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<SEC-DOCUMENT>0000096287-05-000010.txt : 20050429
<SEC-HEADER>0000096287-05-000010.hdr.sgml : 20050429
<ACCEPTANCE-DATETIME>20050429171141
ACCESSION NUMBER: 0000096287-05-000010
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 14
CONFORMED PERIOD OF REPORT: 20050129
FILED AS OF DATE: 20050429
DATE AS OF CHANGE: 20050429
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BOMBAY COMPANY INC
CENTRAL INDEX KEY: 0000096287
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FURNITURE STORES [5712]
IRS NUMBER: 751475223
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0128
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-07288
FILM NUMBER: 05787168
BUSINESS ADDRESS:
STREET 1: 550 BAILEY AVE STE 700
CITY: FORT WORTH
STATE: TX
ZIP: 76107
BUSINESS PHONE: 8173478200
MAIL ADDRESS:
STREET 1: 550 BAILEY AVENUE
STREET 2: SUITE 700
CITY: FORT WORTH
STATE: TX
ZIP: 76107
FORMER COMPANY:
FORMER CONFORMED NAME: TANDY BRANDS INC
DATE OF NAME CHANGE: 19901114
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>form10k04.txt
<DESCRIPTION>FISCAL 2004 FORM 10-K
<TEXT>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended January 29, 2005
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to ___________________
Commission file number 1-7288
THE BOMBAY COMPANY, INC.
(Exact name of registrant as specified in its charter)
A Delaware Corporation 75-1475223
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification Number)
550 Bailey Avenue
Fort Worth, Texas 76107
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(817) 347-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, Par Value, $1 Per Share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes X No __
The aggregate market value of the voting and non-voting stock held by
nonaffiliates of the registrant based on the closing price of the stock on July
31, 2004 was approximately $207,587,787.
Shares outstanding at April 2, 2005: Common Stock, $1 Par Value: 35,930,783
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Definitive Proxy Statement for the Annual Meeting to be held
June 9, 2005 (as expressly incorporated by reference in Parts II and III).
Page 1 of 52
<PAGE> 2
FORM 10-K
PART I
ITEM 1. BUSINESS.
(a) General Development of Business
The Bombay Company, Inc. and its wholly-owned subsidiaries design, source and
market a line of proprietary home furnishings that includes large furniture,
occasional furniture, wall decor and decorative accessories that is timeless,
transitional and classic in its styling through a network of retail locations
throughout the United States and Canada, through specialty catalogs, the
Internet and international licensing arrangements. We also have a small
wholesale operation that distributes a separate line of occasional furniture.
Throughout this report, the terms "our," "we," "us", "Bombay" and "Company"
refer to The Bombay Company, Inc., including its subsidiaries.
The Company has a retail (52-53 week) fiscal year, which ends on the Saturday
nearest January 31. The periods ended January 29, 2005 ("Fiscal 2004"),
January 31, 2004 ("Fiscal 2003") and February 1, 2003 ("Fiscal 2002") reflect
52 weeks.
Bombay's unique position in the market place is a result of our core
competencies in design, sourcing and importing. We are a global importer,
sourcing product from approximately 20 countries worldwide. Over 90% of the
product has been designed or styled to Bombay's specifications.
Bombay has three distinct retail concepts leveraging the Bombay brand: Bombay,
BombayKIDS and Bombay Outlet. Bombay stores feature timeless and classically
styled home furnishings including accessories, wall decor and furniture
focusing on the bedroom, the home office, the dining room and the living room.
We entered the children's furnishings business in 2001 with the introduction of
BombayKIDS, which features a line of children's furniture, textiles and
accessories for children's bedrooms and bathrooms. Bombay Outlet stores, which
are located primarily in major outlet centers across the United States and in
Canada, feature an assortment of home furnishings similar to the Bombay store
offering at lower price points. Additionally, Bombay Outlet stores provide a
channel to liquidate overstocks of Bombay and BombayKIDS product as well as
merchandise produced for our wholesale operation.
In addition to our primary retail operations, Bombay has other operating
enterprises which contributed incrementally to profitability but which were not
significant to our operations in Fiscal 2004. Unless specified otherwise, the
discussions in this Annual Report on Form 10-K relate to the Bombay retail
operations, including BombayKIDS, outlets, Internet and catalog.
(b) Financial Information About Segments
Bombay operates primarily in one business segment as a multi-channel retailer
selling decorative home furnishings, furniture and related items.
(c) Narrative Description of Business
Merchandise Sales, Purchasing and Distribution
Bombay operates stores located in regional shopping malls, certain secondary
malls, open-air lifestyle centers, high-end strip centers and selected urban
and suburban locations. As of January 29, 2005, there were 446 stores in 42
states in the United States and 56 stores in nine Canadian provinces. We also
market our products through our mail order operations in the United States and
Canada and over the Internet at www.bombaycompany.com, www.bombaykids.com,
www.bombayoutlet.com and www.bombay.ca.
We offer a diverse selection of products consisting of approximately 6,500
stock keeping units ("SKUs") of which over 90% of the product has been designed
or styled to our specifications. Bombay's proprietary product offers unique
design, quality and exceptional value to a wide audience of consumers. We
regularly update our merchandise assortment by introducing new products while
discontinuing others. Our product offerings have a fashion component,
primarily in the accessory and wall decor areas, which are introduced
seasonally. Other products with longer lives are discontinued as they approach
the end of their life cycles. Approximately 3,500 and 2,600 new SKUs were
introduced in Fiscal 2004 and Fiscal 2003, respectively. Typically, new
product introductions have been concentrated during our spring, fall and
Christmas selling periods. The principal categories of merchandise include the
following:
Furniture - We sell two broad categories of furniture as described
below. Our furniture is manufactured by third party vendors located
principally in China, Vietnam, Malaysia, Taiwan, India and Indonesia.
2
<PAGE> 3
Large Furniture - This category includes both wood and metal
furniture focusing on the bedroom, home office, dining room and
living room. Many of the larger items are displayed in store and
stocked in our distribution centers and are available for store
delivery typically within ten days. Large furniture represented
29%, 30% and 26% of total sales in Fiscal 2004, Fiscal 2003 and
Fiscal 2002, respectively.
Occasional Furniture - This category includes wood and metal
hall tables, end and coffee tables, plant stands and other small
accent tables, stands and curios that are ready-to-assemble, take
home products. Occasional furniture represented 19% of total sales
in Fiscal 2004, Fiscal 2003 and Fiscal 2002.
Accessories - This is the broadest category and represented 40%,
39%, and 42% of total sales in Fiscal 2004, Fiscal 2003, and Fiscal 2002.
This category includes both functional and decorative accessories
including lamps, jewelry and memorabilia boxes, crystal, ceramics, frames
and desktop items, textiles, florals, candles and holiday items. The
items are sourced from over 20 countries in Asia, North America and
Europe.
Wall Decor - This category includes prints, mirrors and wall
accessories that represented 12%, 12% and 13% of total sales in Fiscal
2004, Fiscal 2003 and Fiscal 2002, respectively. This merchandise is
sourced primarily from the United States and various countries in Asia.
Merchandise is manufactured to Bombay's specifications through a network of
third party vendors principally located in Asia and North America. More than
90% of production needs are sourced from foreign countries. We have branch
offices in Taiwan, Malaysia, China, Vietnam and India, and utilize agents in
various countries to locate prospective vendors, coordinate production
requirements with manufacturers and provide technical expertise and quality
control.
We are not dependent on any particular supplier and have had long standing
relationships with many of our vendors. Forty manufacturers in eight countries
supply almost 70% of our merchandise requirements. Bombay has no long-term
production agreements; however, we generally have agreements with major
manufacturers that prohibit the production of our proprietary product for other
parties. Additional manufacturing capacity and alternative sources, both
domestic and international, continue to be added through new vendors and plant
expansions by existing vendors. We transact business with our vendors
principally in United States currency, and historically have not experienced
any material disruptions as a result of any foreign political, economic or
social instability.
The product development process takes between three and twelve months,
beginning with the original idea and concluding with the final product received
at regional distribution centers in the United States and Canada. Depending on
the category, the source country and whether an item is new or reordered, lead
times generally vary from two to six months from order placement until arrival
at the stores. Order times are slightly less for North American manufacturers
principally due to shorter shipping times. Lead times may also be impacted by
seasonality factors, especially in months when manufacturers are producing at,
or near, peak capacity to meet seasonal demands. As a result, we strive to
maintain an adequate inventory position in our distribution centers to ensure a
sufficient supply of products to our customers.
We have regional distribution centers in Fort Worth, Texas; McDonough, Georgia;
Breinigsville, Pennsylvania; Gilbertsville, Pennsylvania; Mira Loma,
California; Plainfield, Indiana and Mississauga, Ontario. The distribution
centers are strategically located to provide the capability to replenish the
majority of store inventories within 48 hours of when the order is processed.
We use dedicated trucks and less-than-truckload carriers to transport product
from our distribution centers to the stores.
Channels of Distribution
RETAIL
Stores and Real Estate
Historically, we have located our stores primarily in regional shopping malls,
certain secondary malls and selected urban and suburban locations that
satisfied our demographic and financial return criteria. Over the past two
years, as many of those leases came up for renewal, we began aggressively
pursuing an off-mall strategy for new and relocated stores focusing on open-air
lifestyle centers and high-end strip centers (especially those with a
concentration of home furnishings retailers). Such locations offer us the
opportunity to lower occupancy costs, improve operating efficiencies and
provide a more convenient shopping experience for our customer. Our preference
is to identify locations where we can operate a combined Bombay and BombayKIDS
store, thereby realizing economies that come with a larger location while
attracting a new and younger customer to Bombay. As of January 29, 2005,
approximately 37% of our stores, excluding outlets, were in off-mall locations.
3
<PAGE> 4
In selecting store locations, our real estate department conducts extensive
analyses of potential store sites. We base our selection on the existing or
planned co-tenancy of the center, the size of the market and the demographics
of the surrounding area. In evaluating a store location, placement of the
store relative to retail traffic patterns and customer base of other retailers
in the nearby vicinity are important considerations. Significant attention is
given to visual merchandising opportunities to maximize the ability to display
product in the most attractive setting. We seek out the most potentially
profitable locations for the opening of new stores regardless of the venue. We
are currently targeting 8,500 to 9,000 square foot locations where we can
construct a Bombay store of approximately 4,500 square feet with an adjacent
BombayKIDS store of approximately 4,000 square feet. Bombay mall stores are
slightly smaller in size, currently averaging approximately 3,600 square feet.
New Bombay off-mall locations are expected to be in the 4,000 to 5,000 square
foot range. In addition to building new stores, we continue to selectively
convert our existing regular stores, which average approximately 2,000 square
feet, to the larger format. As of January 29, 2005, there were 20 regular
stores remaining in the chain.
At January 29, 2005, the store chain included a total of 47 outlet stores. We
view the use of outlets as an opportunity to increase sales to a different
customer base, to assist in the orderly clearance of merchandise and to further
leverage our design and sourcing capabilities.
