may be exempt from backup withholding include:
o A corporation.
o A financial institution.
o A dealer in securities or commodities registered in the U.S., the District
of Columbia or a possession of the U.S.
o A futures commission merchant registered with the Commodity Futures Trading
Commission.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An entity registered at all times during the tax year under the Investment
Company Act of 1940.
o A foreign central bank of issue.
o A middleman known in the investment community as a nominee or who is listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
o A trust exempt from tax under section 664 as described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
o Payments of patronage dividends where the amount received is not paid in
money.
o Payments made by certain foreign organizations.
o Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Mortgage interest paid to you.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION
NUMBER, WRITE "EXEMPT" IN PART II OF THE FORM, SIGN AND DATE THE FORM,
AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage interest,
dividends, and patronage dividends, that are not subject to information
reporting are also not subject to backup withholding.
PRIVACY ACT NOTICE.--Section 6109 of the Code requires most recipients
of dividend, interest, or other payments to give taxpayer identification
numbers to payers who must report the payments to IRS. IRS uses the
numbers for identification purposes and to help verify the accuracy of
your tax return. The IRS may also provide this information to the
Department of Justice for civil and criminal litigation and to cities,
states, and the District of Columbia to carry out their tax laws. You
must provide your taxpayer identification number whether or not you are
required to file tax returns. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who
does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
FOR IMMEDIATE RELEASE
GARDEN RIDGE CORPORATION ANNOUNCES
SELF TENDER OFFER
FOR SHARES OF ITS COMMON STOCK
HOUSTON, TEXAS -- August 26, 1999 -- Garden Ridge Corporation (NASDAQ/NM: GRDG)
today announced that it will commence a self tender offer to purchase for cash
up to 3,000,000 shares (or approximately 17.5%) of its outstanding common stock
at a price of $7.00 per share (the "Offer"). The Offer commences on August 26,
1999 and will expire at 5:00 p.m. Eastern Daylight Savings Time, on September
23, 1999 (unless extended by the Company).
Garden Ridge Corporation's Chief Executive Officer and President, Paul Davies
stated, "This tender offer to repurchase shares is another important step in
our efforts to increase shareholder value. The Company's financial position,
outlook and current market conditions, including recent trading prices of
shares, make this a favorable time to repurchase a significant portion of the
outstanding shares of common stock. At the end of the Company's second fiscal
quarter on July 31, 1999, the Company had cash and marketable securities of $9.3
million and no long-term indebtedness. In addition, the Company increased the
size of its credit facility from $15 to $30 million on August 24, 1999. As a
result, we believe that after the completion of the proposed tender offer, the
Company will continue to have the financial capability to continue implementing
its business and growth strategies."
Under the terms of the Offer, stockholders may sell their shares to the Company
for $7.00 per share, net to the seller in cash. The Offer provides the
stockholders an opportunity to sell those shares without the usual transaction
costs associated with open market sales, and at a price greater than the market
price prevailing prior to the announcement of the Offer. The terms of the Offer
are described in the Offer to Purchase dated August 26, 1999 and the related
Letter of Transmittal.
If more than 3,000,000 shares of common stock are properly tendered pursuant to
the Offer, the Company will accept shares on a pro rata basis. Odd lots will not
be subject to proration. The Company reserves the right to purchase more than
3,000,000 shares of common stock pursuant to the Offer. The Offer is not
conditioned on any minimum number of shares being tendered.
Neither the Company nor its Board of Directors makes any recommendation to any
stockholder as to whether to tender or refrain from tendering shares. Each
stockholder must make the decision whether to tender shares and, if so, how many
shares should be tendered. The Company has been advised that none of its
directors or executive officers intend to tender any shares.
On August 25, 1999, the last trading day prior to the announcement of the Offer,
the price per share for the last trade for the common stock on NASDAQ National
Market was 5 15/16. The Offer to Purchase, Letter of Transmittal and related
documents are being mailed to the Company's stockholders of record and will also
be made available for distribution to beneficial owners of common stock.
Stockholders may obtain further information by calling ChaseMellon Shareholder
Services, L.L.C., the Depository and Information Agent for the Offer at (800)
635-9270. The dealer manager for the Offer is The Robinson-Humphrey Company,
LLC.
Certain statements herein include forward-looking statements that involve risks
and uncertainties. Potential risks and uncertainties include, but are not
limited to, customer demands and trends, competitive factors and pricing
pressures, the availability of real estate and other risks detailed in the
Company's SEC filings.
For more information contact: Jane Arbuthnot, CFO
(281) 579-7901, ext. 205
EXHIBIT 9(b)
================================================================================
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
dated as of August 24, 1999
between
BANK OF AMERICA, N.A.
and
GARDEN RIDGE CORPORATION
<PAGE>
TABLE OF CONTENTS PAGE
SECTION 1. DEFINITIONS....................................................-1-
1.1 Terms Defined Above............................................-1-
1.2 Certain Definitions............................................-1-
1.3 Type of Advances...............................................-9-
1.4 Accounting Principles.........................................-10-
SECTION 2. THE ADVANCES AND THE LETTERS OF CREDIT........................-10-
2.1 The Advances..................................................-10-
2.2 Procedure.....................................................-10-
2.3 Fees..........................................................-12-
2.4 Reduction of the Commitment...................................-12-
2.5 Repayment.....................................................-13-
2.6 Interest......................................................-13-
2.7 Prepayments...................................................-14-
2.8 Breakage Costs................................................-15-
2.9 Increased Costs...............................................-15-
2.10 Payments and Computations.....................................-15-
2.11 No Deduction for Certain Taxes................................-16-
2.12 Letters of Credit.............................................-16-
SECTION 3. CONDITIONS PRECEDENT..........................................-17-
3.1 Representations and Warranties................................-17-
3.2 Event of Default..............................................-17-
3.3 Material Adverse Change.......................................-17-
SECTION 4. REPRESENTATIONS AND WARRANTIES................................-18-
4.1 Organization..................................................-18-
4.2 Authorization.................................................-18-
4.3 Enforceability................................................-18-
4.4 Financial Condition...........................................-18-
4.5 Subsidiaries..................................................-18-
4.6 Debt..........................................................-19-
4.7 Ownership and Liens...........................................-19-
4.8 Litigation....................................................-19-
4.9 Other Agreements..............................................-19-
4.10 Permits.......................................................-19-
4.11 Compliance with Laws..........................................-19-
4.12 Taxes.........................................................-20-
4.13 ERISA.........................................................-20-
SECTION 5. COVENANTS.....................................................-20-
5.1 Organization..................................................-20-
5.2 Reporting.....................................................-21-
5.3 Inspection....................................................-22-
<PAGE>
5.4 Financial Covenants...........................................-23-
5.5 Debt..........................................................-23-
5.6 Liens.........................................................-24-
5.7 Corporate Transactions........................................-24-
5.8 Asset Sales...................................................-24-
5.9 Distributions, etc............................................-25-
5.10 Transactions with Affiliates..................................-25-
5.11 Investments and Capital Expenditures..........................-25-
5.12 Maintenance of Property.......................................-25-
5.13 Compliance with Laws..........................................-25-
5.14 Taxes.........................................................-26-
5.15 ERISA.........................................................-26-
5.16 Lines of Business; Inventory Accounting Method................-26-
5.17 Insurance.....................................................-26-
5.18 Environmental Law Compliance..................................-26-
SECTION 6. EVENTS OF DEFAULT.............................................-27-
6.1 Payment Failure...............................................-27-
6.2 False Representation..........................................-27-
6.3 Breach of Covenant............................................-27-
6.4 Bankruptcy and Insolvency.....................................-27-
6.5 Adverse Judgment..............................................-27-
6.6 Cross Default.................................................-28-
6.7 Ownership.....................................................-28-
6.8 Guaranties....................................................-28-
SECTION 7. REMEDIES......................................................-28-
7.1 Terminate Commitments.........................................-28-
7.2 Acceleration..................................................-28-
7.3 Setoff........................................................-28-
7.4 Credit Documents..............................................-29-
7.5 Default Interest..............................................-29-
7.6 Remedies Cumulative and Not Waived............................-29-
7.7 Application of Payments.......................................-29-
SECTION 8. MISCELLANEOUS.................................................-29-
8.1 Expenses......................................................-29-
8.2 Indemnification of Bank.......................................-29-
8.3 Usury Savings.................................................-30-
8.4 Notice........................................................-30-
8.5 Timing........................................................-31-
8.6 Amendments and Waivers........................................-31-
8.7 Invalidity....................................................-31-
8.8 Survival of Agreements........................................-31-
8.9 Successors and Assigns........................................-31-
8.10 Arbitration...................................................-31-
<PAGE>
8.11 Counterparts..................................................-32-
8.12 Choice of Law.................................................-32-
8.13 No Further Agreements.........................................-32-
Exhibit A - Form of Borrowing Base and Compliance Certificate
Exhibit B - Form of Guaranty
Exhibit C - Form of Letter of Credit Application
Exhibit D - Form of Notice of Borrowing
Exhibit E - Form of Notice of Conversion or Continuation
Exhibit F - Form of Closing Document Checklist
Schedule 4.4 - Liabilities
Schedule 4.5 - Subsidiaries
Schedule 4.6 - Debt
Schedule 4.8 - Litigation
Schedule 5.6 - Liens
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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This Third Amended and Restated Credit Agreement dated as of August 24,
1999 is between Garden Ridge Corporation, a Delaware corporation ("Borrower"),
and Bank of America, N.A.
("Bank").
A. The Borrower and the Bank are parties to the Second Amended and
Restated Credit Agreement dated as of October 26, 1995, as amended by Amendment
No. 1 dated as of November 15, 1996 and Amendment No. 2 dated as of June 4, 1998
(as amended, the "Original Loan Agreement").
B. The Borrower and the Bank wish to amend and restate the Original Loan
Agreement.
Therefore, the Borrower and the Bank agree as follows:
SECTION 1. DEFINITIONS.
1.1 TERMS DEFINED ABOVE. As used in this Agreement, the terms "Original
Loan Agreement," "Borrower," and "Bank" shall have the meanings indicated above.
1.2 CERTAIN DEFINITIONS. As used in this Agreement, the terms below shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"ADVANCE" means any revolving credit advance made pursuant to Section 2.1.
"AFFILIATE" means, with respect to any Person, any other Person (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Person; (b) which
beneficially owns or holds of record 5 percent or more of any class of Voting
Securities of the Person; or (c) in which 5 percent or more of any class of
Voting Securities is beneficially owned or held of record by the Person. The
term "control" (including the terms "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Securities, by contract, or otherwise.
"AGREEMENT" means this Third Amended and Restated Credit Agreement dated
as of August 24, 1999 between the Borrower and the Bank, as it may be amended,
modified, or supplemented from time-to-time.
"APPLICABLE LENDING OFFICE" means the Bank's Domestic Lending Office in
the case of a Prime Rate Advance and the Bank's Eurodollar Lending Office in the
case of a Eurodollar Rate Advance.
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"APPLICABLE MARGIN" means, at any time with respect to any Eurodollar Rate
Advance, 1.50%.
"BORROWING BASE" means, at any date of its determination, 40% of the value
of the Borrower's and its Subsidiaries' inventory as determined in accordance
with GAAP.
"BORROWING BASE AND COMPLIANCE CERTIFICATE" means a borrowing base and
compliance certificate in the form of the Borrowing Base and Compliance
Certificate attached as EXHIBIT A.
"BUSINESS DAY" means a day of the year on which banks are not required or
authorized to close in Houston, Texas and, if the applicable Business Day
relates to any Eurodollar Rate Advances, on which dealings are carried on by
banks in the London interbank market.