Following is a table summarizing our store activity and composition:
<TABLE>
<CAPTION>
January 29, January 31, February 1,
2005 2004 2003
<S> <C> <C> <C>
Number of stores:
Beginning of year. 471 422 419
Opened............ 66 84 28
Closed............ 35 35 25
End of year....... 502 471 422
Store composition:
Large format..... 384 365 334
Regular.......... 20 25 37
Outlet........... 47 46 46
BombayKIDS....... 51 35 5
Store location:
Mall............ 272 302 328
Off-mall........ 183 123 48
Outlet.......... 47 46 46
Retail square footage (in thousands):
Large format..... 1,570 1,459 1,297
Regular.......... 38 46 68
Outlet........... 200 198 193
BombayKIDS....... 212 144 20
Total............ 2,020 1,847 1,578
</TABLE>
During Fiscal 2005, we plan to open approximately 45 to 50 new stores,
including approximately 12-13 BombayKIDS stores. We plan to close
approximately 42 stores, ending the year with approximately 505 to 510 stores.
For store count purposes, a combined Bombay and BombayKIDS location represents
two stores.
Our average cost of leasehold improvements, furniture, fixtures and machinery
for Bombay stores opened in Fiscal 2004, net of landlord construction
allowances, was approximately $175,000 per store, or $37 per square foot. In
addition, other investments, which consist primarily of inventory in the store
location, averaged approximately $90,000 per large format store. The average
net cost of a BombayKIDS store is approximately $220,000 but, at $53 per square
foot, is higher than a Bombay large format store on a per square foot basis due
to higher fixturing costs. Inventory investment averaged $85,000 for a
BombayKIDS store. During Fiscal 2004, average inventory physically in store
was approximately 43% of the total inventory investment. Our mall-based stores
typically achieve store level operating profitability during their first full
year of operations and reach maturity in three years. Off-mall stores are
typically profitable during their first year of operation. However, based upon
our limited experience, it appears that it may take slightly longer for these
stores to mature. Further, whether a store was relocated from a local mall or
is a new store in a market may also be an influencing factor as to
profitability and length of time until maturity.
4
<PAGE> 5
As of January 29, 2005, 446 stores were operating in 42 states in the United
States and 56 stores were operating in nine provinces in Canada as illustrated
in the map below.
{The paper version on the Annual Report on Form 10-K contains herein a map of
the United States and Canada with states and provinces outlined, labeled with
the appropriate number of Bombay stores located in each, as follows:
UNITED STATES:
AL - 7 KY - 3 NY - 22
AR - 1 LA - 8 OH - 17
AZ - 6 MA - 11 OK - 4
CA - 61 MD - 13 OR - 4
CO - 6 MI - 9 PA - 17
CT - 12 MN - 4 RI - 1
DE - 3 MO - 6 SC - 6
FL - 41 MS - 2 TN - 10
GA - 19 NC - 12 TX - 49
IA - 1 NE - 1 UT - 3
ID - 1 NH - 3 VA - 17
IL - 25 NJ - 19 WA - 5
IN - 7 NM - 1 WI - 3
KS - 2 NV - 3 WV - 1
CANADA:
AB - 4 NB - 1 ON - 31
BC - 6 NF - 1 PQ - 8
MB - 2 NS - 2 SK - 1}
5
<PAGE> 6
Direct
We offer virtually all our retail SKUs for purchase over the internet through
our U.S. websites at www.bombaycompany.com for Bombay, www.bombaykids.com for
BombayKIDS and www.bombayoutlet.com for Bombay Outlets. During Fiscal 2003, we
launched our Bombay Canada website at www.bombay.ca, which currently sells core
product and a limited selection of outlet product. We plan to add a Canadian
BombayKIDS site in the future. We continue to pursue online marketing
partnerships to broaden our reach to additional customers. Business-to-
consumer revenues over the Internet were approximately $21.2 million, $17.1
million and $8.1 million in Fiscal 2004, Fiscal 2003 and Fiscal 2002,
respectively. We also maintain websites supporting our wholesale activities.
Bombay has a catalog business which primarily serves as a marketing vehicle to
drive customers into stores and to the Internet. Direct catalog sales
represent less than 2% of revenues.
WHOLESALE
Bailey Street Trading Company - During Fiscal 2000, we created a wholesale
subsidiary, Bailey Street Trading Company ("Bailey Street"). The brand is
separate from Bombay and allows us to capitalize on our strengths in product
design, sourcing and importing. Current product offerings are focused on
occasional furniture, which we distribute to a variety of customers, including
independent gift stores, catalogers, department stores, furniture stores and
mass merchants through a network of independent regional sales representatives.
In November 2004, we announced our intention to exit the Bailey Street
operations through sale or liquidation in order to focus on our core business.
We are currently in the process of evaluating alternatives and expect to exit
Bailey Street during Fiscal 2005.
International - Bombay International, Inc. ("International") is our
international licensing and distribution channel. International operations
have extended to 15 licensed stores as of the end of Fiscal 2004, operating
principally in the Middle East and the Caribbean. International revenues
totaled $3.8 million in Fiscal 2004 compared to $3.7 million in Fiscal 2003.
During Fiscal 2004, the Company entered into a master licensing agreement with
a third party to manage and expand International operations in the Middle East
and certain eastern European countries. We plan limited expansion abroad
through licensing and distribution agreements in existing markets or with
current partners, including the master licensee. During Fiscal 2005,
approximately three additional International stores are planned to be opened by
our licensees.
Intangibles
We own a number of the trademarks and service marks used in our business,
including federal registrations for the marks The Bombay
Company{reg-trade-mark}, Bombay{reg-trade-mark}, the palm tree logo,
BombayKIDS{reg-trade-mark} and Bailey Street Trading Company{reg-trade-mark}.
Our trademarks are also registered or are the subject of pending applications
in a number of foreign countries. Each registration is renewable indefinitely
if the mark is still in use at the time of renewal.
We believe that our trademarks have significant value and that these marks
enhance the Bombay{reg-trade-mark} brand and are instrumental in our ability to
create, sustain demand for and market our product. From time to time, we
discover products in the marketplace that are counterfeit reproductions of our
product or that otherwise infringe upon our trademark or tradedress rights. We
have and will continue to vigorously defend our rights under the marks as
necessary.
Seasonality
Operating results are subject to seasonal variation. Historically, the largest
proportion of sales and substantially all of the income occur in the fourth
fiscal quarter, which includes the Christmas season. Inventory balances are
generally built to their highest levels prior to the Christmas selling season.
Inventories decline, short-term borrowings are repaid and cash balances
increase significantly in December due to the Christmas business.
Competition
The home furnishings and decorative accessories market is highly fragmented and
very competitive. We face competition from furniture stores, department
stores, mass merchants and other specialty retailers, including national chains
and independent retailers. We believe that we compete primarily on the basis
of style, selection, quality and value of merchandise.
Employees
We have approximately 5,000 employees, including approximately 3,000 part-time
employees, and we are not a party to any union contract. Employee relations
are considered to be good based on employee retention and industry trends.
6
<PAGE> 7
Risks and Uncertainties
All statements in this Annual Report on Form 10-K, including those incorporated
herein by reference, that do not reflect historical information are forward-
looking statements made in reliance upon the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among
others, the following: general economic and financial market conditions which
affect consumer confidence in the spending environment for home-related
purchases; competition; seasonality; success of operating initiatives; new
product development and introduction schedules; uninterrupted flow of product;
acceptance of new product offerings; inherent safety of product offerings;
advertising and promotional efforts; adverse publicity; expansion of the store
chain; availability, locations and terms of sites for store development;
ability to renew leases on an economic basis; changes in business strategy or
development plans including risks associated with the strategy to move off-
mall; availability and terms of borrowings or capital for operating purposes;
labor and employee benefit costs; ability to obtain insurance at a reasonable
cost; rising fuel and energy costs and their impact on the operations of the
business; reliance on technology; security of the technological infrastructure;
changes in government or trade regulations including duties on bedroom
furniture imports from China and the possibility that the scope of such duties
will be expanded to encompass additional countries or product categories; risks
associated with international business; fluctuations in foreign currency
exchange rates; terrorism; war or threat of war; potential travel or
import/export restrictions due to communicable diseases; regional weather
conditions; hiring and retention of adequate and qualified personnel. The
Company undertakes no obligation to revise the forward-looking statements
contained herein to reflect events or circumstances after the date hereof as a
result of new information, future events or otherwise.
(d) Financial Information About Geographic Areas
Bombay operates in one industry segment, specialty retailing. Greater than 90%
of all revenues results from the sale of home furnishings and accessories
through retail stores in the United States and Canada. The remaining portion
of our revenues results from the sale of home furnishings and accessories
through our wholesale operations, direct-to-customer retail operations and
related shipping charges. Our wholesale and direct-to-customer operations have
been immaterial to our operations and financial results to-date. Long-lived
assets include all non-current assets except deferred taxes.
The following table shows net revenues and long-lived assets by geographic area
(in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
January 29, January 31, February 1,
2005 2004 2003
(restated) (restated)
<S> <C> <C> <C>
Net revenues:
United States $505,499 $526,219 $442,339
Canada..... 70,588 70,216 51,661
Total.. $576,087 $596,435 $494,000
Long-lived assets:
United States $91,093 $72,356 $49,435
Canada..... 7,136 6,247 4,253
Total... $98,229 $78,603 $53,688
</TABLE>
(e) Available Information
We make available free of charge through our website, www.bombaycompany.com,
all materials that we file electronically with the Securities and Exchange
Commission ("SEC"), including our annual report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, and Section 16 filings as soon as reasonably practicable after
electronically filing such materials with, or furnishing them to, the SEC.
During the period covered by this Annual Report on Form 10-K, we made all such
materials available through our website as soon as reasonably practicable after
filing or furnishing such materials with the SEC.
Any materials filed by the Company with the SEC may also be read and copied at
the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website,
www.sec.gov, that contains reports, proxy and information statements and other
information which we file electronically with the SEC.
7
<PAGE> 8
ITEM 2. PROPERTIES.
We own our United States headquarters office complex of which we occupy
approximately 87,000 square feet. We lease stores, distribution centers,
regional and Canadian offices under numerous operating leases. Owned and
leased facilities are summarized following:
<TABLE>
<CAPTION>
Square Feet
Description Owned Leased
<S> <C> <C>
Stores:
Large format... - 1,570,000
Regular........ - 38,000
Outlet......... - 200,000
BombayKIDS..... - 212,000
Distribution centers:
Breinigsville, PA - 410,000
Plainfield, IN. - 300,000
McDonough, GA.. - 254,000
Fort Worth, TX. - 250,000
Gilbertsville, PA - 200,000
Mira Loma, CA.. - 156,000
Mississauga, ON, CAN - 114,000
Offices and storage:
Mississauga, ON, CAN - 9,000
Regional sites. - 2,000
Fort Worth, TX. 121,000 35,000
121,000 3,750,000
</TABLE>
We lease all of our retail locations and distribution centers under non-
cancelable operating leases whose initial terms typically have 10-year terms,
expiring between 2005 and 2016, and may include options that permit renewal for
additional periods. Rents under the store leases are generally based upon
minimum rentals plus additional contingent rentals based upon a percentage of
the store's sales volume in excess of specified levels. Store lease terms
generally require additional payments covering taxes, common area maintenance
charges, insurance and certain other costs.