"CAPITAL LEASES" means, for any Person and time, any lease of any Property
by such Person as lessee which would, in accordance with GAAP consistently
applied, be required to be classified and accounted for as a capital lease on
the balance sheet of such Person.
"CLEAN-UP PERIOD" means a period of time selected by the Borrower
beginning no earlier than November 15 of each year and no later than January 2
of the following year and lasting 60 consecutive days during which there shall
be no outstanding Advances.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations and published interpretations thereof.
"COMMITMENT" means the obligation of the Bank to make the Advances and
issue the Letters of Credit in an amount not to exceed (a) from the date hereof
until November 15, 1999, $30,000,000, and (b) thereafter, $25,000,000, as each
such amount may be reduced pursuant to Section 2.4 or terminated pursuant to
Section 7.
"COMMONLY CONTROLLED ENTITY" means a Person which is under common control
with the Borrower within the meaning of Section 414(b) or 414(c) of the Code.
"CONVERT", "CONVERSION", and "CONVERTED" each refers to a conversion of an
Advance of one Type into an Advance of another Type pursuant to Section 2.2(b).
"CREDIT DOCUMENTS" means this Agreement, the Note, the Guaranties, and
each other agreement, document, or instrument now or hereafter executed in
connection with this Agreement.
"DEBT" means (a) indebtedness for borrowed money; (b) obligations
evidenced by bonds, debentures, notes, or other similar instruments; (c)
obligations to pay the deferred purchase price of property or services
(including trade obligations); (d) obligations as lessee under Capital Leases;
(e) obligations under guaranties, endorsements, letters of credit and
reimbursements for draws thereunder, performance bonds, assurances of payment,
required investments, assurances against loss, and all other contingent
obligations relating to the assurance of another Person against loss; (f) any
obligation secured by any Lien; and (g) all liabilities of such Person in
respect of unfunded vested benefits under any Plan.
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"DEFAULT" means the occurrence of any event which with notice or lapse of
time or both would become an Event of Default.
"DEFAULT RATE" means a fluctuating interest rate per annum equal to the
Prime Rate plus 5 percent, but in no event to exceed the Highest Lawful Rate.
"DOLLAR EQUIVALENT" means the equivalent in another currency of an amount
in Dollars to be determined by reference to the rate of exchange quoted by the
Bank on the date of determination, to prime banks in New York City for the spot
purchase in the New York City foreign exchange market of such amount of Dollars
with such other currency.
"DOLLARS" and "$" means lawful money of the United States of America.
"DOMESTIC LENDING OFFICE" means the office of the Bank at 901 Main Street,
Dallas, Texas 75283-1000, or such other office of the Bank as it may from
time-to-time specify to the Borrower.
"EBIT" means, for any period, (a) Net Income for such period PLUS (b) to
the extent deducted in determining Net Income, Interest Expense and taxes for
such period.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board (or any successor), as in effect from
time-to-time.
"EURODOLLAR LENDING OFFICE" means the office of the Bank at 901 Main
Street, Dallas, Texas 75283-1000, or such other office of the Bank as it may
from time-to-time specify to the Borrower.
"EURODOLLAR RATE" means, for the Interest Period for each Eurodollar Rate
Advance, an interest rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on display page 3750 (or any successor page) of
the Dow Jones Markets Service (formerly known as Telerate) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period. If for any reason such rate is
not available, the term "Eurodollar Rate" shall mean, for any Eurodollar Rate
Advance for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page
as the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"EURODOLLAR RATE ADVANCE" means an Advance which bears interest as
provided in Section 2.6(b).
"EURODOLLAR RATE RESERVE PERCENTAGE" of the Bank for the Interest Period
for any Eurodollar Rate Advance means the reserve percentage applicable during
such Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in
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such Interest Period during which any such percentage shall be so applicable)
under regulations issued from time-to-time by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for the Bank with
respect to liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period and in an amount
substantially equal to such Eurodollar Rate Advance.
"EVENT OF DEFAULT" means the occurrence of any of the events specified in
Section 6.
"EXPIRATION DATE" means, with respect to any Letter of Credit, the date on
which such Letter of Credit will expire or terminate in accordance with its
terms.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any of its successors.
"FIXED CHARGE COVERAGE RATIO" means, for any Person for any fiscal
quarter, the ratio of such Person's (a) EBIT PLUS Lease Expense, each for the
four-fiscal quarter period then ended to (b) Interest Expense PLUS Restricted
Payments, excluding stock repurchases permitted or consented to hereunder, PLUS
Lease Expense, each for the four-fiscal quarter period then ended, PLUS current
maturities of long-term Debt as of the end of such period.
"FUNDING LOSS" means, with respect to (a) any payment of principal of any
Eurodollar Rate Advance by the Borrower on a day other than the last day of the
Interest Period for such Advance as a result of any prepayment pursuant to
Section 2.7, the acceleration of the maturity of the Note pursuant to Section 7,
or for any other reason, (b) the Borrower's failure to make a principal or
interest payment or prepayment with respect to any Eurodollar Rate Advance on
the date such payment or prepayment is due and payable, or (c) the Borrower's
failure to borrow as a result of its failure to satisfy the conditions described
in Section 3 on or before the date specified in the applicable Notice of
Borrowing or Notice of Conversion or Continuation for a Eurodollar Rate Advance
as described in Section 2.2(d), any loss or reasonable expense reasonably
incurred by the Bank (including but not limited to any loss or reasonable
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Bank to fund or maintain such Advance) and shall be
limited to the amount equal to the discounted present value of the difference
between (i) the Bank's cost of obtaining the funds for the amount prepaid, the
amount which the Borrower failed to prepay, or the amount the Borrower failed to
borrow in accordance with a Notice of Borrowing or a Notice of Conversion or
Continuation, MINUS (ii) any lesser amount received by the Bank in redeploying
such amount during the "Applicable Period." The Applicable Period (A) for a
prepayment is from the date of such prepayment to the end of the then current
Interest Period, and (B) for a failure to borrow or prepay, is from the intended
date of the borrowing or prepayment to the end of the Interest Period for such
borrowing or prepayment. Notwithstanding the foregoing, Funding Loss shall
include reasonable administrative and other losses or expenses (other than loss
of anticipated profits) incurred by the Bank in redeploying or obtaining the
funds loaned to the Borrower. The Bank shall promptly provide a statement,
supported where applicable and possible by documentary evidence, explaining the
amount of such loss or expense (which statement shall be conclusive absent
manifest error).
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"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" means any foreign governmental authority, the
United States of America, any state of the United States of America and any
subdivision of any of the foregoing, and any agency, department, commission,
board, authority or instrumentality, bureau or court having jurisdiction over
the Bank, the Borrower or any of their respective Properties.
"GRPI" means Garden Ridge Pottery, Inc., a Texas corporation.
"GUARANTORS" means (a) Garden Ridge Finance Corporation, (b) Garden Ridge
Management, Inc., (c) Garden Ridge Investments, Inc., (d) Garden Ridge, L.P.,
and (e) any other Subsidiary of the Borrower.
"GUARANTY" means a guaranty executed by a Subsidiary of the Borrower in
the form of the Guaranty attached as EXHIBIT B.
"HAZARDOUS MATERIALS" has the meaning set forth in Section 5.18.
"HIGHEST LAWFUL RATE" means the maximum lawful interest rate, if any, that
at any time or from time-to-time may be contracted for, charged, or received
under the laws applicable to the Bank which are presently in effect or, to the
extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow. On each day, if any, that Chapter 303 of the Texas
Finance Code, as amended, establishes the Highest Lawful Rate, the Highest
Lawful Rate shall be the weekly ceiling for that day as provided for in Chapter
303 of the Texas Finance Code, as amended (formerly known as the indicated
(weekly) rate ceiling in Article 5069-1.04 of the Revised Civil Statutes of
Texas). Chapter 346 of the Texas Finance Code (which regulates certain revolving
credit loan accounts and revolving tri-party accounts) shall not apply to this
Agreement or the Notes.
"INTEREST EXPENSE" means, for any period, total interest expense for such
period, whether paid or accrued (including that attributable to obligations
which have been or should be, in accordance with GAAP, recorded as Capital
Leases), including, without limitation, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under any cap, swap, collar or other interest rate hedge
agreement, all as determined in conformity with GAAP.
"INTEREST PERIOD" means, for each Eurodollar Rate Advance, the period
commencing on the date of such Eurodollar Rate Advance or the date of the
Conversion of any Prime Rate Advance into a Eurodollar Rate Advance and ending
on the last day of the period selected by the Borrower pursuant to the
provisions below and Section 2.2 and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below and Section 2.2. The duration of each such Interest Period
shall be in the case of Eurodollar Rate Advances one, two, three, or six months
(a "month" being, subject to clause (c) below, the period of time extending from
any calendar date in a calendar month to and including the numerically
corresponding calendar date in the next succeeding calendar month), as the
Borrower may, upon notice received by the Bank not
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later than 1:00 p.m. (Houston, Texas time) on the third Business Day prior to
the first day of such Interest Period, select; PROVIDED, HOWEVER, that:
(a) the Borrower may not select any Interest Period for any Advance
which ends after the Maturity Date;
(b) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day, PROVIDED that if
such extension would cause the last day of such Interest Period for any
Eurodollar Rate Advance to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding Business Day; and
(c) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month.
"INVESTMENT AGREEMENT" means the Investment Agreement dated as of December
17, 1993 among Allied Capital Corporation, Allied Capital Corporation II, Allied
Technology Partnership, Equus Capital Partners, L.P., Equus II Incorporated, and
Triad Ventures Limited II, L.P., as amended by Amendment No. 1 to the Investment
Agreement dated as of October 21, 1994 and Amendment No. 2 to the Investment
Agreement dated as of November 15, 1994.
"INVESTMENT" has the meaning set forth in Section 5.11.
"LEASE EXPENSE" means, for any period, all amounts payable by a Person
during such period under any lease, sublease, or other instrument (other than a
Capital Lease) pursuant to which such Person is entitled to use any real
Property of another Person or any personal Property of another Person (to the
extent the amounts owing under such personal Property leases, subleases or other
instruments exceed $150,000 in the aggregate).
"LETTER OF CREDIT" means, individually, any irrevocable documentary or
standby letter of credit issued by the Bank for the account of the Borrower or
any of its Subsidiaries which is subject to this Agreement, and "LETTERS OF
CREDIT" means all such letters of credit collectively.
"LETTER OF CREDIT APPLICATION" means a letter of credit application on the
Bank's form and attached as EXHIBIT C.
"LETTER OF CREDIT EXPOSURE" means, at any time, the sum of (a) the
aggregate undrawn maximum face amount of each Letter of Credit at such time and
(b) the aggregate unpaid amount of all Reimbursement Obligations at such time.
"LIEN" means with respect to any asset (a) any claim, pledge, mortgage,
lien, security interest, or encumbrance of any kind or (b) the interest of a
vendor or lessor under any conditional sale agreement or other title retention
agreement.