Rental expense included in the accompanying consolidated statements of
operations for operating leases was (dollars in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
2004 2003 2002
(restated) (restated)
<S> <C> <C> <C>
Minimum rentals..... $58,286 $58,470 $50,543
Contingent rentals.. 296 482 211
Total............. $58,582 $58,952 $50,754
Leased year-end square footage 3,750,000 3,167,000 2,787,000
</TABLE>
The minimum rental commitments for future fiscal years related to real estate
leases that have initial or remaining noncancelable lease terms in excess of
one year are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal
<S> <C>
2005........... $ 44,597
2006........... 43,161
2007........... 41,758
2008........... 39,410
2009........... 37,089
Thereafter..... 110,729
$316,744
</TABLE>
We believe that the insurance coverage maintained on all properties is
adequate.
8
<PAGE> 9
ITEM 3. LEGAL PROCEEDINGS.
We have certain contingent liabilities resulting from litigation and claims
incident to the ordinary course of business. Management believes that the
probable resolution of such contingencies will not materially affect our
financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the fourth
quarter of Fiscal 2004.
9
<PAGE> 10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
(a) The principal market for Bombay's common stock is the New York Stock
Exchange. The high and low trading prices, quoted by fiscal quarter,
follow:
<TABLE>
<CAPTION>
Fiscal Year Ended January 29, 2005 High LowFiscal Year Ended January 31, 2004 High Low
<S> <C> <C> <C> <C>
First quarter..... $7.99 $5.44 First quarter..... $ 8.69 $4.34
Second quarter.... 6.49 4.70 Second quarter.... 12.65 7.80
Third quarter..... 7.59 4.47 Third quarter..... 14.11 9.20
Fourth quarter.... 7.16 5.10 Fourth quarter.... 13.80 6.30
</TABLE>
(b) The approximate number of record holders of common stock on April 28,
2005 was 1,700.
(c) Our credit facility allows us to pay dividends, under the following
circumstances: no default or event of default has occurred and is
continuing; immediately after giving effect thereto, availability exceeds
usage under the line by at least $25 million; and certain other conditions
are satisfied. We are not currently, nor have we been, restricted from
paying such dividends. However, we have not paid dividends the past two
years and will continue to utilize available funds primarily for the
expansion of our retail stores and operating purposes.
(d) The information required by this item appears under the caption "Equity
Compensation Plan Information" in the Definitive Proxy Statement of The
Bombay Company, Inc. relating to the Company's Annual Meeting of
Shareholders, which information is incorporated herein by reference.
We did not repurchase any of our equity securities during the fourth quarter of
Fiscal 2004.
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<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA.
(Unaudited)
The following selected financial data has been derived from our consolidated
financial statements. The data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our consolidated financial statements and notes thereto.
<TABLE>
<CAPTION>
Fiscal Year Ended
January 29, January 31, February 1,February 2,February 3,
Financial Data: 2005 2004 2003 2002 2001
(restated) (restated) (restated) (restated)
<S> <C> <C> <C> <C> <C>
Net revenues*................ $576,087 $596,435 $494,000 $437,457 $423,459
Net revenues increase (decrease) (3)% 21% 13% 3% 8%
Same store sales increase (decrease) (12)% 13% 5% (2)% 5%
Net income (loss)*........... $(12,205) $9,866 $7,228 $3,681 8,619
Basic earnings (loss) per share $(.34) $.28 $.22 $.11 $.26
Diluted earnings (loss) per shares $(.34) $.28 $.22 $.11 $.26
Total assets*................ $284,173 $269,735 $239,806 $210,623 $209,839
Stockholders' equity*........ $181,931 $191,017 $169,117 $158,406 $154,470
Return on average assets..... (4.4)% 3.9% 3.2% 1.8% 4.2%
Return on average equity..... (6.5)% 5.5% 4.4% 2.4% 5.6%
Operating Data:
Average sales per store open for full fiscal year* $1,074 $1,249 $1,098 $1,012 $1,012
Average sales per square foot $273 $322 $296 $288 $306
Number of stores:
Beginning of year....... 471 422 419 408 415
Opened.................. 66 84 28 32 10
Closed.................. 35 35 25 21 17
End of year............. 502 471 422 419 408
Store composition:
Large format........... 384 365 334 324 291
Regular................ 20 25 37 59 93
Outlet................. 47 46 46 36 24
BombayKIDS............. 51 35 5 - -
Store locations:
Mall.................. 272 302 328 348 359
Off-mall.............. 183 123 48 35 25
Outlet................ 47 46 46 36 24
Retail square footage: *
Large format........... 1,570 1,459 1,297 1,244 1,116
Regular................ 38 46 68 107 163
Outlet................. 200 198 193 151 92
BombayKIDS............. 212 144 20 - -
Total.................. 2,020 1,847 1,578 1,502 1,371
</TABLE>
Bombay has paid no cash dividends during the periods presented.
*In thousands.
NOTE: In January 2005, we revised our accounting for leases and adopted a
policy to capitalize pre-opening rent during the store build out and fixturing
periods. We have restated prior years' financial statements to reflect these
changes. See Note 2 to the consolidated financial statements for further
discussion.
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<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Special Note Regarding Forward-Looking Statements
Certain statements in this Annual Report to Shareholders under "Management's
Discussion and Analysis" constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such forward-
looking statements involve known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and financial market conditions
which affect consumer confidence in the spending environment for home-related
purchases; competition; seasonality; success of operating initiatives; new
product development and introduction schedules; uninterrupted flow of product;
acceptance of new product offerings; inherent safety of product offerings;
advertising and promotional efforts; adverse publicity; expansion of the store
chain; availability, locations and terms of sites for store development;
ability to renew leases on an economic basis; changes in business strategy or
development plans including risks associated with the strategy to move off-
mall; availability and terms of borrowings or capital for operating purposes;
labor and employee benefit costs; ability to obtain insurance at a reasonable
cost; rising fuel and energy costs and their impact on the operations of the
business; reliance on technology; security of the technological infrastructure;
changes in government or trade regulations including duties on bedroom
furniture imports from China and the possibility that the scope of such duties
will be expanded to encompass additional countries or product categories; risks
associated with international business; fluctuations in foreign currency
exchange rates; terrorism; war or threat of war; potential travel or
import/export restrictions due to communicable diseases; regional weather
conditions; hiring and retention of adequate and qualified personnel. The
Company undertakes no obligation to revise the forward-looking statements
contained herein to reflect events or circumstances after the date hereof as a
result of new information, future events or otherwise.
Restatement of Previously Issued Financial Statements
During the fourth quarter of Fiscal 2004, we began an
evaluation of our lease accounting practices and determined that it was
appropriate to restate previously issued financial statements. Historically,
we have recognized store lease expense on a straight-line basis beginning on
the date that the store opened. This generally had the effect of excluding the
pre-opening store build out, fixturing and merchandise stocking periods during
which the Company typically had no rent payments. Based upon our evaluation of
our lease accounting practices, we have adopted an accounting policy to
capitalize rent during the construction period and recognize straight-line
rent expense upon the store becoming substantially complete and ready for its
intended use, which results in us recording rent expense during the merchandise
stocking periods.
Additionally, in prior periods, we reflected proceeds from landlord
construction allowances as a separately identified component of cash flows from
investing activities in the Consolidated Statements of Cash Flows. We have
restated our historical Fiscal 2003 and Fiscal 2002 Consolidated Statements of
Cash Flows to reflect such proceeds as a component of cash flows from
operating activities.
The restatement includes adjustments to cost of sales, buying and store
occupancy costs, income (loss) before income taxes, provision (benefit) for
income taxes, net income (loss) and earnings (loss) per share. These changes
increased net loss and loss per share by $43,000 and $.00 per diluted share
in the first three quarters of Fiscal 2004. The restatement adjustments
decreased net income and earnings per share in Fiscal 2003 by $85,000 and $.00
per diluted share, and increased net income and earnings per share in Fiscal
2002 by $11,000 and $.00
per diluted share. Although the restatement did not impact any net cash flows
for any period presented, it did have the effect of increasing operating cash
flows and increasing investing cash flows by a similar amount. These changes
increased net cash provided by operating activities and increased our net
cash used in investing activities in Fiscal 2003 and Fiscal 2002 by $11.9
million and $3.5 million, respectively. The restatement also affects periods
prior to Fiscal 2002. The impact of the restatement on such prior periods has
been reflected as a reduction of $301,000, or less than 1%, to total
stockholders' equity as of February 2, 2002 in the
accompanying consolidated statement of changes in stockholders' equity. We
have also restated the applicable financial information for Fiscal 2003,
Fiscal 2002, Fiscal 2001 and Fiscal 2000 in Item 6, Selected Financial Data.
For information with respect to the restatement adjustments, see Note 2 to the
accompanying consolidated financial statements. This Management's Discussion
and Analysis gives effect to these restatements.
The restatement relating to the reflection of proceeds from landlord
construction allowances as a component of cash flows from operating activities
increased our net cash provided by operating activities and increased our net
cash used in investing activities in the three, six and nine month interim
periods of Fiscal 2004 by $.5 million, $4.3 million and $8.5 million,
respectively, and increased our net cash provided by (used in) operating
activities and increased our net cash in investing activities in the nine
month interim period of Fiscal 2003 by $7.4 million.
Executive Overview
Bombay designs, sources and markets a line of proprietary home furnishings that
includes large furniture, occasional furniture, wall decor and decorative
accessories that is timeless, transitional and classic in its styling. More
than 90% of the items are imported from approximately 20 countries worldwide,
with more than half of the product coming from China. We are a multi-
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<PAGE> 13
channel
retailer with store locations, Internet and mail order operations. We have a
small wholesale operation that is immaterial to overall revenue but contributes
incrementally to profitability.
We focus on several key metrics in managing and evaluating our operating
performance and financial condition including the following: same store sales,
sales and gross margins by merchandise categories, operating margins as a
percentage of revenues, earnings per share, cash flow, return on assets and
inventory turn.
We are currently executing a multi-phase turnaround intended to improve
Bombay's long-term profitability and generate competitive operating results in
line with current market leaders in the sector whose operating profits are in
the 8% to 12% range. Fiscal 2004 was an investment year during which many
structural issues were addressed.
Phase I of the turnaround commenced during the third quarter of Fiscal 2002 and
continued into Fiscal 2003. Our goal was to reclaim market share, generating
above average same store sales and validating our positioning within the market
place. We reported 13 consecutive months of double-digit same store sales
increases beginning in September 2002 and continuing through September 2003.
As a result of the strength of these sales, we were able to leverage many of
our fixed costs including our buying and occupancy costs, a key component to
improving our overall operating margins.
Phase II can be characterized by the aggressive repositioning of our real
estate portfolio. During the 1980s and 1990s, our focus was on opening stores
in "A" malls throughout North America. As shopping habits have evolved, with
alternative venues such as lifestyle centers and big box strip centers gaining
popularity, we began to migrate our stores to off-mall locations. In addition
to being more convenient for customers and suitable for the sale of large
items, such locations typically have lower cost structures, both from a fixed
rent perspective and for other common area expenses billed by landlords.
Management believes that the movement to the off-mall locations will ultimately
result in lower fixed costs for Bombay and will help improve profitability.
Another key aspect of Phase II included aggressively investing in marketing to
attract new customers to Bombay and support the move from mall to off-mall.
During the late 1990s and early 2000s, we had become increasingly reliant on
periodic catalogs to drive customers into the store and did not have marketing
vehicles with a broader reach. In Fiscal 2001, the marketing expenditures
reached their historical low of 3.4% of revenues. During Fiscal 2002 and
Fiscal 2003, we increased our marketing to 4.1% and 4.6% of revenues,
respectively, with much of the incremental spending going to support a program
for monthly inserts in Sunday newspapers in our top markets.