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"LIQUID INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States maturing
within 180 days from the date of any acquisition thereof;
(b) (i) negotiable or nonnegotiable certificates of deposit, time
deposits, or other similar banking arrangements maturing within 180 days from
the date of acquisition thereof ("bank debt securities"), issued by (A) the Bank
or (B) any other bank or trust company which has primary capital of not less
than $500,000,000 or the Dollar Equivalent thereof, if at the time of deposit or
purchase, such bank debt securities are rated not less than "AA" (or the then
equivalent) by the rating service of Standard & Poor's Corporation or of Moody's
Investors Service, Inc., and (ii) commercial paper issued by (A) any Bank or (B)
any other Person if at the time of purchase such commercial paper is rated not
less than "A-1" (or the then equivalent) by the rating service of Standard &
Poor's Corporation or not less than "P-1" (or the then equivalent) by the rating
service of Moody's Investors Service, Inc., or upon the discontinuance of both
of such services, such other nationally recognized rating service or services,
as the case may be, as shall be selected by the Borrower with the consent of the
Bank;
(c) repurchase agreements relating to investments described in
clauses (a) and (b) above with a market value at least equal to the
consideration paid in connection therewith, with any Person who regularly
engages in the business of entering into repurchase agreements and has a
combined capital surplus and undivided profit of not less than $500,000,000 or
the Dollar Equivalent thereof, if at the time of entering into such agreement
the debt securities of such Person are rated not less than "AA" (or the then
equivalent) by the rating service of Standard & Poor's Corporation or of Moody's
Investors Service, Inc.; and
(d) such other instruments (within the meaning of Article 9 of the
Texas Business and Commerce Code) as the Borrower may request and the Bank may
approve in writing, which approval will not be unreasonably withheld.
"MATURITY DATE" means the earlier of (A) June 30, 2001, and (B) the
earlier termination in whole of the Commitment pursuant to Section 2.4 or
Section 7.
"MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of
ERISA.
"NET INCOME" means, for any period, the Borrower's consolidated net income
for such period after taxes, as determined in accordance with GAAP.
"NET WORTH" means, for any Person and time, the sum of the assets of the
Person less the total liabilities of the Person except any preferred stock of
such Person to the extent such preferred stock is classified as a "liability" on
such Person's financial statements, as set forth on its consolidated balance
sheet as of such date and determined in accordance with GAAP consistently
applied.
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"NOTE" means the $30,000,000 Promissory Note dated as of August 24, 1999
by the Borrower payable to the order of the Bank, as the same may be increased,
extended, rearranged or otherwise amended from time-to-time.
"NOTICE OF BORROWING" means a notice of borrowing in the form of the
attached EXHIBIT D signed by a Responsible Officer of the Borrower.
"NOTICE OF CONVERSION OR CONTINUATION" means a notice of conversion or
continuation in the form of the attached EXHIBIT E signed by a Responsible
Officer of the Borrower.
"OBLIGATIONS" means any and all amounts now or hereafter owed by the
Borrower to the Bank in connection with this Agreement and any other Credit
Document, including any increases, extensions, rearrangements, and other
amendments thereof, whether for principal, interest, fees, reimbursement,
indemnification, or otherwise.
"PBGC" means the Pension Benefit Guaranty Corporation or its successor.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof (including government
corporations), or any other form of entity, or any trustee, receiver, custodian
or similar official.
"PLAN" means pension plan which is covered by Title IV of ERISA and in
respect of which the Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3(5) of ERISA.
"PRIME RATE" means the rate of interest established by the Bank from time
to time as its "prime rate," whether the Borrower has notice thereof. Such rate
is set by the Bank as a general reference rate of interest, taking into account
such factors as the Bank may deem appropriate, it being understood that many of
the Bank's commercial or other loans are priced in relation to such rate, that
it is not necessarily the lowest or best rate actually charged to any customer
and that the Bank may make various commercial or other loans at rates of
interest having no relationship to such rate.
"PRIME RATE ADVANCE" means an Advance which bears interest as provided in
Section 2.6(a).
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"REIMBURSEMENT OBLIGATIONS" means, with respect to any Letter of Credit,
all of the reimbursement and other payment obligations of the Borrower set forth
in the Letter of Credit Application applicable to such Letter of Credit.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
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"RESPONSIBLE OFFICER" means the Chief Executive Officer or Chief Financial
Officer of the Person to whom reference is made.
"RESTRICTED PAYMENT" means the making by any Person of any dividends or
other distributions (in cash, Property, or otherwise) on, or any payment for the
purchase, redemption or other acquisition of, any shares of any capital stock of
such Person, other than dividends payable in such Person's stock.
"SIGNAL SECURITY DOCUMENTS" means (a) the Leasehold Deeds of Trust (With
Security Agreement and Assignment of Rents and Leases) each dated November 4,
1988 by Garden Ridge Pottery and World Imports, Inc. ("World Imports"), as
grantor, to Tyrone Tyll, as trustee, for the benefit of Signal Capital
Corporation ("Signal"), (b) the Leasehold Deed of Trust (With Security Agreement
and Assignment of Rents and Leases) dated November 4, 1988 by GRPI, as grantor,
to Tyrone Tyll, as trustee, for the benefit of Signal, (c) the Landlord's
Agreements each dated as of May 12, 1992 by Eric W. White and Carolyn B. White
as lessors and World Imports, as lessee, for the benefit of Signal, (d) the
Amended and Restated Loan and Security Agreement dated as of August 13, 1992
("Amended Agreement") between GRPI and the Borrower, (e) the Renewal Note, the
Revolving Credit Note, Term Note A and Term Note B (each as defined in the
Amended Agreement) (f) the Guaranty dated as of November 4, 1988 by World
Imports for the benefit of Signal; (g) the Security Agreement dated as of
November 4, 1988 between World Imports and Signal; (h) the Pledge Agreement
dated as of November 4, 1988 by GRPI in favor of Signal; and (i) any other
agreement executed in connection with the Amended Agreement.
"SUBSIDIARY" shall mean, with respect to any Person, any other Person, a
majority of whose outstanding Voting Securities (other than directors'
qualifying shares) shall at any time be owned by such Person or one or more
Subsidiaries of such Person.
"TANGIBLE NET WORTH" means, for any Person and time, such Person's Net
Worth minus the amount of any such Net Worth attributable to goodwill, patents,
trademarks, copyrights, non-competition covenants, deferred charges, consulting
agreements and all other intangible assets (as determined in accordance with
GAAP).
"TCR ADVISORY AGREEMENT" means the TCR Advisory Agreement dated as of July
8, 1992 between the Borrower and Three Cities Research, Inc.
"TYPE" has the meaning set forth in Section 1.3.
"VOTING SECURITIES" means (a) capital stock of a corporation having
general voting power under ordinary circumstances to elect directors of such
corporation (irrespective of whether at the time stock of any other class or
classes shall have or might have special voting power or rights by reason of the
happening of any contingency), and (b) any partnership interest or other
ownership interest having general voting power to elect the general partner or
other management of a partnership or other Person.
1.3 TYPE OF ADVANCES. Advances are classified by "Type." The "Type" of an
Advance refers to whether such Advance is a Prime Rate Advance or a Eurodollar
Rate Advance.
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1.4 ACCOUNTING PRINCIPLES. When this Agreement requires the determination
of a Person's assets, liabilities, items of income, items of expense, or any
other commonly used accounting term, then that determination shall be made in
accordance with GAAP applied on a basis consistent with the application
reflected in the financial statements of the Person whose assets, liabilities,
items of income, or items of expense are being calculated.
SECTION 2. THE ADVANCES AND THE LETTERS OF CREDIT
2.1 THE ADVANCES. The Bank agrees, on the terms and conditions set forth
in this Agreement, to make Advances to the Borrower from time-to-time on any
Business Day during the period from the date of this Agreement until the
Maturity Date in an aggregate outstanding amount not to exceed at any time the
lesser of (i) the Commitment LESS the aggregate outstanding principal amount of
the Advances and the Letter of Credit Exposure at such time and (ii) the
Borrowing Base LESS the aggregate outstanding principal amount of the Advances
and the Letter of Credit Exposure at such time. Each Advance shall be in an
aggregate amount not less than (A) with respect to Prime Rate Advances, $25,000
and in integral multiples of $25,000 in excess thereof and (B) with respect to
Eurodollar Rate Advances, $100,000 and in integral multiples of $100,000 in
excess thereof. Within the limits of the Bank's Commitment, the Borrower may
from time-to-time borrow, prepay pursuant to Section 2.7 and reborrow under this
Section 2.1.
2.2 PROCEDURE.
(a) NOTICE. Each Advance shall be made pursuant to a Notice of
Borrowing (or by telephone notice promptly confirmed in writing by a Notice of
Borrowing), given not later than 1:00 p.m. (Houston, Texas time) (i) on the
third Business Day before the date of the proposed Advance, in the case of a
Eurodollar Rate Advance, or (ii) on the Business Day of the proposed Advance, in
the case of a Prime Rate Advance, by the Borrower to the Bank. Each Notice of a
Borrowing shall be in writing or by telecopier or telex, confirmed immediately
in writing, specifying the requested date of such Advance, Type of Advance,
aggregate amount of such Advance, and if such Advance is to be a Eurodollar Rate
Advance, the Interest Period for such Advance. The Bank shall, before 1:00 p.m.
(Houston, Texas time) on the date of the Advance, make such funds available to
the Borrower at its account at the Bank.
(b) CONVERSIONS AND CONTINUATIONS. In order to elect to Convert or
continue an Advance under this Section, the Borrower shall deliver an
irrevocable Notice of Conversion or Continuation to the Bank (or give telephone
notice promptly confirmed in writing by a Notice of Conversion or Continuation)
at its office no later than 1:00 p.m. (Houston, Texas time) (i) on the Business
Day of the proposed conversion date in the case of a Conversion to a Prime Rate
Advance, and (ii) at least three Business Days in advance of the proposed
Conversion or continuation date in the case of a Conversion to, or a
continuation of, a Eurodollar Rate Advance. Each such Notice of Conversion or
Continuation shall be in writing or by telex or telecopier confirmed immediately
in writing, stating (A) the requested Conversion or continuation date (which
shall be a Business Day), (B) the amount and Type of the Advance to be Converted
or continued, (C) whether a Conversion or continuation is requested, and if a
Conversion, into what Type of Advance, and (D) in the case of a Conversion to,
or a continuation of, a Eurodollar Rate Advance, the requested Interest Period.
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(c) CERTAIN LIMITATIONS. Notwithstanding anything in paragraphs (a)
and (b) above:
(i) at no time shall there be more than five outstanding
Eurodollar Rate Advances;
(ii) if the Bank shall, at least one Business Day before the
date of any requested Advance, reasonably conclude that the passage
of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other
Governmental Authority asserts that it is unlawful, for the Bank or
its Eurodollar Lending Office to perform its obligations under this
Agreement to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances, the right of the Borrower to select
Eurodollar Rate Advances shall be suspended until the Bank shall
reasonably determine that the circumstances causing such suspension
no longer exist (which the Bank agrees promptly to provide notice of
to Borrower), and each subsequent Advance during such period shall
be a Prime Rate Advance;
(iii) if the Bank is unable, after the exercise of reasonable
diligence, to determine the Eurodollar Rate for Eurodollar Rate
Advances, the right of the Borrower to select Eurodollar Rate
Advances shall be suspended until the Bank shall reasonably
determine that the circumstances causing such suspension no longer
exist (which the Bank agrees promptly to provide notice of to
Borrower), and each subsequent Advance during such period shall be a
Prime Rate Advance; provided, however, the Bank agrees to use
reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such a designation would permit the
Bank to determine the Eurodollar Rate for Eurodollar Rate Advances
and would not, in the Bank's reasonable judgment, be otherwise
disadvantageous;
(iv) if the Bank shall, at least one Business Day before the
date of any requested Advance, reasonably conclude that the
Eurodollar Rate for Eurodollar Rate Advances will not adequately
reflect the cost to the Bank of making or funding Eurodollar Rate
Advances, as the case may be, the right of the Borrower to select
Eurodollar Rate Advances shall be suspended until the Bank shall
reasonably determine that the circumstances causing such suspension
no longer exist (which the Bank agrees promptly to provide notice of
to Borrower), and each subsequent Advance during such period shall
be a Prime Rate Advance;
(v) if the Borrower fails to select the duration or
continuation of any Interest Period for any Eurodollar Rate Advance
in accordance with the provisions contained in the definition of
"Interest Period" in Section 1.2 and paragraphs (a) and (b) above,
the Bank will forthwith so notify the Borrower and such Advance will
be made available to the Borrower on the date of such Borrowing with
a one-month Interest Period and if an existing Eurodollar Rate
Advance, continue with a one-month Interest Period; and
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(vi) if the Borrower fails to deliver a Notice of Conversion
or Continuation prior to the end of an Interest Period for any
existing Eurodollar Rate Advance which is to be refinanced, then the
Borrower shall (unless such Advance is repaid at the end of an
Interest Period) be deemed to have given notice of an election to
refinance such Advance with a Prime Rate Advance.