In addition to investing in new stores, we began making some key investments in
our infrastructure intended to serve as the foundation upon which we plan to
grow with competitive operating margins. During Phase II, we made investments
in our supply chain, in our information technology, in our distribution network
and in key leadership positions.
As we began Fiscal 2004, we were facing a number of challenges. We had a lack
of new product in our inventory with an assortment over-weighted in basic and
core merchandise. We also were effecting a significant number of migrations of
our core Bombay stores from mall to off-mall, and at the same time, taking our
BombayKIDS stores to critical mass. Additionally, we were anniversarying a
year during which we recorded a 13% same store sales increase. We
underestimated the impact of these factors, as well as the softness of the
environment that would develop in the third and fourth quarters, which led to
an overall decline in revenue for the year and a 12% decline in same store
sales. The lower revenue base made it difficult to leverage fixed costs
throughout the organization and for the year, the Company reported a net loss
of $12.2 million.
With respect to our inventory assortment, we made the conscious decision to
exit Fiscal 2003 with higher levels of core merchandise than ideal. While the
merchandise was salable, it prevented us from bringing in appropriate levels of
new fresh product. As a result, both sales and margin suffered. Product flow
and newness was further impacted by interruptions in the supply chain caused by
the imposition of antidumping duties on bedroom furniture beginning in June
2004. While we were aware of the impending action by the U.S. Department of
Commerce and had taken action to move much of our bedroom furniture production
from China to Vietnam and other source countries, inefficiencies associated
with dealing with new vendors, limited production capacity in these factories
as Bombay and other home furnishings retailers sought alternatives to Chinese
sources, and the inability, in some cases, to locate factories outside of China
that were capable of manufacturing product to Bombay quality and safety
specifications, resulted in disruptions in our supply chain and significant
voids in the assortment, particularly during the second half of the year.
We believe that we have taken, and are continuing to take, positive actions to
correct these situations going forward. We ended the year with a much improved
merchandise mix. We have hired a general merchandise manager experienced in
overseas sourcing and have modified our plans with respect to new product
introductions, eliminating SKU count in certain categories and introducing
additional classifications such as home fragrance, designed to increase repeat
purchases and boost the overall productivity of the store. We plan to slow
the rate of product introduction in key furniture categories, and have taken
steps to mitigate risk as we transition from one product line into another. We
believe that these actions should help drive improved sales and margins.
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<PAGE> 14
We continued to invest in marketing during Fiscal 2004, spending 5.6% of total
revenue on advertising. However, we began to see a decline in the
effectiveness of the reach vehicles being used and some investments were
unwarranted. Going forward, the Company expects to continue to invest in
marketing at the rate of 4.5% of revenues on an annual basis but will
reallocate funds to focus on driving existing customers in to make additional
purchases through the use of more direct mail pieces. We also expect to invest
more heavily in new store grand opening support and will readdress certain
locations that opened softer than expected during Fiscal 2004 with additional
marketing spend.
While Fiscal 2004 was a disappointing year in the short term, there were longer
term successes. We have continued to migrate stores successfully from mall to
off-mall locations. During Fiscal 2004, we closed 35 stores, of which the
majority were mall based. A total of 66 real estate projects, including new
stores and relocations, were completed during the year resulting in opening 61
new off-mall locations. The total number of stores grew to 502, a net increase
of 31 stores. While assortment issues adversely impacted new stores as well as
existing stores, the overall four-wall profit for off-mall stores opened a full
year was approximately 350 to 400 basis points higher than those of mall-based
stores and the average sales per store was 8% higher. Occupancy costs in the
off-mall locations are in line with expectations and represent on average a 15%
reduction in per store costs compared to the mall store - in spite of the fact
that the average off-mall store size is 27% larger than its mall-based
counterpart.
The following table reflects the real estate portfolio at each fiscal year end:
<TABLE>
<CAPTION>
January 29, January 31, February 1,
2005 2004 2003
<S> <C> <C> <C> <C> <C> <C>
Units % of total Units % of total Units % of total
Mall.... 272 54% 302 64% 328 78%
Off-mall 183 37 123 26 48 11
Outlet.. 47 9 46 10 46 11
Total 502 100% 471 100% 422 100%
</TABLE>
We will continue to invest in the migration of mall to off-mall locations
during Fiscal 2005 as leases expire. Overall, we expect to open 45 to 50
stores and close 42 stores during the year. By the end of Fiscal 2005, we
expect approximately 44% of our stores to be in off-mall locations.
During Fiscal 2004, we also opened a total of 16 BombayKIDS stores, ending the
year with 51 stores. This growth, along with planned openings in Fiscal 2005,
has helped us reach critical mass which we expect to result in improved
efficiency in the buying, distribution, marketing and field operations
functions. We continue to prefer to open BombayKIDS stores adjacent to Bombay
locations thus enabling us to leverage cost and introduce a new customer to the
Bombay brand.
We will continue to invest selectively in infrastructure and, in this area, we
achieved some major goals during Fiscal 2004. In August 2004, we relocated to
a new distribution center in the Northeast. The previous location was
severely undersized and resulted in excessive use of off-site storage. We
also identified and have initiated plans to move to a new distribution center
in the metropolitan Toronto area. The new facility will replace our current
undersized location and is expected to result in improved operational
efficiencies when it opens during the second quarter of Fiscal 2005. We
completed the rollout of the new point-of-sale system and the broadband
environment to our Canadian stores. We relaunched our Internet site on a
more stable, reliable platform. The new site has improved functionality and
we expect to make continued enhancements to it in the future. We have made
improvements in our planning and allocations systems and expect to continue to
invest in this area in order to improve our ability to forecast and assort our
stores. While we believe that these investments are critical to our future
success, we also need to ensure that our expenses are in line with our revenue
base. As a result, we have taken steps in other areas to right size the
organization and continue to aggressively control expenses as we seek to
restore profitability to the Company.
The infrastructure that we develop and the investments that we make will be
critical to the third phase of our turnaround strategy. Our plan is to
organically develop other retail concepts and areas of operations that would
leverage our core competencies and become new growth vehicles for Bombay.
This longer-term strategy is dependent on successfully accomplishing earlier
phases, which will be the focus for Fiscal 2005 and beyond.
Other Disclosures
The largest percentage of our sales and operating income is realized in the
fourth fiscal quarter, which includes December (Christmas season).
Same store sales comparisons are calculated based upon revenue from stores
opened for more than 12 months. Stores converted from the regular format to
the large format and stores relocated from mall to off-mall locations are
classified as new and are excluded from same store sales until they have been
opened for 12 months. Stores relocated within a mall and whose size is
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<PAGE> 15
significantly changed are treated as new stores and are excluded from the same
store sales calculation until opened for a full year. Remodeled stores remain
in the computation of same store sales.
Cost of sales includes all costs associated with the purchase of product
including, but not limited to, vendor cost, inbound transportation costs,
duties, commission, inspections, quality control, warehousing and outbound
transportation costs. Buying costs include costs associated with our buying
department, consisting primarily of salaries, travel, product development and
product sample costs. Store occupancy costs include costs such as rent, real
estate taxes, common area maintenance charges, utilities and depreciation and
amortization of leasehold improvements and other fixed assets relating to our
retail locations.
The impact of inflation on operating results is typically not significant
because the majority of our products are proprietary. We attempt to alleviate
inflationary pressures by improving designs, finding alternative production
sources in lower cost countries and increasing selling prices (subject to
competitive conditions).
An anti-dumping petition against China furniture makers for allegedly dumping
bedroom furniture was filed during 2003. This created some disruption in the
industry and in our flow of product as we shifted orders to vendors with
production capacity in other countries in preparation for the unfavorable
duties. The actual duties determined by the U.S. Department of Commerce were
announced late in 2004 and we do not expect the impact of these duties to have
a material effect on operations going forward.
Bombay has a retail (52-53 week) fiscal year, which ends on the Saturday
nearest January 31. The periods ended January 29, 2005 ("Fiscal 2004"),
January 31, 2004 ("Fiscal 2003") and February 1, 2003 ("Fiscal 2002") reflect
52 weeks.
NET REVENUES
Net revenues consist of sales to retail customers, through store, mail order
and Internet, and wholesale sales, through Bailey Street and to our
international licensees, as well as shipping fees and other revenues. Shipping
fees reflect revenue from customers for delivery of merchandise. Other
includes royalties and territory fees from international licensees.
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Net revenues (in millions) 2004 2003 2002
<S> <C> <C> <C>
Retail.......... $551.5 $571.8 $478.3
Wholesale....... 17.0 17.7 10.8
Shipping........ 7.2 6.6 4.6
Other........... .4 .3 .3
Total........ $576.1 $596.4 $494.0
</TABLE>
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Merchandise category 2004 2003 2002
<S> <C> <C> <C>
Accessories..... 40% 39% 42%
Large furniture. 29 30 26
Occasional furniture 19 19 19
Wall decor...... 12 12 13
Total........ 100% 100% 100%
</TABLE>
Fiscal 2004
Net revenues decreased $20.3 million, or 3%, to $576.1 million, compared to
$596.4 million in Fiscal 2003. Revenues from retail operations decreased $19.8
million, or 3%, from the previous year. Same store sales declines of 12% were
partially offset by sales from new stores, which contributed approximately
$85.7 million in net sales. During the year, we opened 50 large format stores
and 16 BombayKIDS stores. Increases from new stores were partially offset by
the closing of 31 large format stores and four regular stores which, in
aggregate, contributed approximately $48.4 million to net sales in Fiscal 2003.
Direct-to-customer revenues increased 6% to $31.7 million from $29.8 million in
the previous year, attributable to 25% growth in Internet sales, which more
than offset the 31% decline in mail order revenues. Wholesale revenues
declined slightly to $18.9 million from $19.5 million in Fiscal 2003 due
primarily to a decline in the Bailey Street business.
All regions of the U.S. and Canada reported low double digit same store sales
declines. We ended Fiscal 2004 with 384 large format stores, 20 regular
stores, 47 outlets and 51 BombayKIDS stores. Total retail square footage
increased 9% from Fiscal 2003 year end, while the store count increased by a
net 31 units. The number of retail transactions for the year increased by
approximately 8%, and the average ticket decreased to $77.
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<PAGE> 16
Fiscal 2003
Net revenues increased $102.4 million, or 21%, to $596.4 million, compared to
$494.0 million in Fiscal 2002. Revenues from retail operations increased $94.9
million, or 20%, from the prior year. Both new stores and same store sales
increases contributed to the growth. Same store sales increased 13% for the
year while stores classified as new stores during Fiscal 2003 contributed
approximately $51.8 million in net sales. During the year, we opened 53 large
format stores, 30 BombayKIDS stores and one outlet. In addition, we converted
four regular stores to the large format. Increases from new stores were
partially offset by the closing of 26 large format stores, eight regular stores
and one outlet which, in aggregate, contributed approximately $24.9 million in
net sales in Fiscal 2002. Direct-to-customer revenues increased 44% to $29.8
million, from $20.6 million, due to strong Internet sales, partially offset by
a decrease of approximately 10% in mail order sales. The remainder of the
increase relates to growth in our wholesale operations, in particular, Bailey
Street, where revenues increased 88%, to $15.8 million from $8.4 million in
Fiscal 2002.