(d) NOTICES IRREVOCABLE. Each Notice of Borrowing pursuant to which
the Borrower requests a Eurodollar Rate Advance and Notice of Conversion or
Continuation pursuant to which the Borrower elects to Convert to or continue a
Eurodollar Rate Advance shall be irrevocable and binding on the Borrower. In the
case of any Advance designated in the related Notice of Borrowing or Notice of
Conversion or Continuation specifies that the Proposed Borrowing (as defined in
such Notice of Conversion or Continuation) shall be a Eurodollar Rate Advance,
the Borrower shall indemnify the Bank against any Funding Loss reasonably
incurred by the Bank as a result of any failure of the Borrower to borrow the
Advance described therein due to the Borrower's failure to fulfill on or before
the date specified in such Notice of Borrowing or Notice of Conversion or
Continuation for such Advance the applicable conditions set forth in Section 3.
(e) NOTE. The indebtedness of the Borrower to the Bank resulting
from Advances owing to the Bank shall be evidenced by the Note from the Borrower
payable to the order of the Bank.
2.3 FEES.
(a) COMMITMENT FEES. The Borrower agrees to pay to the Bank a
commitment fee on the average daily amount by which the Commitment exceeds the
sum of the outstanding Advances and the Letter of Credit Exposure from the date
of this Agreement until the Maturity Date at the rate of 0.30% per annum. The
fees payable pursuant to this clause (a) are due quarterly in arrears on the
last day of each March, June, September, and December commencing September 30,
1999 and on the Maturity Date.
(b) LETTER OF CREDIT FEES. The Borrower agrees to pay to the Bank a
fee for each Letter of Credit equal to 1.5% per annum on the face amount of such
Letter of Credit. The foregoing fee shall be based on the maximum amount
available to be drawn under such Letter of Credit from the date of issuance of
the Letter of Credit until its Expiration Date and be payable quarterly in
advance on the date of the issuance of the Letter of Credit and for the period
from such date until the end of the calendar quarter in which such Letter of
Credit is issued and on the last day of each March, June, September and December
thereafter until its Expiration Date; provided that, in no event shall the total
fee payable pursuant to this Section 2.3(b) be in amount less than $250 for any
Letter of Credit.
(c) UPFRONT FEES. The Borrower agrees to pay to the Bank an upfront
fee equal to $97,500 on the date hereof.
2.4 REDUCTION OF THE COMMITMENT. The Borrower shall have the right, upon
at least five Business Days' irrevocable notice to the Bank, to terminate in
whole or reduce ratably in part the unused portion of the Commitment; PROVIDED
that each partial reduction shall be in the minimum
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aggregate amount of $500,000 and in integral multiples of $500,000 in excess
thereof. Any reduction and termination of the Commitment pursuant to this
Section 2.4 shall be permanent, with no obligation of the Bank to reinstate such
Commitment and the commitment fees provided for in Section 2.3(a) shall
thereafter be computed on the basis of the Commitment, as so reduced.
2.5 REPAYMENT. The Borrower shall repay the outstanding principal amount
of each Advance on the first day of each Clean-Up Period and on the Maturity
Date.
2.6 INTEREST. The Borrower shall pay interest on the unpaid principal
amount of each Advance made by the Bank from the date of such Advance until such
principal amount shall be paid in full, at the following rates per annum:
(a) PRIME RATE ADVANCES. If such Advance is a Prime Rate Advance, a
rate per annum equal at all times to the Prime Rate in effect from time-to-time
and payable in arrears on the last day of each calendar month and on the date
such Prime Rate Advance shall be paid in full, PROVIDED that any amount of
principal which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest from the date on which such
amount is due until such amount is paid in full, payable on demand, at a rate
per annum equal at all times to the Default Rate pursuant to Section 7.5.
(b) EURODOLLAR RATE ADVANCES. If such Advance is a Eurodollar Rate
Advance, a rate per annum equal at all times during the Interest Period for such
Advance to the Eurodollar Rate for such Interest Period PLUS the Applicable
Margin, payable on each monthly anniversary date of the beginning of such
Interest Period and on the last day of such Interest Period; PROVIDED that any
amount of principal which is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest from the date on which such
amount is due until such amount is paid in full, payable on demand, at a rate
per annum equal at all times to the Default Rate pursuant to Section 7.5.
(c) ADDITIONAL INTEREST ON EURODOLLAR RATE ADVANCES. The Borrower
shall pay to the Bank, so long as it shall be required under regulations of the
Federal Reserve Board to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional interest on the
unpaid principal amount of each Eurodollar Rate Advance, from the effective date
of such Advance until such principal amount is paid in full, at an interest rate
per annum equal at all times to the remainder obtained by subtracting (i) the
Eurodollar Rate for the Interest Period for such Advance from (ii) the rate
obtained by dividing such Eurodollar Rate by a percentage equal to 100% MINUS
the Eurodollar Rate Reserve Percentage of the Bank for such Interest Period,
payable on each date on which interest is payable on such Advance. Such
additional interest shall be determined by the Bank and notified to the Borrower
(such notice to include the calculation of such additional interest, which
calculation shall be conclusive in the absence of manifest error) and shall be
due and payable within five Business Days after the giving of such notice.
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2.7 PREPAYMENTS.
(a) RIGHT TO PREPAY. The Borrower shall have no right to prepay any
principal amount of any Advance except as provided in this Section 2.7.
(b) OPTIONAL. The Borrower may elect to prepay any of the Advances,
after giving by 1:00 p.m. (Houston, Texas time) (i) in the case of Eurodollar
Rate Advances, at least three Business Days' or (ii) in the case of Prime Rate
Advances, same day prior written notice to the Bank stating the proposed date
and aggregate principal amount of such prepayment. Any such notice may also
specify the Advances to which such prepayments are to be applied, in which event
the Bank shall apply the prepayments as so specified. If any such notice is
given, the Borrower shall prepay such Advance in whole or ratably in part in an
aggregate principal amount equal to the amount specified in such notice,
together with accrued interest to the date of such prepayment on the principal
amount prepaid and, within five Business Days after receipt of notice from the
Bank specifying the aggregate amount, the amount, if any, required to be paid
pursuant to Section 2.8 as a result of such prepayment being made on such date;
PROVIDED, however, that each partial prepayment of principal shall be in a
minimum amount of (A) in the case of a prepayment of Prime Rate Advances,
$25,000 and in integral multiples of $25,000 in excess thereof and (B) in the
case of Eurodollar Rate Advances, $100,000 and in integral multiples of $100,000
in excess thereof.
(c) MANDATORY. If at any time during the term of this Agreement, the
aggregate outstanding amount of the Advances PLUS the Letter of Credit Exposure
exceeds either (i) the Commitment or (ii) the Borrowing Base, the Borrower shall
immediately without notice or demand pay the Bank an amount equal to the amount
of such excess, including any unpaid accrued interest on the principal amount
prepaid. Additionally, on the date of each reduction of the Commitment pursuant
to Section 2.4 and on the date of the issuance, increase, or extension of any
Letter of Credit made pursuant to Section 2.12, the Borrower agrees to make a
prepayment in respect of the outstanding amount of Advances to the extent, if
any, that the aggregate unpaid principal amount of all the Advances PLUS the
Letter of Credit Exposure exceeds the Commitment, as so reduced. Each such
mandatory prepayment may be accompanied by a notice from the Borrower indicating
the amount of such prepayment and the Advances to which such prepayment is to be
applied, in which event the Bank shall apply the prepayments as so specified.
(d) ILLEGALITY. If the Bank shall notify the Borrower that the
passage of or any change in or in the interpretation of any law or regulation
makes it unlawful, or that any central bank or other Governmental Authority
asserts that it is unlawful for the Bank or its Eurodollar Lending Office to
perform its obligations under this Agreement to maintain any Eurodollar Rate
Advances then outstanding hereunder, (i) the Borrower shall, no later than 1:00
p.m. (Houston, Texas time) (A) if not prohibited by law, on the last day of the
Interest Period for each outstanding Eurodollar Rate Advance or (B) if required
by such passage of or change in or in interpretation of such law or regulation,
on the fifth Business Day following its receipt of notice thereof from the Bank
prepay all of the Eurodollar Rate Advances then outstanding, together with
accrued interest on the principal amount prepaid to the date of such prepayment
and, within five Business Days after receipt of notice from the Bank specifying
the aggregate amount, the amount, if any, required to be paid pursuant to
Section 2.8 as a result of such prepayment being made on such date (provided,
that, before giving any such notice to the Borrower to prepay all of the
Eurodollar Rate Advances then outstanding, the
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Bank agrees to use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for prepayment
of such Advance, or reduce the amount of cost associated with the prepayment of
such Advance (and the Bank is lawfully permitted to make such Advance), and
would not, in the Bank's reasonable judgment, be otherwise disadvantageous, (ii)
the Bank shall simultaneously make a Prime Rate Advance to the Borrower on such
date in an amount equal to the aggregate principal amount of the Eurodollar Rate
Advances prepaid and the amount, if any, required to be paid pursuant to Section
2.8, and (iii) the right of the Borrower to select Eurodollar Rate Advances for
any subsequent Borrowing shall be suspended until the Bank reasonably determines
that the circumstances causing such suspension no longer exist (which the Bank
agrees promptly to provide notice of to Borrower).
(e) NOTICE. All notices given pursuant to this Section 2.7 shall be
irrevocable and binding upon the Borrower.
2.8 BREAKAGE COSTS. If (a) any payment of principal of any Eurodollar Rate
Advance is made other than on the last day of the Interest Period for such
Advance as a result of any payment pursuant to Section 2.7, the acceleration of
the maturity of the Note pursuant to Section 7, or for any other reason or (b)
the Borrower fails to make a principal or interest payment with respect to any
Eurodollar Rate Advance on the date such payment is due and payable, the
Borrower shall, within 10 days of any written demand sent by the Bank to the
Borrower, pay to the Bank any Funding Loss which it may reasonably incur as a
result of such payment or nonpayment. The Bank agrees to promptly give notice of
any circumstance it is aware of that will result in increased costs of the type
set forth above; PROVIDED that, the failure to give such notice shall not
relieve the Borrower of its obligations to pay such increased amounts pursuant
to this Section.
2.9 INCREASED COSTS. If, due to either (a) the passage of or any change
(other than any change by way of imposition or increase of reserve requirements
included in the Eurodollar Rate Reserve Percentage) in or in the interpretation
of any law or regulation or (b) the compliance with any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost to the Bank of agreeing
to make or making, funding or maintaining Eurodollar Rate Advances, then the
Borrower shall from time-to-time, within five Business Days after demand by the
Bank, immediately pay to the Bank additional amounts sufficient to compensate it
for such increased cost; PROVIDED, that, before making any such demand, the Bank
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable Lending Office
if the making of such a designation would avoid the need for, or reduce the
amount of, such increased cost and would not, in its reasonable judgment, be
otherwise disadvantageous.
2.10 PAYMENTS AND COMPUTATIONS.
(a) PAYMENT PROCEDURES. The Borrower shall make each payment under
this Agreement and under the Note not later than 1:00 p.m. (Houston, Texas time)
on the day when due in Dollars to the Bank at 700 Louisiana, Houston, Texas
77002 (or such other location as the Bank shall designate in writing to the
Borrower) in same day funds.
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(b) COMPUTATIONS. All computations of interest and of fees shall be
made by the Bank on the basis of a year of 360 days, in each case for the actual
number of days (including the first day, but excluding the last day) occurring
in the period for which such interest or fees are payable. Each determination by
the Bank of an interest rate shall be conclusive and binding for all purposes,
absent manifest error.
(c) NON-BUSINESS DAY PAYMENTS. Whenever any payment shall be stated
to be due on a day other than a Business Day, such payment shall be made on or
before the next succeeding Business Day, and, if made on such succeeding
Business Day, such extension of time shall in such case be included in the
computation of payment of interest or fees, as the case may be; PROVIDED,
however, that if such extension would cause payment of interest on or principal
of Eurodollar Rate Advances to be made in the next following calendar month,
such payment shall be made on the next preceding Business Day.
2.11 NO DEDUCTION FOR CERTAIN TAXES. Any and all payments by the Borrower
of Eurodollar Rate Advances shall be made, in accordance with Section 2.10, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on the Bank's income, and franchise
taxes imposed on it, by the jurisdiction under the laws of which the Bank is
organized or any political subdivision of the jurisdiction (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes") and Taxes by the jurisdiction of the Bank's
Applicable Lending Office or any political subdivision of such jurisdiction. If
the Borrower shall be required by law to deduct any Taxes from or in respect of
any sum payable to the Bank, the sum payable shall be increased as may be
necessary so that, after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.11), the Bank
receives an amount equal to the sum it would have received had no such
deductions been made. In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Note, or the other Credit Documents.
2.12 LETTERS OF CREDIT.
(a) ISSUANCE. From time-to-time from the date of this Agreement
until the Maturity Date, at the request of the Borrower, the Bank shall, on the
terms and conditions hereinafter set forth, issue, increase, or extend the
expiration date of Letters of Credit for the account of the Borrower or any of
its Subsidiaries on any Business Day.
(b) CERTAIN LIMITATIONS. No Letter of Credit will be issued,
increased, or extended:
(i) if such issuance, increase, or extension would cause the
Letter of Credit Exposure to exceed the lesser of (A) $5,000,000 and
(B) the lesser of (1) the Commitment LESS the aggregate outstanding
principal amount of all Advances or (2) the Borrowing Base LESS the
aggregate outstanding principal amount of all Advances;
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(ii) unless such Letter of Credit has an Expiration Date not
later than the earlier of (A) one year after the date of issuance or
(B) 90 days after the Maturity Date;
(iii) unless such Letter of Credit is in form and substance
reasonably acceptable to the Bank; and
(iv) unless the Borrower has delivered to the Bank, by 1:00
p.m. at least five Business Days before the date of the proposed
issuance of the Letter of Credit, a completed and executed Letter of
Credit Application in the form of the attached EXHIBIT C together
with all exhibits, schedules and other attachments reasonably
necessary to draft and issue such Letter of Credit.
SECTION 3. CONDITIONS PRECEDENT. This Agreement shall become effective and the
Original Loan Agreement shall be amended and restated as provided in this
Agreement on the date the Borrower shall have received written confirmation from
the Bank indicating it has received the documents set forth on the Closing
Document Checklist attached as Exhibit F, each such document dated on or before
such day, duly executed by all the parties thereto, and in form and substance
satisfactory to the Bank. The making of the initial Advance or the issuance of
the initial Letter of Credit shall constitute an acknowledgment by the Bank that
all conditions precedent in this Section 3 relating to the effectiveness of the
Agreement have either been met or waived. Prior to the making of each Advance or
the issuance of each Letter of Credit, the following conditions precedent shall
have been met.
3.1 REPRESENTATIONS AND WARRANTIES. As of the date of the making of any
Advance or the issuance of any Letter of Credit, the representations contained
in this Agreement and in each other Credit Document shall have been made and
shall be true and correct and no warranty made in this Agreement or any other
Credit Document shall be breached, and the Borrower's request for the making of
any Advance or the issuance of any Letter of Credit shall be deemed to be a
representation and additional warranty of the representations and warranties
contained in the Agreement and each other Credit Document.
3.2 EVENT OF DEFAULT. As of the date of the making of any Advance or the
issuance of any Letter of Credit there shall exist no Default or Event of
Default, and the making of the Advance or the issuance of any Letter of Credit
would not cause or be reasonably expected to cause a Default or Event of
Default.
3.3 MATERIAL ADVERSE CHANGE. As of the date of this Agreement and prior to
the making of any Advance or the issuance of any Letter of Credit, no event or
events which individually or in the aggregate could reasonably be expected to
cause a material adverse change in the Borrower's or any of its Subsidiaries'
ability to perform its duties under this Agreement shall have occurred since
January 31, 1999 and be continuing.
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SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Bank, and with each request for an Advance or the issuance of a Letter of
Credit again represents and warrants to the Bank, as follows:
4.1 ORGANIZATION. Each of the Borrower and its Subsidiaries is a
corporation duly and validly organized and existing and in good standing under
the laws of its state of incorporation, and is authorized to do business and is
in good standing in all jurisdictions in which such qualification or
authorization is necessary.
4.2 AUTHORIZATION. The execution, delivery, and performance by the
Borrower and its Subsidiaries of the Credit Documents to which each such Person
is a party and the consummation of the transactions contemplated hereby and
thereby (a) are within the Borrower's and its Subsidiaries' corporate powers,
(b) have been duly authorized by all necessary corporate action, (c) do not
contravene the Borrower's or its Subsidiaries' organizational documents or any
law or any contractual restriction binding on or affecting the Borrower and its
Subsidiaries, and (d) will not result in or require the creation or imposition
of any Lien prohibited by this Agreement.
4.3 ENFORCEABILITY. The Credit Documents have each been duly executed and
delivered and constitute legal, valid, and binding obligations of the Borrower
and its Subsidiaries, enforceable in accordance with their respective terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws at the time in effect affecting the rights of
creditors generally. Without limiting the generality of the foregoing, none of
the Borrower or any of its Subsidiaries is (a) an investment company within the
meaning of the Investment Company Act of 1940, as amended, nor is, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company, within the meaning of said Act, or (b) a "holding company,"
or a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company," or a "subsidiary company" of an "affiliate" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended.
4.4 FINANCIAL CONDITION. The Borrower has delivered to the Bank its
audited consolidated financial statements dated as of January 31, 1999 and its
unaudited consolidated financial statements for the quarter ended May 2, 1999.
These financial statements are true and correct in all material respects and
present fairly the financial condition of the Borrower and its Subsidiaries as
of each such date, subject, in the case of such financial statements for the
quarter ended May 2, 1999, to year-end audit adjustments. Except as disclosed in
SCHEDULE 4.4 (Liabilities) or in such financial statements or notes thereto,
there are no material contingent obligations, liabilities for taxes, unusual
forward or long-term commitments, or material unrealized or anticipated losses
of the Borrower and its Subsidiaries which are not reserved against. Since
January 31, 1999, no event has occurred and is continuing that could reasonably
be expected to have a material adverse effect on the Borrower's and its
Subsidiaries' ability to perform their duties under any Credit Document.
4.5 SUBSIDIARIES. Set forth in SCHEDULE 4.5 (Subsidiaries) is a complete
and accurate list of the Subsidiaries of the Borrower, showing the correct legal
name and jurisdiction of incorporation of each and showing the ownership of the
outstanding stock of each Subsidiary. All of the outstanding capital stock of
each Subsidiary has been validly issued, is fully paid and nonassessable,
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and is owned by the Borrower or a Subsidiary of the Borrower free and clear of
all Liens, other than Liens permitted in Section 5.6 of this Agreement.
4.6 DEBT. SCHEDULE 4.6 (Debt) is a complete and correct list of all
arrangements presently in effect providing for or relating to extensions of
credit (including agreements and arrangements for the issuance of letters of
credit or for acceptance financing) in respect of which the Borrower or any of
its Subsidiaries is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, outstanding or to
be outstanding, are correctly stated.
4.7 OWNERSHIP AND LIENS. Each of the Borrower and its Subsidiaries has
title to, or a valid leasehold interest in, all of the material Property used in
its business, both real and personal, including the Property reflected in the
financial statements referred to in Section 4.4 (other than any properties or
assets disposed of in the ordinary course of business), and the Property owned
by the Borrower and its Subsidiaries and their leasehold interests are not
subject to any Lien, except such as may be otherwise permitted under this
Agreement or by SCHEDULE 5.6.
4.8 LITIGATION. Except as disclosed in SCHEDULE 4.8 (Litigation), there
are no material actions, suits, or proceedings pending or, to the knowledge of
the Borrower, threatened against the Borrower or any Subsidiary at law, in
equity, or in admiralty, or by or before any governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign, or
any arbitrator, which could reasonably be expected to result in a liability
(after giving effect to any insurance covering such liability) in excess of
$100,000.
4.9 OTHER AGREEMENTS. The Borrower and its Subsidiaries are not in
violation of any material provision of any other indenture, loan, or credit
agreement to which any of them is a party, and the execution and delivery of
this Agreement, the consummation of the transactions and the execution and
delivery of the instruments contemplated hereby, and fulfillment of the terms
and compliance with the provisions hereof and thereof, will not result in any
violation or breach of any material provisions of, or constitute a material
default under, any other indenture, loan, or credit agreement to which any of
them is a party. None of the Borrower or any of its Subsidiaries is a party to
or bound by any contract except the Signal Security Documents and the Investment
Agreement which at the date hereof materially and adversely affects the
business, operations, or financial condition of the Borrower.
4.10 PERMITS. To the knowledge of the Borrower and its Subsidiaries, each
of the Borrower and its Subsidiaries possesses all material licenses, permits,
franchises, patents, copyrights, trademarks, and trade names, or has rights
thereto, necessary to conduct its business substantially as now conducted and as
presently proposed to be conducted, and, to the knowledge of the Borrower and
its Subsidiaries, neither the Borrower nor any of its Subsidiaries is in any
material violation of any valid rights of others with respect to any of the
foregoing.
4.11 COMPLIANCE WITH LAWS. Each of the Borrower and its Subsidiaries is in
compliance, in all material respects, with all federal, state, and local laws
and regulations which are applicable to the operations and Property of the
Borrower and its Subsidiaries.
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4.12 TAXES. Each of the Borrower and its Subsidiaries has filed all tax
returns and reports required to be filed and has paid all taxes, assessments,
fees, and other governmental charges levied upon the Borrower's or any of its
Subsidiaries' Property or income which are due and payable, including interest
and penalties, except those taxes, assessments, fees, and other governmental
charges which are being contested in good faith and by appropriate proceedings,
and with respect to which reserves in conformity with GAAP have been provided.
4.13 ERISA. Each of the Borrower and its Subsidiaries is in compliance in
all material respects with all applicable provisions of ERISA. With respect to
the Borrower, neither a Reportable Event nor a Prohibited Transaction has
occurred and is continuing with respect to any Plan; no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; no Commonly Controlled Entity has
completely or partially withdrawn from a Multiemployer Plan; the Borrower and
each Commonly Controlled Entity have met their minimum funding requirements
under ERISA with respect to all of their Plans and the present value of all
vested benefits under each Plan does not exceed the fair market value of all
Plan assets allocable to such benefits, as determined on the most recent
valuation date of such Plan and in accordance with the provisions of ERISA; and
neither the Borrower nor any Commonly Controlled Entity has incurred any
liability to the PBGC under ERISA.