All regions of the U.S. and Canada reported positive same store sales, with all
but the Midwest reporting double-digit sales increases. At the end of Fiscal
2003, we had 365 large format stores, 25 regular stores, 46 outlets and 35
BombayKIDS stores. Total retail square footage increased 17% compared to year-
end Fiscal 2002, while the store count increased by a net 49 units. The number
of retail transactions for the year increased by almost 15% and the average
ticket increased to $86 from $82 in Fiscal 2002.
COST OF SALES, BUYING AND STORE OCCUPANCY COSTS
(In millions)
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
2004 2003 2002
(restated)(restated)
<S> <C> <C> <C>
Cost of sales, buying
and occupancy costs $420.7 $412.7 $344.0
Shipping........ 7.9 8.8 5.6
Total........ $428.6 $421.5 $349.6
</TABLE>
Fiscal 2004
Cost of sales, including buying and store occupancy costs, for Fiscal 2004 was
$428.6 million, or 74.4% of revenues, up from 70.7% of revenues in Fiscal 2003.
Product margins declined 130 basis points as a result of issues with
merchandise mix, promotional activity and a general softness in the home
furnishings retail sector. Additionally, distribution costs had a negative
impact on margins as they were deleveraged on a lower sales volume. Buying and
store occupancy costs increased 240 basis points, reflecting the deleveraging
impact of these relatively fixed costs compared to the lower sales volume.
Buying and store occupancy costs included impairment charges totaling $.5
million to write down the fixed assets related to ten unprofitable stores.
Fiscal 2003
Cost of sales, including buying and store occupancy costs, for Fiscal 2003 was
$421.5 million, or 70.7% of revenues. As a percentage of revenues, these costs
improved from 70.8% in Fiscal 2002. Product margins declined 210 basis points
as we focused on our value offerings at key price points designed to increase
market share and drive sales volumes. Buying and store occupancy costs
declined as a percentage of revenues to 16.8% from 19.1% in Fiscal 2002,
reflecting the significant leverage gained as a result of higher same store
sales. Buying and store occupancy costs included impairment charges totaling
$.2 million to write down the fixed assets related to eight unprofitable
stores.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Fiscal 2004
Selling, general and administrative expenses were $165.7 million compared to
$158.4 million in Fiscal 2003. As a percentage of revenues, expenses increased
to 28.8% in Fiscal 2004 compared to 26.6% in Fiscal 2003.
At the store level, expenses increased $2.4 million, or 90 basis points. The
increase was driven primarily by a $2.0 million increase in store payroll
resulting from the higher store count over the course of the year. On a per
store basis, total costs were down as we tightly managed expenses in a soft
sales environment. The 90 basis point increase as a percentage of revenue is
the result of the same store sales declines and a general softness in sales for
all stores making it difficult to leverage fixed costs, particularly early in
the year when store payroll costs tend to be more fixed in nature.
Marketing and visual merchandising costs increased approximately $1.5 million
or 40 basis points to 5.6% of total revenue. The increase in this category
resulted from our decision to continue to invest in marketing despite the soft
sales trend in order to drive traffic and reach new customers.
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<PAGE> 17
Corporate office selling, general and administrative expenses increased $3.4
million, or 90 basis points over the prior year, due to higher medical and
other insurance costs of $2.7 million and higher severance expenses of $.7
million associated with right-sizing the organization. Additionally, audit
expenses increased approximately $.6 million as a result of the new
requirements for compliance with Section 404 of the Sarbanes-Oxley Act of 2002.
Internet and mail order selling, general and administrative expense increased
by $1.1 million due to higher internet sales and higher hosting and design
costs as we launched our updated website on a new platform. Also, we had
approximately $.8 million less foreign exchange gain resulting from changes in
the Canadian dollar exchange rate, in addition to other less significant
changes. Current year depreciation was $2.0 million lower than in Fiscal 2003
as a result of the prior year charge of $2.1 million associated with replacing
the Company's point-of-sales system. Additionally, corporate incentive-based
compensation expense was $1.4 million lower in Fiscal 2004 than in Fiscal 2003.
Fiscal 2003
Selling, general and administrative expenses, including marketing,
were slightly lower at 26.6% of revenues in Fiscal 2003 compared to 26.8%
of revenues in Fiscal 2002. In dollars, total selling, general and
administrative expenses were $158.4 million compared to $132.3 million in
Fiscal 2002, an increase of $26.1 million.
At the store level, costs increased $13.7 million but declined
slightly as a percentage of sales. Major factors contributing to the
increased costs include factors associated with the increase in volume and
number of stores such as higher store payroll and bonuses, which increased
$9.3 million, and higher costs associated with credit card processing and
collections, which increased $1.2 million. Store payroll declined 30
basis points as a percentage of revenue due to leveraging against the
higher sales base while store bonuses, which are based upon improvement in
store level profitability from the comparative prior year period,
increased 10 basis points. Other store level initiatives that resulted in
higher selling, general and administrative costs included the replacement
of the point-of-sale dial-up environment with a new broadband
communication network which resulted in increased costs of approximately
$1.1 million, and store opening and closing expenses of $0.6 million.
Marketing costs, including visual merchandising costs, increased
$7.5 million, or 50 basis points, as we increased our distribution of
monthly Sunday newspaper inserts from three markets in late Fiscal 2002 to
21 markets in Fiscal 2003, in order to attract new customers and drive
traffic into the stores. Growth in Internet marketing, support for new
store openings and general increase attributable to the increased store
count also contributed to the higher marketing dollars.
Corporate office selling, general and administrative expenses
increased $4.9 million compared to the prior year but declined
approximately 40 basis points as a percentage of revenue as we leveraged
insurance and payroll costs against the higher revenue base. Corporate
payroll, including bonuses, increased $3.5 million as we built
infrastructure to support the current and future growth plans. Insurance
costs declined slightly primarily due to favorable experience relating to
workers' compensation insurance. Costs associated with infrastructure
investment in systems resulted in an increase in depreciation and
amortization cost and related operating costs of approximately $2.1
million. Internet selling and operating costs also contributed to the
increase during the period. These cost increases were partially offset by
foreign exchange gains of $1.4 million related to the strengthening of the
Canadian dollar, and costs incurred during Fiscal 2002 of $1.3 million
related to the settlement of a California wage and hour lawsuit and $1.1
million relating to the departure of the former Chief Executive Officer.
INTEREST
Fiscal 2004
During Fiscal 2004, we had interest income of $67,000 and interest expense of
$601,000, compared to interest income of $176,000 and interest expense of
$621,000 in Fiscal 2003. Interest income declined as we had lower levels of
invested cash balances during the year resulting from the lack of
profitability. However, interest expense also declined as we managed inventory
levels and maintained average borrowing levels lower than in Fiscal 2003.
Fiscal 2003
During Fiscal 2003, we had interest income of $176,000 and interest expense of
$621,000, compared to interest income of $331,000 and interest expense of
$152,000 in Fiscal 2002. Decline in interest income and increase in expense
are the result of lower invested cash balances and greater utilization of the
credit facility in the current year. Funds were primarily used to finance our
capital expansion plan, with the addition of 49 locations, and higher inventory
levels to support both the higher store count and the increase in same store
sales.
17
<PAGE> 18
INCOME TAXES
We provided income tax benefit of $6.5 million in Fiscal 2004 and income tax
expense of $6.2 million and $5.1 million in Fiscal 2003 and Fiscal 2002,
respectively. The effective rates were 34.6%, 38.7% and 41.2% in the
respective periods. Fluctuations in the effective rate were primarily related
to foreign taxes associated with our Canadian subsidiary and the relative
significance of the profit generated by the Canadian subsidiary to the overall
consolidated entity, as well as the impact of state tax expenses that have not
changed proportionately to income (loss) before income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity and capital resources are cash flows from
operations and a line of credit. We have a secured, revolving credit agreement
with a group of banks, with an aggregate commitment of up to $125 million for
working capital, inventory financing and letter of credit purposes. The
available commitment under the facility is limited to a borrowing base
generally comprised of 75% of eligible inventory and 85% of receivables, as
defined in the credit agreement and with seasonal and reserve adjustments. The
aggregate commitment under the facility can be increased to $175 million prior
to September 15, 2007, at the request of the Company. At January 29, 2005, the
bank commitment was $70.2 million, and $61.4 million was available for
borrowings or additional letters of credit. The credit facility expires
September 15, 2009.
Fiscal 2004
During Fiscal 2004, we ended the year with cash and long-term investments of
$9.2 million, $16.5 million lower than at the previous year end. Capital
expenditures were the primary use of cash, at $36.9 million, as we opened 66
stores, including 50 large format stores and 16 BombayKIDS locations, and a
distribution center during the year in addition to routine purchases of
software and equipment.
Although we recorded a net loss of $12.2 million, cash provided by operations
was $19.3 million, due primarily to non-cash depreciation and amortization of
$18.8 million and an increase in accounts payable and accrued expenses of $15.8
million. Cash flows from operations also reflects $11.6 million of landlord
construction allowances from store and distribution center landlords that help
reduce the net outlay of cash related to the new construction.
At January 29, 2005, inventory balances were $5.8 million higher than at
January 31, 2004, due primarily to higher level of merchandise in-transit from
the vendors as of the end of the year. Inventory at the store level and in the
distribution centers was similar to last year's levels. Inventory was $72 per
square foot of retail space as of the end of Fiscal 2004 compared to $75 per
square foot last year. On a per store basis, inventories decreased to $288,000
per store compared to $294,000 per store last year. We believe that the
quality of merchandise is much improved compared to last year with a greater
portion of the assortment consisting of new product to support Fiscal 2005
sales.
From a liquidity and capital expenditures standpoint, our strategy is to
utilize our credit facility to finance seasonal borrowings and working capital
required by store growth while we utilize cash flow from operations and our
balance sheet to finance our capital programs. The operating loss for Fiscal
2004 and the resulting decline in the cash balance has caused us to reassess
our liquidity and capital program and investigate alternatives to fund the
continued migration of stores from mall to off-mall and the growth of the
BombayKIDS stores. Management has developed a plan that calls for a reduction
in store growth for Fiscal 2005 compared to levels previously announced and the
disposal of certain assets which are either non-operating assets or are not an
integral component of our core operations. In November, we announced that we
plan to divest the Bailey Street wholesale operations. We are currently in the
process of assessing sale and liquidation scenarios as well as a combination of
both. Substantially all of the assets of Bailey Street are current assets
(inventory and accounts receivable). We also plan to sell non-operating
assets, including a Company-owned building occupied by a third party and a
parcel of land adjacent to our Company headquarters, in order to supplement our
available capital. We expect that the proceeds from the sale and/or
liquidation of our Bailey Street operation, along with the sale of land and
building, should be adequate, when added to expected cash flow from operations,
to fund our capital expenditure program and result in a higher cash balance at
the end of Fiscal 2005.
Our capital requirements for Fiscal 2005 are estimated to be $20 to $25 million
and includes opening 45 to 50 new stores during the year while closing
approximately 42 stores, resulting in an ending store count of approximately
505 to 510 stores. Other capital expenditure plans include the opening of a
new distribution center to replace an existing undersized facility in Canada
and continued investment in information systems.
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<PAGE> 19
In connection with continuing operations, we have various contractual
obligations and commercial commitments requiring payment in future periods,
summarized in the table below.