4.14 YEAR 2000 COMPLIANCE.
(a) The Borrower has (i) begun analyzing its business and operations
and each of its subsidiaries and affiliates' business and operations that could
be adversely affected by failure to become Year 2000 compliant (that is, the
risk that computer applications, imbedded microchips and other systems used by
the Borrower or any of its subsidiaries or affiliates will be able to perform
properly date sensitive functions prior to and after December 31, 1999), (ii)
developed a plan for becoming Year 2000 compliant in a timely manner, the
implementation of which is on schedule in all material respects and (iii) to
date, implemented that plan in accordance with that timetable. The Borrower
reasonably believes that it will become Year 2000 compliant for its operations
and those of its subsidiaries and affiliates on a timely basis except to the
extent that a failure to do so could not reasonably be expected to have a
material adverse effect upon the financial condition of the Borrower.
(b) The Borrower reasonably believes any suppliers and vendors that
are material to its operations or the operations of its subsidiaries and
affiliates will be Year 2000 compliant for their own computer applications
except to the extent that a failure to do so could not reasonably be expected to
have a material adverse effect upon the financial condition of the Borrower.
SECTION 5. COVENANTS. Until the Bank receives full payment of the Obligations
and has no further obligations under this Agreement or any other Credit
Document, the Borrower covenants as follows:
5.1 ORGANIZATION. Each of the Borrower and its Subsidiaries shall maintain
(a) its organization and good standing under the laws of its state of
incorporation, and (b) its authorization
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to do business and good standing in all jurisdictions in which such
qualification or authorization is necessary.
5.2 REPORTING. The Borrower shall furnish to the Bank all of the
following:
(a) ANNUAL FINANCIAL REPORTS. As soon as available and in any event
not later than 120 days after the end of each fiscal year of the Borrower, a
copy of the annual audit report for such year for the Borrower, including
therein the consolidated balance sheet of the Borrower and its Subsidiaries as
of the end of such fiscal year and consolidated statements of income, retained
earnings, and cash flow for the Borrower and its Subsidiaries for such fiscal
year, in each case certified by Arthur Andersen & Co. or other independent
certified public accountants approved by the Bank. The Borrower shall also
provide, if specifically requested by the Bank, its corresponding internally
prepared statements of income for each store. The above financial reports shall
be accompanied by a duly completed Borrowing Base and Compliance Certificate.
(b) QUARTERLY FINANCIAL REPORTS. As soon as available and in any
event not later than 45 days after the end of each fiscal quarter, the
consolidated balance sheet of Borrower and its Subsidiaries as of the end of
such quarter and the consolidated statements of income, retained earnings, and
cash flow for the Borrower and its Subsidiaries as of the end of such quarter,
all in reasonable detail and duly certified by the chief financial officer of
the Borrower as having been prepared in accordance with GAAP. The above
financial reports shall be accompanied by a duly completed Borrowing Base and
Compliance Certificate and shall also include same store sales information.
(c) MONTHLY BORROWING BASE REPORTS. If any Advances are outstanding,
as soon as available and in any event not later than 15 days after the end of
each fiscal month, Section 1 of the Borrowing Base and Compliance Certificate
duly completed.
(d) ERISA. Promptly, and in any event within 30 days after the
Borrower knows that any circumstances exist that constitute grounds entitling
the PBGC to institute proceedings to terminate a Plan subject to ERISA with the
respect to the Borrower or any Commonly Controlled Entity; and promptly, but in
any event within two Business Days of receipt by the Borrower or any Commonly
Controlled Entity of notice that the PBGC intends to terminate a Plan or appoint
a trustee to administer the same; and promptly, but in any event within five
Business Days of the receipt of notice concerning the imposition of withdrawal
liability with respect to the Borrower or any Commonly Controlled Entity; the
Borrower will deliver to the Bank a certificate of the chief financial officer
of the Borrower setting forth all relevant details and the action which the
Borrower proposes to take with respect thereto.
(e) LITIGATION. Promptly after the commencement thereof, (i) to the
extent each of the following is not covered by insurance and could reasonably be
expected to result in a liability of the Borrower or any of its Subsidiaries in
excess of $100,000, notice of all actions, suits, and proceedings before any
court or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Borrower or any Subsidiary
and (ii) notice of any adverse development in pending actions, suits and
proceedings which, if determined adversely, could
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reasonably be expected to have a material adverse effect on the ability of the
Borrower to perform its duties under the Credit Documents.
(f) MATERIAL CHANGES. Prompt written notice of any condition or
event of which the Borrower has knowledge, which condition or event has resulted
or may reasonably be expected to result in a material adverse effect on the
ability of the Borrower to perform its duties under this Agreement or any other
Credit Document.
(g) SEC AND OTHER REPORTS. Promptly after the same become publicly
available, copies of all Forms 10-K, 10-Q, 8-K, annual reports, tender offer
documentation, proxy statements and any other information which the Bank may
reasonably request or which relates to events or circumstances which could
reasonably be expected to have a material adverse effect on the Borrower's and
its Subsidiaries' ability to perform their respective obligations under this
Agreement and the other Credit Documents, filed by the Borrower with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934 or filed with any national securities exchange
or distributed to the Borrower's shareholders.
(h) CHANGES IN MANAGEMENT. Promptly, but in any event within five
days after the occurrence thereof, a notice detailing any material changes in
the Chief Executive Officer, the Chief Financial Officer or the President of the
Borrower or its Subsidiaries.
(i) OTHER INFORMATION. Such other information respecting the
business operations or Property of the Borrower or its Subsidiaries, financial
or otherwise, as the Bank may from time-to-time reasonably request.
(j) DEFAULTS. Promptly, but in any event within five days after the
occurrence thereof, a notice of each Default known to the Borrower, together
with a statement of the chief financial officer of the Borrower setting forth
the details of such Default and the actions which the Borrower has taken and
proposes to take with respect thereto.
(k) YEAR 2000 COMPLIANCE. Prompt written notice in the event the
Borrower determines that any computer application which is material to its
operations or the operations of any of its subsidiaries, affiliates, material
vendors, suppliers or customers will not be fully Year 2000 compliant on a
timely basis, except to the extent that such failure could not reasonably be
expected to have a material adverse effect upon the financial condition of the
Borrower.
5.3 INSPECTION. From time-to-time upon reasonable notice, the Borrower
shall (a) permit the Bank to examine and copy the books and records of, and
visit, inspect, and conduct field audits of the Property of the Borrower and
each of its Subsidiaries and to discuss the business operations and Property of
the Borrower and each of its Subsidiaries with any of their respective officers
or directors, and (b) if reasonably requested by the Bank, furnish the Bank with
a report prepared by a qualified independent consultant, the first two of each
such reports in any fiscal year being provided at the expense of the Borrower
and all subsequent reports for such fiscal year being provided at the expense of
the Bank.
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5.4 FINANCIAL COVENANTS.
(a) LEVERAGE RATIO. The Borrower shall not permit, at the end of any
fiscal month, the ratio of its (i) total consolidated liabilities to its (ii)
Tangible Net Worth to exceed 1.0 to 1.0.
(b) FIXED CHARGE COVERAGE RATIO. The Borrower shall not permit its
Fixed Charge Coverage Ratio to be less than 1.25 to 1.00 at the end of any
fiscal quarter for the four-fiscal quarter period then ended.
(c) TANGIBLE NET WORTH. The Borrower shall not permit, at the end of
any fiscal quarter, its Tangible Net Worth to be less than for each fiscal
quarter, an amount equal to (A) $110,700,000 PLUS (B) an amount equal to 75% of
the cumulative amount of positive Net Income of the Borrower and its
Subsidiaries since May 2, 1999 PLUS (C) an amount equal to the net proceeds
received after giving effect to any associated transaction costs (including,
without limitation, underwriting discount, brokerage fees, attorney fees and
financial advisory fees) from the issuance by the Borrower or any of its
Subsidiaries of any equity to the extent that such issuance would be included
in, and therefore increase, the Borrower's Net Worth LESS (D) the amount of any
capital stock repurchases made and permitted under Section 5.9(b) after the date
hereof.
5.5 DEBT. None of the Borrower or any of its Subsidiaries shall create,
assume, incur, suffer to exist, or in any manner become liable, directly or
indirectly, or contingently in respect to, any Debt other than all of the
following:
(a) Debt owed to the Bank, including the Obligations;
(b) Debt existing on the date of this Agreement that is listed in
Schedule 4.6 (Debt), and any rearrangments, extensions, or refinancing thereof
which do not increase the amount thereof;
(c) Debt in the form of accounts payable to trade creditors for
goods or services which are not aged more than 60 days from the date due and
current operating liabilities (other than for borrowed money) which are not more
than 60 days past due, in each case incurred in the ordinary course of business,
as presently conducted, and paid within the specified time, unless contested in
good faith and by appropriate proceedings;
(d) Debt not otherwise permitted by this Section 5.5 in an aggregate
amount not to exceed 10% of the Borrower's Net Worth;
(e) Debt secured by Liens described in Section 5.6 (c), (d) or (e);
and
(f) Debt arising as a result of any guaranty of any operating leases
by the Borrower or any Subsidiary.
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5.6 LIENS. None of the Borrower or any of its Subsidiaries shall create,
assume, incur, or suffer to exist any Lien on any of its Property whether now
owned or hereafter acquired, or assign any right to receive income, except all
of the following:
(a) Liens securing Debt owed to the Bank, including, without
limitation, the Obligations and the Equipment Loan;
(b) Liens disclosed to the Bank in SCHEDULE 5.6 (Liens) provided
that the indebtedness secured by such Liens shall not be increased so that the
amount of such Debt becomes greater than the outstanding amount of such Debt on
the date of this Agreement;
(c) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens, landlord's liens (whether statutory
or contractual), and other similar liens arising in the ordinary course of
business securing obligations which are not overdue for a period of more than 30
days;
(d) Liens arising in the ordinary course of business out of pledges
or deposits under workers compensation laws, unemployment insurance, old age
pensions, or other social security or retirement benefits, or similar
legislation to secure public or statutory obligations;
(e) Liens for taxes, assessment or other governmental charges and
which are not yet due or which are being actively contested in good faith by
appropriate proceedings;
(f) Liens arising in the ordinary course of business which are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit and which do not materially detract from the value of the Borrower's
or its Subsidiaries' Property or assets or materially interfere with their
business; and
(g) Liens securing purchase money indebtedness (including Capital
Lease obligations) to the extent such Debt is permitted to be incurred pursuant
to Section 5.5(d); PROVIDED that, Liens on accounts receivable and inventory of
the Borrower and its Subsidiaries (other than Liens securing the Obligations)
are expressly prohibited.
5.7 CORPORATE TRANSACTIONS. The Borrower shall not, without the prior
written consent of the Bank, alter its current corporate structure as disclosed
in SCHEDULE 4.5 (Subsidiaries). Without limiting the foregoing, the Borrower
will not, without the prior written consent of the Bank: (a) merge with or into
any other Person, (b) change its name or the names of its Subsidiaries or
reincorporate in another jurisdiction, (c) create or suffer to exist any
Subsidiary not existing on the date of this Agreement, or (d) sell or otherwise
dispose of any shares of capital stock of any Subsidiary except (i) as permitted
under the Investment Agreement or (ii) the issuance by the Borrower of shares of
its capital stock (whether common or preferred). Notwithstanding any of the
foregoing, the Bank shall not unreasonably withhold its consent to any of the
actions restricted by this Section 5.7.
5.8 ASSET SALES. None of the Borrower or any of its Subsidiaries shall
sell, transfer, or convey any of its assets outside the ordinary course of
business, except that the Borrower and its
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Subsidiaries may (a) make intercompany loans and advances, and (b) if no Default
has occurred and is continuing, enter into sale and leaseback transactions
involving real Property if the proceeds realized from the assets being sold in
such transactions are at least equal to the net book value of such assets.
5.9 DISTRIBUTIONS, ETC. Without the prior approval of the Bank, the
Borrower and its Subsidiaries shall not make any Restricted Payments; PROVIDED
that so long as no Default has occurred and is continuing or would occur after
giving effect thereto (a) the Borrower may pay dividends on its capital stock
(whether common or preferred) and (b) the Borrower may purchase up to 3,000,000
shares of its capital stock (as adjusted for stock splits, stock dividends or
any other similar adjustment) from the date of this Agreement until January 31,
2000 for consideration not to exceed $21,000,000. Additionally, the Bank
consents to the Borrower's purchases made before the Effective Date of 1,090,000
shares of the Borrower's common stock.
5.10 TRANSACTIONS WITH AFFILIATES. None of the Borrower or any of its
Subsidiaries shall enter into any transaction directly or indirectly with or for
the benefit of an Affiliate except transactions with an Affiliate in the
ordinary course of business for which the monetary or business consideration
arising from such a transaction would be substantially as advantageous to the
Borrower or such Subsidiary as the monetary or business consideration which it
would obtain in a comparable arm's length transaction. Nothing in this Section
shall prohibit the Borrower or any of its Subsidiaries from engaging in the
transactions arising under the TCR Advisory Agreement.
5.11 INVESTMENTS AND CAPITAL EXPENDITURES. None of the Borrower or any of
its Subsidiaries shall make or hold any investment in any Person, including
capital contributions to the Person, investments in the debt or equity
securities of the Person, loans, guaranties, or other extensions of credit to
the Person (including trade credit), or make any capital expenditures or capital
investments (each of the foregoing investments or capital expenditures being
referred to as an "Investment") except:
(a) intercompany loans or advances among the Borrower and its
Subsidiaries;
(b) Liquid Investments;
(c) capital expenditures during any fiscal year in an amount not to
exceed 20% of the Borrower's Net Worth determined as of the last day of the
preceding fiscal year; and
(d) as permitted by the Bank.
5.12 MAINTENANCE OF PROPERTY. Each of the Borrower and its Subsidiaries
shall maintain its owned, leased, or operated property, equipment, buildings,
and fixtures in good condition and repair, and not permit the commission of
material waste or other injury, destruction, or loss thereto.
5.13 COMPLIANCE WITH LAWS. Each of the Borrower and its Subsidiaries shall
comply, in all material respects with all federal, state, and local laws and
regulations which are applicable to the operations and Property of the Borrower
and its Subsidiaries, PROVIDED that this Section shall not prevent the Borrower
and its Subsidiaries from, in good faith and with reasonable diligence,
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contesting the validity or application of any such laws or regulations by
appropriate legal proceedings for which reserves in conformity with GAAP have
been provided.
5.14 TAXES. The Borrower and its Subsidiaries shall pay and discharge all
taxes, assessments, and other charges and claims imposed on the Borrower and its
Subsidiaries, PROVIDED that nothing in this Section shall require the Borrower
or any of its Subsidiaries to pay any tax, assessment, or charge which is being
contested in good faith and by appropriate proceedings, and with respect to
which reserves in conformity with GAAP have been provided.
5.15 ERISA. The Borrower and its Subsidiaries shall prevent, as they
relate to the Borrower: any Reportable Event, complete or partial withdrawal
from any Multiemployer Plan, any Prohibited Transaction, the filing of a notice
of intent to terminate a Plan, the termination of a Plan that is not fully
funded, or circumstances to exist which constitute grounds entitling the PBGC to
institute proceedings to terminate a Plan, or the PBGC from instituting such
proceedings, and any other events or conditions which could subject the Borrower
to any tax, penalty, lien, or other liability under ERISA.
5.16 LINES OF BUSINESS; INVENTORY ACCOUNTING METHOD. None of the Borrower
or any of its Subsidiaries will (a) change the character of its business as
conducted on the date of this Agreement, (b) engage in any type of business not
reasonably related to its business as presently and normally conducted, or (c)
change its method of accounting for inventory.
5.17 INSURANCE.
(a) Each of the Borrower and its Subsidiaries will maintain
insurance with its current carrier or other responsible and reputable insurance
companies or associations consented to by the Bank in such amounts and covering
such risks as are usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower and
its Subsidiaries operate. Without limiting the generality of the foregoing, the
Borrower and its Subsidiaries will not terminate any type of insurance coverage
now in force except to replace an existing insurance carrier, or directly or
indirectly decrease the level of such coverage.
(b) The Borrower and its Subsidiaries will deliver to the Bank, at
the Bank's request, copies of such policies and certificates evidencing such
policies.
(c) The Borrower and its Subsidiaries will not engage in any self
insurance plan established after the date of this Agreement that is not
consented to in writing by the Bank.
5.18 ENVIRONMENTAL LAW COMPLIANCE. The Borrower and its Subsidiaries will
not violate any federal laws, rules or ordinances for environmental protection,
including, but not limited to, the following: Clean Air Act, 42 U.S.C. ss. 7401
ET. SEq.; Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 ET. SEq.;
Solid Waste Disposal Act, 42 U.S.C. ss. 6901 ET. seq.; Comprehensive
Environmental Response, Compensation Liability Act ("CERCLA" or "SUPERFUND"), 42
U.S.C. ss. 9601 ET. SEq.; National Environmental Policy Act, 42 U.S.C. ss. 4321
ET. SEq.; regulations of the Environmental Protection Agency and any applicable
local or state law, rule, regulation or rule of common law and any judicial
interpretation thereof relating primarily to the environment or Hazardous
Materials (as
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defined herein), which the failure to comply with could have a material adverse
effect on the Borrower, any Subsidiary or any Guarantor. "Hazardous Materials"
include all materials defined as hazardous wastes or substances under any local,
state or federal environmental laws, rules or regulations, and petroleum,
petroleum products and oil.
SECTION 6. EVENTS OF DEFAULT. Each of the following shall be an "Event of
Default" for the purposes of this Agreement and for each of the Credit
Documents:
6.1 PAYMENT FAILURE. The Borrower defaults in the payment when due of any
amount due under this Agreement or any other Credit Document, including payments
of principal, interest, fees, reimbursements, and indemnifications, except that
a Default arising from the failure to pay any such amount (other than principal)
when due shall not be an Event of Default if such Default is cured within three
days of the occurrence thereof; provided that, with respect to fees and expenses
for which there is no requirement that the Bank give notice of the date such
amounts are due (but excluding fees and expenses for which the due dates are set
forth in this Agreement), the three day grace period contemplated herein shall
not begin running prior to the date that the Borrower receives notice from the
Bank detailing the amount of such fees or expenses owing to it);
6.2 FALSE REPRESENTATION. Any representation or warranty made by the
Borrower or any of its Subsidiaries or any officer thereof in this Agreement or
in any other Credit Document proves to have been materially false or erroneous
at the time it was made or deemed made;
6.3 BREACH OF COVENANT. (a) Any breach by the Borrower or any Subsidiary
of any of the covenants in Sections 5.3, 5.5 through 5.9, 5.11, 5.17 (a), and
5.17 (c), or (b) any breach by the Borrower or any Subsidiary of Section 5.17(b)
or any other covenant contained in this Agreement or any other Credit Document,
and such breach if curable, is not cured within 30 days of the occurrence
thereof;
6.4 BANKRUPTCY AND INSOLVENCY. The Borrower or any Subsidiary or any
Guarantor (a) admits in writing its inability to pay its debts generally as they
become due; makes an assignment for the benefit of its creditors; consents to or
acquiesces in the appointment of a receiver, liquidator, fiscal agent, or
trustee of itself or any of its Property; files a petition under bankruptcy or
other laws for the relief of debtors; or consents to any reorganization,
arrangement, workout, liquidation, dissolution, or similar relief; or (b) shall
have had, without its consent: any court enter an order, judgment, or decree
appointing a receiver, liquidator, fiscal agent, or trustee of itself or any of
its Property; any court approve a petition filed against it seeking
reorganization, arrangement, workout, liquidation, dissolution, or similar
relief under bankruptcy or other laws for the relief of debtors; or any court
adjudicate the Borrower, any Subsidiary, or any Guarantor as bankrupt and any of
the foregoing in clause (b) shall remain unvacated, not set aside, or unstayed
for an aggregate of 60 days, whether or not consecutive;
6.5 ADVERSE JUDGMENT. The Borrower or any Subsidiary suffers a final
judgment against it which, within 30 days from the date such judgment is
entered, shall not have been satisfied or execution thereof stayed pending
appeal, unless the aggregate amount of all such judgments, less any insurance
proceeds covering such judgments, is less than $100,000 in the aggregate;
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6.6 CROSS DEFAULT. (a) Any breach by the Borrower or any Subsidiary of any
contract related to any Debt (except intercompany loans and advances) of the
Borrower in excess of $100,000 and such breach is not cured within any
applicable grace period; (b) any breach by the Borrower or any Subsidiary of any
contract related to any Lien securing any Debt (except intercompany loans and
advances) in excess of $100,000 on the Borrower's or any Subsidiary's Property
and such breach is not cured within any applicable grace period; or (c) any
breach by the Borrower or any Subsidiary of any contract where such breach could
have a material adverse effect on the ability of the Borrower to perform its
duties under this Agreement or any other Credit Document and such breach is not
cured within any applicable grace period;
6.7 OWNERSHIP. The Borrower or any of its Subsidiaries shall cease to own
100% of the Voting Securities of its Subsidiaries; or
6.8 GUARANTIES. Any of the guaranty provisions in the Guaranties shall for
any reason cease to be valid and binding on the Guarantors or any Guarantor
shall so state in writing.
SECTION 7. REMEDIES.
7.1 TERMINATE COMMITMENTS. Upon the occurrence of any Event of Default
relating to bankruptcy or insolvency under Section 6.4, all of the commitments
of the Bank hereunder shall immediately and automatically terminate. During the
continuation of any Event of Default other than a bankruptcy or insolvency Event
of Default under Section 6.4, the Bank may declare all of the commitments of the
Bank hereunder terminated, whereupon the same shall immediately terminate.
7.2 ACCELERATION. Upon the occurrence of any Event of Default relating to
bankruptcy or insolvency under Section 6.4, the aggregate outstanding amount of
all loans made hereunder, all accrued interest thereon, and all other amounts
payable by the Borrower under this Agreement and any other Credit Document shall
immediately and automatically become due and payable. During the continuation of
any Event of Default other than a bankruptcy or insolvency Event of Default
under Section 6.4, the Bank may declare the aggregate outstanding amount of all
loans made hereunder, all accrued interest thereon, and all other amounts
payable by the Borrower under this Agreement and any other Credit Document to be
immediately due and payable. Except as expressly provided herein, the Borrower
waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of intent to accelerate, notice of
acceleration, and all other notices in connection with any action under this
paragraph.
7.3 SETOFF. During the continuance of any Event of Default, the Bank may
from time-to-time, without notice to the Borrower or any of its Subsidiaries
(any such notice being expressly waived by the Borrower), set-off and apply any
and all deposits of the Borrower or any of its Subsidiaries (general or special,
time or demand, provisional or final) at any time held by the Bank, and may
set-off and apply all amounts owed by the Bank to or for the account of the
Borrower or any of its Subsidiaries, against the Obligations. The Bank agrees to
promptly notify the Borrower after any such set-off or application; PROVIDED
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Bank under this Section are in
addition to
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other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
7.4 CREDIT DOCUMENTS. Following the occurrence and during the continuance
of an Event of Default, the Bank may take any and all actions permitted under
the Credit Documents and the Guaranties.