(In thousands)
Payments Due by Period
<TABLE>
<CAPTION>
Total Less than 1 Year 1 - 3 Years 4 - 5 Years After 5 Years
<S> <C> <C> <C> <C> <C>
CONTRACTUAL OBLIGATIONS
Real estate operating leases $317,636 $ 45,489 $124,329 $71,168 $76,650
Unconditional purchase orders 163,784 163,784 * * *
Equipment operating leases 2,256 850 1,366 40 *
Employment contracts.. 3,265 2,950 315 * *
Other contractual obligations 13,844 11,659 2,185 * *
Total contractual cash obligations $500,785 $224,732 $128,195 $71,208 $76,650
COMMERCIAL COMMITMENTS
Import letters of credit $5,870 $5,870 $ * $ * $ *
Standby letters of credit 2,942 2,942 * * *
Guarantees of travel cards 199 199 * * *
Total commercial commitments $9,011 $9,011 $ * $ * $ *
</TABLE>
Fiscal 2003
During Fiscal 2003, we used $31.0 million of cash, ending the year with $25.6
million in cash and long-term investments. The decline in the level of cash
from Fiscal 2002, for both year-end comparisons and throughout the period, is
due to our higher capital expenditures and corresponding inventory levels in
Fiscal 2003 to support the additional stores and growth in same store sales.
The primary sources of cash were net income, including non-cash depreciation,
amortization expense and deferred tax expense, as well as the exercise of stock
options. Cash was primarily used for capital expansion, partially offset by
construction allowances granted by landlords, and to purchase additional
inventory to support the larger store base and increased same store sales.
Other significant uses of cash included the payment of federal income taxes and
a decrease in other current assets, primarily due to a decrease in prepaid rent
resulting from the timing of the end of the fiscal period.
Capital expenditures totaled $41.1 million and included the costs of opening 53
large format stores, 30 KIDS stores, one outlet, a distribution center in
Plainfield, Indiana, investments in new point-of-sale, planning and allocation
and other systems and routine purchases of equipment. These expenditures were
partially offset by construction allowances of $11.9 million granted by
landlords.
At January 31, 2004, inventory levels were $138.9 million or $36.1 million
higher than at February 1, 2003. This increase represents investments to
support the additional number of stores and higher sales levels. The year end
level was above desired levels as a result of aggressively buying to Christmas
sales that did not materialize.
CRITICAL ACCOUNTING POLICIES
In the course of preparing the financial statements, management makes certain
judgments relative to accounting policies that are appropriate in the
circumstances and the application of those policies. The following policies
are those deemed to be most critical.
Inventory Valuation
Inventories are valued at the lower of cost or market, with cost being
determined based upon the weighted average inventory method. Cost is calculated
based upon the actual landed cost of an item at the time it is received in the
warehouse based upon actual vendor invoices, or estimates of costs for which an
invoice is not present, or for which an allocation of shared costs is required.
In addition, we include the cost of warehousing and transporting product to the
stores in our costs.
We regularly evaluate our compliance with the lower of cost or market
principle. Items are evaluated by SKU and, to the extent that the cost of the
item exceeds the current selling price, provision is made to reduce the
carrying cost of the item. Additionally, we review the aging of our inventory
by SKU. The carrying cost of the item is reduced based upon certain age
criteria and product category. Since the determination of carrying value of
inventory involves both estimation and judgment of cost and market value,
differences in these estimates could result in valuations that vary from the
recorded amount.
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<PAGE> 20
Each month, we record an allowance for shrinkage to provide for the estimated
cost of lost or stolen inventory. The amount of the allowance is determined
based upon the historical shrinkage results and is adjusted at least annually
to reflect current circumstances. Inventory is physically counted at all
locations at least once each year, at which time actual results are reflected
in the financial statements. Physical counts were taken at substantially all
stores and distribution centers during January 2005.
Impairment of Long-Lived Assets
We review long-lived assets with definite lives at least annually and whenever
events or changes in circumstances indicate that the carrying value of the
asset may not be recoverable. This review includes the evaluation of
individual under-performing retail stores and assessing the recoverability of
the carrying value of the fixed assets related to the store. Future cash flows
are projected for the remaining lease life using a probability-weighted
approach to estimate the fair value of the store assets. These projections
consider such factors as future sales levels, gross margins, changes in rent
and other expenses as well as the overall operating environment specific to
that store. If the estimated future cash flows are less than the carrying
value of the assets, we record an impairment charge equal to the difference
between the assets' fair value and carrying value. Since the projection of
future cash flows involves judgment and estimates, differences in circumstances
or estimates could produce different results.
Income Taxes
In determining net loss for financial statement purposes, we make certain
estimates and judgments in the calculation of tax benefit and the resulting
tax liabilities and in the recoverability of deferred tax assets.
In the ordinary course of business, there may be transactions and calculations
where the ultimate tax outcome is not certain. The calculation of tax
liabilities involves dealing with uncertainties in the application of complex
tax laws. We recognize potential liabilities for anticipated tax audit issues
in the U.S. and other tax jurisdictions based on an estimate of the ultimate
resolution of whether, and the extent to which, additional taxes will be due.
Although we believe that the estimates are reasonable, no assurance can be
given that the final outcome of these matters will not be different than what
is reflected in the current and historical income tax provisions and accruals.
Deferred tax assets are recognized for items that have a difference between the
time they are deductible for financial statement purposes and for tax purposes
as well as for net operating loss carryforwards and credit carryforwards. As
of January 29, 2005, we have recorded $9.4 million of net deferred tax assets,
including net operating loss and credit carryforwards of $4.0 million recorded
during Fiscal 2004 as a result of our net taxable loss exceeding amounts for
which a carryback was available.
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes, requires that deferred tax assets be reduced by a valuation
allowance if, based on available evidence, it is more likely than not that some
portion or all of the recorded deferred tax assets will not be realized in
future periods. This assessment requires significant judgment, and the fact
that a benefit may be expected for a portion but not all of a deferred tax
asset increases the judgmental complexity.
We evaluate the realizability of our deferred tax assets on an ongoing basis,
considering all available positive and negative evidence, including the
reversal patterns of the assets, our past results, the existence of cumulative
losses in recent years, our forecast of future taxable income and on-going
prudent and feasible tax planning strategies. A significant factor impacting
our evaluation of the deferred tax assets recorded as of January 29, 2005, was
the net loss recognized for Fiscal 2004. We believe that the performance of
Fiscal 2004 will not be repeated and that we will return to profitability in
Fiscal 2005 and beyond for the following reasons:
We entered 2005 with an improved inventory mix having elected to
clear much of the undesirable inventory in late Fiscal 2004 whereas last
year, we entered the year with an oversupply of core and basic
merchandise, which restricted our ability to introduce new, fresh product
into the assortment and resulted in higher inventory carrying costs.
We have taken measures to substantially improve our merchandise
assortment and the process by which we introduce new product and exit old
product under the leadership of our new general merchandise manager.
We do not expect the supply chain interruption and additional costs
that we experienced as a result of the imposition of antidumping duties
on bedroom furniture from China, which necessitated moving production
from China to Vietnam and other alternative source countries.
We have an increased number of stores in off-mall locations where
operating costs are lower and where we have experienced higher average
sales volumes, thus helping to improve the overall profitability of our
stores. Additionally, many of these stores were relatively new or were
the result of migrating from mall to off-mall locations. As the stores
become more mature, we expect overall sales volumes to strengthen.
We have fewer new store openings planned for Fiscal 2005, which will
reduce store opening expenses and help to reduce the cannibalization of
existing stores, thereby enhancing profitability.
We have taken steps to reduce general and administrative costs in
order to right size the organization and improve profitability.
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<PAGE> 21
Based upon our evaluation, we have concluded that it is more likely than not
that the benefit of the deferred tax assets will be realized and, thus, no
valuation allowance has been established as of January 29, 2005. However, if
our plans for the return to profitability in the future do not come to
fruition, or if other conditions indicate that the benefit of the deferred tax
assets is more likely than not to be realized, we will record a valuation
allowance to reduce the assets to their realizable value. Such valuation
allowance, if established, would serve to increase our tax expense and reduce
net income in the period in which it is recorded.
Insurance
We are self-insured with respect to medical and dental insurance coverage
offered to our eligible employees, up to a maximum of $150,000 per claim.
Above that amount, medical insurance coverage is in place. In connection with
the self-insured portion, we maintain a liability for claims that are in the
process of being paid and those that have been incurred but not yet reported to
our insurance carrier. We base the amount of the liability upon historical
claims experience and actuarial estimates regarding the exposure for claims
incurred but not yet reported. At January 29, 2005, the balance of the medical
and dental liability was $957,000.
Since Fiscal 2001, we have also maintained workers' compensation insurance
coverage with a deductible of up to $150,000 per claim. At January 29, 2005,
we had recorded a liability of $3.1 million, representing the estimated amount
that will have to be paid in future periods related to the settlement of claims
under the insurance policies for Fiscal 2001 through Fiscal 2004. The amount
of the liability reflects expected remaining workers' compensation claims based
upon actuarial estimates, utilizing historical claims experience and other
relevant information and trends. Prior to Fiscal 2001, our workers'
compensation insurance was not subject to a deductible. Beginning in Fiscal
2005, our workers' compensation insurance deductible will be $250,000 per
claim.
If circumstances change or if information becomes available that would indicate
that future payments with respect to insurance liabilities would be different
than what was previously estimated, we will adjust such liabilities
accordingly. Since the amounts recorded for insurance liabilities are based
upon various estimates, actual future requirements could vary from the recorded
liabilities.
New Accounting Pronouncements
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation 46, Consolidation of Variable Interest Entities - An
Interpretation of ARB No. 51 ("FIN 46"). FIN 46 is intended to clarify the
application of ARB No. 51, Consolidated Financial Statements, to certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support. For those entities, a controlling financial interest cannot be
identified based on an evaluation of voting interests and may be achieved
through arrangements that do not involve voting interests. The consolidation
requirement of FIN 46 was effective immediately to variable interests in
variable interest entities ("VIEs") created or obtained after January 31, 2003.
FIN 46 also sets forth certain disclosures regarding interests in VIEs that are
deemed significant, even if consolidation is not required. In December 2003,
the FASB issued FIN 46 (revised December 2003), Consolidation of Variable
Interest Entities ("FIN 46R"), which delayed the effective date of the
application of FIN 46 to us for non-special purpose VIEs acquired or created
before February 1, 2003, to our interim period ended on May 1, 2004, and
provided additional technical clarifications to implementation issues. During
Fiscal 2004, we adopted the provisions of FIN 46R. Since we do not have any
VIEs, the adoption of FIN 46R had no impact on our consolidated financial
position or results of operations.
In November 2004, the FASB issued SFAS No. 151, Inventory Costs. SFAS 151
requires that fixed production costs be allocated to inventory based on the
normal capacity of production facilities and that unallocated overheads be
recognized as an expense in the periods in which they are incurred. In
addition, other items such as abnormal freight, handling costs and amounts of
excess spoilage require treatment as current-period charges rather than as a
portion of the inventory cost. SFAS 151 is effective for Fiscal 2006, at which
time we will adopt the provisions of the standard. We do not expect the
adoption of the standard to have a material impact on our consolidated
financial position or results of operations.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004) ("123R"), Share-
Based Payment. SFAS 123R establishes standards for accounting for transactions
in which an entity exchanges its equity instruments for goods or services. The
primary focus of SFAS 123R is on employee services obtained in share-based
payment transactions. SFAS 123R requires that all share-based payments to
employees be recognized in the financial statements based upon their fair
values. The cost will be recognized over the period during which an employee
is required to provide services in exchange for the award. The standard is
effective for our financial statements beginning in Fiscal 2006, at which time
we will adopt its provisions. We are in the process of planning our
implementation and evaluating the impact of adoption on our consolidated
financial position and results of operations.
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<PAGE> 22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk represents the potential loss arising from adverse changes in the
value of financial instruments. The risk of loss is assessed based upon the
likelihood of adverse changes in fair values, cash flows or future earnings.
We have exposure to interest rate risk, as borrowings under our credit facility
are based upon LIBOR, prime and other benchmark rates which may fluctuate with
market conditions. Based upon our seasonal borrowing levels, management does
not believe that a change in interest rates of 100 basis points would have a
significant impact on our consolidated financial position or results of
operations.
International purchases of inventory are primarily denominated in United States
dollars, which reduces our risk to foreign exchange rate fluctuation. Our
greatest foreign exchange exposure is with respect to intercompany transactions
with our Canadian subsidiary and translation of their financial statements for
inclusion in our consolidated financial statements.
As of January 29, 2005 we had no debt or other market risk sensitive
instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The index to the consolidated financial statements is found on page 28. Our
consolidated financial statements and notes to the consolidated financial
statements follow the index.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
There have been no changes in or disagreements with accountants on accounting
or financial disclosures.
ITEM 9A. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
that are designed to provide reasonable assurance that the information that we
are required to disclose in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. It should be noted that, because of inherent
limitations, our disclosure controls and procedures, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the disclosure controls and procedures are met.
Management began a review of our accounting policies and practices with respect
to leases during the fourth quarter of Fiscal 2004 based upon their monitoring
of restatement activity and the related communication within the retail
industry. As a result of this internal review, we identified errors in our
reporting of landlord allowances within the consolidated statements of cash
flows. Landlord allowances, although clearly separately identified, were
improperly included as a component of cash flows from investing activities
instead of cash flows from operating activities. Accordingly, we have
restated our consolidated statements of cash flows for Fiscal 2003 and Fiscal
2002. Management, with the participation of the Chief Executive Officer and
Chief Financial Officer, has performed an evaluation of our disclosure controls
and procedures as of January 29, 2005, and for the reason set forth below, our
Chief Executive Officer and Chief Financial Officer have concluded that as of
January 29, 2005, our disclosure controls and procedures were not effective at
a reasonable level of assurance, based on the evaluation of these controls and
procedures as required by Exchange Act Rule 13a-15(b).
In light of the material weakness described below, we performed additional
analysis and other procedures to ensure that our consolidated financial
statements were prepared in accordance with generally accepted accounting
principles. Accordingly, management believes that the financial statements
included in this Annual Report on Form 10-K present fairly, in all material
respects, our financial position, results of operations and cash flows for the
periods presented in conformity with accounting principles generally accepted
in the United States of America.
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<PAGE> 23
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Exchange Act Rule 13a-
15(f). Our internal control over financial reporting is a process that is
designed under the supervision of our Chief Executive Officer and Chief
Financial Officer, and effected by our Board of Directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America. Our internal control over financial reporting
includes those policies and procedures that:
i. Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets;
ii. Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States
of America, and that receipts and expenditures recorded by us are
being made only in accordance with authorizations of our management
and Board of Directors of the Company; and
iii. Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies and procedures may deteriorate.
Management, with the participation of our Chief Executive Officer and Chief
Financial Officer, performed an assessment of the effectiveness of the
Company's internal control over financial reporting as of January 29, 2005. In
making this assessment, we used the criteria set forth in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the "COSO").
A material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be
prevented or detected. Management has concluded that as of January 29, 2005,
our controls over the selection and application of our lease accounting
policies related to the classification of landlord allowances within the
consolidated statements of cash flows were ineffective to ensure that such
leasing transactions were reported in the consolidated statements of cash flows
in accordance with accounting principles generally accepted in the United
States of America. Specifically, the deficiency in our controls over the
selection and application of our lease accounting policies failed to identify
misstatements in the reporting of cash provided by operating activities and
cash used in investing activities reported in the consolidated statements of
cash flows, which resulted in the restatement of our Fiscal 2003 and Fiscal
2002 annual consolidated financial statements. Additionally, this control
deficiency could result in a misstatement of cash provided by operating
activities and cash used in investing activities that would result in a
material misstatement to annual or interim financial statements that would not
be prevented or detected. Accordingly, management, with the participation of
our Chief Executive Officer and Chief Financial Officer, has determined that
this control deficiency constituted a material weakness. Because of this
material weakness, management has concluded that as of January 29, 2005, we did
not maintain effective internal control over financial reporting based on the
criteria established in Internal Control-Integrated Framework issued by the
COSO.
Our independent registered public accounting firm, PricewaterhouseCoopers LLP,
has audited our management's assessment of the effectiveness of the Company's
internal control over financial reporting as of January 29, 2005 as stated in
their report, which is included herein.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
No changes in our internal control over financial reporting occurred during the
fiscal quarter ended January 29, 2005 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
In the first quarter of 2005, the Company enhanced its monitoring of
developments surrounding the accounting for leases and revised its accounting
policies with respect to classification of tenant allowances.
23
<PAGE> 24
ITEM 9B. OTHER INFORMATION.
There were no events during the fourth fiscal quarter requiring disclosure in a
report on Form 8-K, other than those previously reported on a Form 8-K.
24
<PAGE> 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
We have adopted a code of ethics that applies to all employees including our
principal executive officer and principal financial and accounting officer. A
copy of the Code of Business Conduct and Ethics was previously filed as an
Exhibit to the Annual Report on Form 10-K for the year ended January 31, 2004
and is incorporated herein by reference. In addition, the code is posted on
our website at www.bombaycompany.com or can be obtained, free of charge, upon
request from the office of the Corporate Secretary.
Other information required under Item 10 appears under the captions "Election
of Directors", "Executive Officers of the Company", "Meetings and Committees of
the Board" and "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Definitive Proxy Statement of The Bombay Company, Inc. relating to the
Company's Annual Meeting of Shareholders, which is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item appears under the captions "Executive
Compensation" and "Compensation of Directors" in the Definitive Proxy Statement
of The Bombay Company, Inc. relating to the Company's Annual Meeting of
Shareholders, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information required by this item appears under the captions "Equity
Compensation Plan Information" and "Security Ownership" in the Definitive Proxy
Statement of The Bombay Company, Inc. relating to the Company's Annual Meeting
of Shareholders, which is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no relationships or related transactions during the reporting period
which require disclosure.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this item appears under the captions "Independent
Registered Public Accounting Firm's Fees" and "Audit Committee's Pre-approval
Policy and Procedures" in the Definitive Proxy Statement of The Bombay Company,
Inc. relating to the Company's Annual Meeting of Shareholders, which is
incorporated herein by reference.
25
<PAGE> 26
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)The following documents are filed as a part of this Annual Report for The
Bombay Company, Inc. and its
subsidiaries:
(1)Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the Fiscal Years Ended
January 29, 2005, January 31, 2004
and February 1, 2003
Consolidated Balance Sheets at January 29, 2005 and January 31, 2004
Consolidated Statements of Stockholders' Equity for the Fiscal Years
Ended January 29, 2005, January 31, 2004 and February 1, 2003
Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 29, 2005, January 31, 2004 and February 1, 2003
Notes to Consolidated Financial Statements
(2)Financial statement schedules not included in this Form 10-K Annual
Report have been omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
(3)Exhibits:
A list of exhibits required to be filed as part of this report is set
forth in the Index to Exhibits, which immediately precedes such
exhibits, and is incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE BOMBAY COMPANY, INC.
(Registrant)
Date: April 29, 2005
/s/ JAMES D. CARREKER
James D. Carreker
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Position Date
<S> <C> <C>
/s/ JAMES D. CARREKER Chairman of the Board and April 29, 2005
James D. Carreker Chief Executive Office
/s/ NIGEL TRAVIS Lead Director April 27, 2005
Nigel Travis
/s/ JOHN H. COSTELLO Director April 27, 2005
John H. Costello
/s/ SUE T. GROENTEMAN Director April 28, 2005
Sue T. Groenteman
/s/ PAUL J. RAFFIN Director April 27, 2005
Paul J. Raffin
/s/ JULIE L. REINGANUM Director April 27, 2005
Julie L. Reinganum
/s/ LAURIE M. SHAHON Director April 27. 2005
Laurie M. Shahon
/s/ BRUCE R. SMITH Director April 27, 2005
Bruce R. Smith
/s/ ELAINE D. CROWLEY Senior Vice President, April 29, 2005
Elaine D. Crowley Chief Financial Officer and Treasurer
</TABLE>
27
<PAGE> 28
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page No.
Report of Independent Registered Public Accounting Firm..... 29-30
Consolidated Statements of Operations for the Fiscal Years
Ended January 29, 2005, January 31, 2004 and February 1, 2003 31
Consolidated Balance Sheets at January 29, 2005 and
January 31, 2004 32
Consolidated Statements of Stockholders' Equity for the Fiscal
Years Ended January 29, 2005, January 31, 2004 and
February 1, 2003 34-35
Consolidated Statements of Cash Flows for the Fiscal Years
Ended January 29, 2005, January 31, 2004 and February 1, 2003 36
Notes to Consolidated Financial Statements.................. 37-48
Unaudited Quarterly Financial Data.......................... 49
28
<PAGE> 29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
The Bombay Company, Inc.:
We have completed an integrated audit of The Bombay Company, Inc.'s fiscal 2004
consolidated financial statements and of its internal control over financial
reporting as of January 29, 2005 and audits of its fiscal 2003 and fiscal 2002
consolidated financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Our opinions, based
on our audits, are presented below.
Consolidated financial statements
In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(1) present fairly, in all material respects, the
financial position of The Bombay Company, Inc. and its subsidiaries (the
"Company") at January 29, 2005 and January 31, 2004, and the results of their
operations and their cash flows for each of the three years in the period ended
January 29, 2005 in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit of
financial statements includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As discussed in Note 2 to the consolidated financial statements, the Company
has restated its fiscal 2003 and fiscal 2002 consolidated financial statements.
Internal control over financial reporting
Also, we have audited management's assessment, included in Management's Report
on Internal Control Over Financial Reporting appearing under Item 9A, that The
Bombay Company, Inc. did not maintain effective internal control over financial
reporting as of January 29, 2005, because the Company did not maintain
effective controls over its selection and application of lease accounting
policies related to the classification of landlord allowances within the
Company's consolidated statements of cash flows, based on criteria established
in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express opinions on
management's assessment and on the effectiveness of the Company's internal
control over financial reporting based on our audit.
We conducted our audit of internal control over financial reporting in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. An audit of
internal control over financial reporting includes obtaining an understanding
of internal control over financial reporting, evaluating management's
assessment, testing and evaluating the design and operating effectiveness of
internal control, and performing such other procedures as we consider necessary
in the circumstances. We believe that our audit provides a reasonable basis for
our opinions.
A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.