7.5 DEFAULT INTEREST. If the Borrower fails to pay when due any amount
payable under this Agreement or any other Credit Document, including principal,
interest, fees, reimbursements, and indemnifications, the amount not paid when
due shall bear interest beginning on the date due until paid in full at the
Default Rate. If a due date for an amount payable is not specified in this
Agreement or any other Credit Document, the due date shall be the date on which
the Bank demands payment therefor. The Borrower shall pay interest (or
additional interest) due under this Section when the amount payable is paid in
full.
7.6 REMEDIES CUMULATIVE AND NOT WAIVED. No right, power, or remedy
conferred to the Bank in the Credit Documents, or now or hereafter existing at
law or in equity, by statute or otherwise, shall be exclusive, and each such
right, power, or remedy shall, to the full extent permitted by law, be
cumulative and in addition to every other such right, power or remedy. No course
of dealing and no delay in exercising any right, power, or remedy conferred to
the Bank in any Credit Document or now or hereafter existing at law, in equity,
or admiralty, or by statute or otherwise, shall operate as a waiver of or
otherwise prejudice any such right, power, or remedy.
7.7 APPLICATION OF PAYMENTS. Prior to an Event of Default, all payments
made hereunder shall be applied as elsewhere provided for hereunder, but if not
elsewhere provided for hereunder, as directed by the Borrower or in absence of
such direction, as determined by the Bank. Following and during the continuance
of an Event of Default, all payment and collections shall be applied in the
order determined by the Bank.
SECTION 8. MISCELLANEOUS.
8.1 EXPENSES. The Borrower shall pay directly or reimburse the Bank for
the reasonable out-of-pocket expenses associated with the creation of the credit
facility contemplated by this Agreement and the other Credit Documents,
including reasonable legal fees of outside counsel. Following the execution of
this Agreement, the Borrower shall pay directly or reimburse the Bank for all
reasonable charges and disbursements of legal counsel for the Bank in connection
with (a) the creation, amendment, modification, waiver, or interpretation of any
Credit Document, and (b) the preservation or enforcement of any rights of the
Bank under the Credit Documents.
8.2 INDEMNIFICATION OF BANK. THE BORROWER HEREBY AGREES TO INDEMNIFY THE
BANK AGAINST ALL CLAIMS, LIABILITIES, DAMAGES, AND REASONABLE OUT-OF-POCKET
EXPENSES IN CONNECTION WITH (A) ACTUAL OR THREATENED DAMAGE TO THE ENVIRONMENT,
AGENCY COSTS OF INVESTIGATION, PERSONAL INJURY OR DEATH, OR ANY DAMAGE TO THE
BORROWER'S OR ANY SUBSIDIARY'S PROPERTY DUE TO A RELEASE OR ALLEGED RELEASE OF
HAZARDOUS MATERIALS ON OR UNDER THE BORROWER'S OR ANY SUBSIDIARY'S PROPERTY OR
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IN THE SURFACE OR GROUND WATER LOCATED ON OR UNDER THE BORROWER'S OR ANY
SUBSIDIARY'S PROPERTY, OR GASEOUS EMISSIONS FROM THE BORROWER'S OR ANY
SUBSIDIARY'S PROPERTY OR ANY OTHER CONDITION EXISTING ON THE BORROWER'S OR ANY
SUBSIDIARY'S PROPERTY RESULTING FROM THE USE OR EXISTENCE OF HAZARDOUS
MATERIALS, WHETHER SUCH CLAIM PROVES TO BE TRUE OR FALSE, AND (B) ANY LITIGATION
OR PROCEEDING RELATING TO THIS AGREEMENT AND ANY OTHER CREDIT DOCUMENT,
INCLUDING CLAIMS CAUSED BY THE BANK'S OWN NEGLIGENCE, EXCEPT AS A RESULT OF THE
BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE BORROWER AGREES TO INDEMNIFY
THE BANK FROM ANY CLAIMS, LIABILITIES, DAMAGES, AND REASONABLE OUT-OF-POCKET
EXPENSES WHICH ARISE OUT OF THE BANK'S GOOD FAITH RELIANCE UPON INSTRUCTIONS
FROM THE BORROWER, AS PROVIDED FOR HEREIN, INCLUDING CLAIMS CAUSED BY THE BANK'S
OWN NEGLIGENCE, EXCEPT AS A RESULT OF THE BANK'S GROSS NEGLIGENCE AND WILLFUL
MISCONDUCT. THE BORROWER FURTHER AGREES THAT ITS INDEMNITY OBLIGATIONS SHALL
INCLUDE, BUT ARE NOT LIMITED TO, LIABILITY FOR DAMAGES RESULTING FROM THE
PERSONAL INJURY OR DEATH OF AN EMPLOYEE OF THE BORROWER, REGARDLESS OF WHETHER
THE BORROWER HAS PAID SUCH EMPLOYEE UNDER THE WORKERS' COMPENSATION LAWS OF ANY
STATE OR OTHER SIMILAR FEDERAL OR STATE LEGISLATION FOR THE PROTECTION OF
EMPLOYEES.
8.3 USURY SAVINGS.
(a) If the rate of interest under this Agreement at any time exceeds
the Highest Lawful Rate, the outstanding amount of the loans made hereunder
shall bear interest at the Highest Lawful Rate until the total amount of
interest due hereunder equals the amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect. In addition, if when loans made hereunder are repaid in
full, the total interest due hereunder (taking into account the increase
provided for above) is less than the total amount of interest which would have
been due hereunder if the stated rates of interest set forth in this Agreement
had at all times been in effect, then the Borrower shall pay to the Bank an
amount equal to the difference between (i) the lesser of (A) the amount of
interest which would have been charged if the Highest Lawful Rate had at all
times been in effect and (B) the amount of interest which would have accrued if
the stated rates of interest set forth in this Agreement had at all times been
in effect and (ii) the amount of interest actually paid and accrued under this
Agreement on the Note.
(b) Notwithstanding the foregoing, it is the intention of the Bank
and the Borrower to conform strictly to any applicable usury laws. Accordingly,
if the Bank contracts for, charges, or receives any consideration which
constitutes interest in excess of the Highest Lawful Rate, then any such excess
shall be canceled automatically and, if previously paid, shall at the Bank's
option be applied to the outstanding amount of the loans made hereunder or be
refunded to the Borrower.
8.4 NOTICE. Unless otherwise specified, all notices and other
communications provided for in this Agreement shall be in writing, including
telecopy, and delivered or transmitted to the addresses set forth next to the
signatures below, or to such other address as shall be designated by the
Borrower or the Bank in written notice to the other party. Notice sent by
telecopy shall be deemed to be given when receipt of such transmission is
acknowledged, and delivered notice shall
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be deemed to be given when receipted for by, or actually received by, an
authorized officer of the Borrower or the Bank, as the case may be.
8.5 TIMING. Time is of the essence in this Agreement and in all other
Credit Documents.
8.6 AMENDMENTS AND WAIVERS. Any provision of this Agreement or any other
Credit Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Bank. No course of
dealing on the part of the Bank, its officers, employees, consultants, or
agents, nor any failure or delay by the Bank with respect to exercising any
right, power, or privilege of the Bank under this Agreement or any other Credit
Document shall operate as a waiver thereof.
8.7 INVALIDITY. If any provision of this Agreement or the other Credit
Documents are held to be illegal, invalid, or unenforceable, such provision
shall be fully severable and this Agreement and the other Credit Documents shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of the Credit Documents, and the remaining
provisions shall remain in full force and effect.
8.8 SURVIVAL OF AGREEMENTS. All representations, warranties, and covenants
of the Borrower in this Agreement or any other Credit Document shall survive the
execution of this Agreement or any other Credit Document.
8.9 SUCCESSORS AND ASSIGNS. This Agreement and each other Credit Document
shall bind the Borrower and its successors and assigns and shall inure to the
benefit of the Bank and its successors and assigns. The Bank shall not assign
its rights or delegate its duties hereunder without the consent of the Borrower
(which consent shall not be unreasonably withheld) and shall give the Borrower
notice of any such assignment. The Borrower may not assign its rights or
delegate its duties under this Agreement or any other Credit Document.
8.10 ARBITRATION.
(a) Any controversy or claim between or among the parties hereto,
including those arising out of or relating to this Agreement or the Credit
Documents, including any claim based on or arising from an alleged tort, shall
be determined by binding arbitration in accordance with the Federal Arbitration
Act (or if not applicable, the applicable state law), the rules of practice and
procedure for the arbitration of commercial disputes of Judicial Arbitration and
Mediation Services, Inc. ("JAMS"), and the "special rules" set forth in
paragraph (b) below. In the event of any inconsistency, the special rules shall
control. Judgment upon any arbitration award may be entered in any court having
jurisdiction. Any party to this Agreement may bring an action, including a
summary or expedited proceeding, to compel arbitration of any controversy or
claim to which this Agreement or any of the Credit Documents applies in any
court having jurisdiction over such action.
(b) The arbitration shall be conducted in Houston, Texas, and
administered by JAMS, who shall appoint an arbitrator; if JAMS is unable or
legally precluded from administering the arbitration, then the American
Arbitration Association shall serve. All arbitration hearings shall
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be commenced within 90 days of the demand for arbitration; further, the
arbitrator shall only be permitted to extend the commencement of such hearing
for up to an additional 60 days and only after showing cause. The payment of
costs and fees associated with the arbitration shall be allocated between the
parties by the arbitrator.
(c) Nothing in this Agreement shall be deemed to (i) limit the
applicability of any otherwise applicable statutes of limitation or repose and
any waivers contained in this Agreement or the Credit Documents; or (ii) be a
waiver by the Bank of the protection afforded to it by 12 U.S.C. Sec. 91 or any
substantially equivalent state law; or (iii) limit the right of the Bank hereto
(A) to exercise self help remedies such as setoff, or (B) to take action to
enforce rights under any security or support for the Obligations, including
foreclosing on collateral and making claims under guaranties, to the extent
permitted under the Credit Documents, or (C) to obtain from a court provisional
or ancillary remedies such as injunctive relief, writ of possession, or the
appointment of a receiver. The Bank may, to the extent permitted under the
Credit Documents, exercise such self help rights, enforce rights related to
security or support, or obtain such provisional or ancillary remedies before,
during, or after the pendency of any arbitration proceeding brought pursuant to
this Agreement. Neither this exercise of self help remedies nor the institution
or maintenance of an action for foreclosure or provisional or ancillary remedies
shall constitute a waiver of the right of any party, including the claimant in
any such action, to arbitrate the merits of the controversy or claim occasioning
resort to such remedies.
8.11 COUNTERPARTS. This Agreement and any other Credit Document may be
executed in multiple counterparts which together shall constitute one and the
same instrument.
8.12 CHOICE OF LAW. This Agreement and the other Credit Documents have
been prepared, are being executed and delivered, and are intended to be
performed in the State of Texas, and the substantive laws of such state and the
applicable federal laws of the United States of America shall govern the
validity, construction, enforcement, and interpretation of this Agreement.
8.13 NO FURTHER AGREEMENTS. THIS WRITTEN AGREEMENT AND THE CREDIT
DOCUMENTS, AS DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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EXECUTED as of the date first above written.
GARDEN RIDGE CORPORATION
By:/s/ JANE ARBUTHNOT
Jane Arbuthnot
Chief Financial Officer
19411 Atrium Place, Suite 170
Houston, Texas 77084-6099
Telephone: (281) 579-7901
Telecopy: (281) 578-0999
BANK OF AMERICA, N.A.
By:/s/ WILLIAM B BORUS
William B. Borus
Vice President
700 Louisiana, 7th Floor
Houston, Texas 77002
Telephone: (713) 247-7756
Telecopy: (713) 247-7748
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