29
<PAGE> 30
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or a combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be
prevented or detected. The following material weakness has been identified and
included in management's assessment. As of January 29, 2005, management has
concluded that the Company's controls over the selection and application of its
lease accounting policies related to the classification of landlord allowances
within the consolidated statements of cash flows were ineffective to ensure
that such leasing transactions were reported in the consolidated statements of
cash flows in accordance with accounting principles generally accepted in the
United States of America. Specifically, the deficiency in the Company's
controls over the selection and application of its lease accounting policies
failed to identify misstatements in the reporting of cash provided by operating
activities and cash used in investing activities reported in the consolidated
statements of cash flows, which resulted in the restatement of the Company's
fiscal 2003 and fiscal 2002 annual consolidated financial statements.
Additionally, this control deficiency could result in a misstatement of cash
provided by operating activities and cash used in investing activities that
would result in a material misstatement to annual or interim financial
statements that would not be prevented or detected. Accordingly, management
has determined that this control deficiency constitutes a material weakness.
This material weakness was considered in determining the nature, timing, and
extent of audit tests applied in our audit of the fiscal 2004 consolidated
financial statements, and our opinion regarding the effectiveness of the
Company's internal control over financial reporting does not affect our opinion
on those consolidated financial statements.
In our opinion, management's assessment that The Bombay Company, Inc. did not
maintain effective internal control over financial reporting as of January 29,
2005, is fairly stated, in all material respects, based on criteria established
in Internal Control - Integrated Framework issued by the COSO. Also, in our
opinion, because of the effect of the material weakness described above on the
achievement of the objectives of the control criteria, The Bombay Company, Inc.
has not maintained effective internal control over financial reporting as of
January 29, 2005, based on criteria established in Internal Control -
Integrated Framework issued by the COSO.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Fort Worth, Texas
April 29, 2005
30
<PAGE> 31
CONSOLIDATED STATEMENTS OF OPERATIONS
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
Fiscal Year Ended
<TABLE>
<CAPTION>
January 29, January 31, February 1,
2005 2004 2003
(restated) (restated)
<S> <C> <C> <C>
Net revenues............................... $576,087 $596,435 $494,000
Costs and expenses:
Cost of sales, buying and store occupancy costs 428,561 421,459 349,582
Selling, general and administrative expenses 165,658 158,446 132,305
Interest income......................... (67) (176) (331)
Interest expense........................ 601 621 152
594,753 580,350 481,708
Income (loss) before income taxes.......... (18,666) 16,085 12,292
Provision (benefit) for income taxes....... (6,461) 6,219 5,064
Net income (loss)....................... $(12,205) $ 9,866 $ 7,228
Basic earnings (loss) per share............ $(.34) $.28 $.22
Diluted earnings (loss) per share.......... $(.34) $.28 $.22
Average common shares outstanding.......... 35,697 34,649 33,048
Average common shares outstanding and
dilutive potential common shares........ 35,697 34,966 33,298
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE> 32
CONSOLIDATED BALANCE SHEETS
The Bombay Company, Inc. and Subsidiaries
(In thousands, except shares)
<TABLE>
<CAPTION>
January 29, January 31,
2005 2004
(restated)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (short-term investments of $3,187 and $15,421 respectively) $ 9,168 $ 25,619
Inventories, at lower of cost or market............. 144,702 138,908
Other current assets................................ 27,022 26,012
Total current assets........................... 180,892 190,539
Property and equipment, at cost:
Land................................................ 892 892
Building............................................ 5,198 5,198
Leasehold improvements.............................. 133,062 113,302
Furniture and equipment............................. 47,144 40,756
186,296 160,148
Accumulated depreciation........................ (94,284) (87,460)
Net property and equipment...................... 92,012 72,688
Deferred taxes......................................... 5,052 593
Other assets........................................... 5,794 5,492
Goodwill, less amortization of $611.................... 423 423
Total assets................................. $284,173 $269,735
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............... $ 48,997 $ 35,348
Income taxes payable................................ * 1,103
Accrued payroll and bonuses......................... 5,660 8,019
Gift cards and certificates redeemable.............. 8,312 7,129
Accrued insurance................................... 4,081 3,730
Total current liabilities....................... 67,050 55,329
Accrued rent and other long term liabilities........... 35,192 23,389
Commitments and contingencies (Notes 6 and 7)
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, 1,000,000 shares authorized * *
Common stock, $1 par value, 50,000,000 shares authorized,
38,149,646 shares issued........................ 38,150 38,150
Additional paid-in capital.......................... 79,700 79,210
Retained earnings................................... 73,737 85,942
Accumulated other comprehensive income.............. 944 122
Common shares in treasury, at cost, 2,259,261 and
2,816,772 shares, respectively.................. (9,268) (11,555)
Deferred compensation............................... (1,332) (852)
Total stockholders' equity...................... 181,931 191,017
Total liabilities and stockholders' equity... $284,173 $269,735
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
32
<PAGE> 33
THIS PAGE INTENTIONALLY NOT USED
33
<PAGE> 34 & 35
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
The Bombay Company, Inc. and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
Accumulated
Common Stock Treasury Stock Additional Stock Other Annual
Paid-In Purchase Deferred Retained Comprehensive Comprehensive
Shares Amount Shares Amount Capital Loans Compensation Earnings Income(Loss) Income(Loss)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total, February 2, 2002
(as previously reported) 38,150 $38,150 (5,113)$(20,861) $75,267 $(950) $(267) $69,144 $(1,776)
Cumulative effect of restatement
for lease accounting (Note 2) * * * * * * * (296) (5)
Total, February 2, 2002
(as restated) 38,150 38,150 (5,113) (20,861) 75,267 (950) (267) 68,848 (1,781)
Purchases of treasury shares * * (202) (895) * 864 * * *
Shares contributed or sold to
employee benefit plans * * 66 271 (89) * * * *
Exercise of stock options * * 596 2,438 45 * * * *
Director fee distributions * * 77 313 3 * * * *
Restricted stock distributions,
net of cancellations * * (45) (184) 220 * (36) * *
Deferred compensation expense * * * * * * 66 * *
Net repayments of stock purchase
loans * * * * * 103 * * *
Interest charges on stock
purchase loans, net * * * * * (17) * * *
Net income (restated) * * * * * * * 7,228 * $7,228
Foreign currency translation
adjustments (restated) * * * * * * * * 381 381
Total, February 1, 2003
(as restated) 38,150 38,150 (4,621) (18,918) 75,446 * (237) 76,076 (1,400) $7,609
Purchases of treasury shares * * (9) (69) * * * * *
Shares contributed or sold to
employee benefit plans * * 64 262 113 * * * *
Exercise of stock options * * 1,613 6,610 3,007 * * * *
Director fee distributions * * 55 227 33 * * * *
Restricted stock distributions,
net of cancellations * * 81 333 611 * (944) * *
Deferred compensation expense * * * * * * 329 * *
Net income (restated) * * * * * * * 9,866 * $9,866
Foreign currency translation
adjustments (restated) * * * * * * * * 1,522 1,522
Total, January 31, 2004
(as restated) 38,150 38,150 (2,817)(11,555) 79,210 * (852) 85,942 122 $11,388
Shares contributed or sold to
employee benefit plans * * 81 331 90 * * * *
Exercise of stock options * * 258 1,017 3 * * * *
Director fee distributions * * 14 55 27 * * * *
Restricted stock distributions,
net of cancellations * * 205 884 370 * (1,171) * *
Deferred compensation expense * * * * * * 691 * *
Net loss * * * * * * * (12,205) * $(12,205)
Foreign currency translation
adjustments * * * * * * * * 822 822
Total, January 29, 2005 38,150 $38,150 (2,259)$(9,268)$79,700 $* $(1,332) $73,737 $944 $(11,383)
The accompanying notes are an integral part of these consolidated financial
statements.
34 35
</TABLE>
<PAGE>
<PAGE> 36
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Bombay Company, Inc. and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
January 29, January 31, February 1,
2005 2004 2003
(restated) (restated)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $(12,205) $ 9,866 $ 7,228
Adjustments to reconcile net income to net cash from operations:
Depreciation..................... 16,606 14,005 13,462
Amortization..................... 2,208 4,248 2,743
Restricted stock compensation.... 692 328 66
Deferred taxes and other......... (6,944) 5,057 (1,537)
Change in assets and liabilities:
Increase in inventories.......... (4,831) (34,833) (12,430)
Increase in other assets......... (2,118) (5,835) (2,633)
Increase (decrease) in accounts payable and accrued expenses 15,803 (1,843) 13,624
Increase (decrease) in income taxes payable (971) (2,276) 3,608
Increase (decrease) in accrued payroll and bonuses (2,435) 725 2,156
Increase (decrease) in noncurrent liabilities 1,858 1,876 (661)
Landlord construction allowances.... 11,625 11,900 3,525
Net cash provided by operations 19,288 3,218 29,151
Cash flows from investing activities:
Purchases of property, equipment and other (36,886) (41,062) (13,749)
Proceeds from sale of property and equipment 36 172 289
Net cash used in investing activities (36,850) (40,890) (13,460)
Cash flows from financing activities:
Purchases of treasury stock......... * (83) (31)
Collection of stock purchase loans.. * * 104
Sale of stock to employee benefit plans 422 387 182
Exercise of stock options........... 847 6,310 2,328
Net cash provided by financing activities 1,269 6,614 2,583
Effect of exchange rate change on cash . (158) 69 (81)
Net increase (decrease) in cash and cash equivalents (16,451) (30,989) 18,193
Cash and cash equivalents at beginning of year 25,619 56,608 38,415
Cash and cash equivalents at end of year $ 9,168 $ 25,619 $ 56,608
Supplemental disclosures of cash flow information:
Interest paid....................... $ 601 $ 597 $ 152
Income taxes paid................... 1,310 4,191 2,298
Non-cash investing and financing activities:
Distributions of director fees.... 82 260 316
Distributions of restricted stock. 1,254 943 368
Repurchase of shares from stock purchase loans * * 864
Capitalization of construction period rent 1,487 1,916 612
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Bombay Company, Inc. and Subsidiaries
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The Bombay Company, Inc. and its wholly-owned subsidiaries design, source and
market a unique line of fashionable home accessories, wall decor and furniture
through a network of retail locations throughout the United States and Canada,
through specialty catalogs, over the Internet and internationally through
licensing arrangements. We also have a small wholesale operation that
distributes a separate line of occasional furniture. Throughout this report,
the terms "our", "we", "us", "Bombay" and "Company" refer to The Bombay
Company, Inc., including its subsidiaries.
The consolidated financial statements include the accounts of Bombay and its
wholly-owned subsidiaries. All significant intercompany transactions, balances
and profits have been eliminated. Certain prior year amounts have been
reclassified to conform to current year presentation. Bombay has a retail (52-
53 week) fiscal year, which ends on the Saturday nearest January 31. The
periods ended January 29, 2005 ("Fiscal 2004"), January 31, 2004 ("Fiscal
2003") and February 1, 2003 ("Fiscal 2002") reflect 52 weeks.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates. Such estimates
are based on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. These estimates affect
reported amounts of assets, liabilities, revenues, expenses and related
disclosures. Actual results could differ materially from those estimates.
FOREIGN CURRENCY TRANSLATION
The functional currency of our Canadian operations is the Canadian dollar.
Fiscal year end exchange rates are used to translate assets and liabilities to
U.S. dollars. Monthly average exchange rates are used to translate income and
expenses. We record the cumulative effect of foreign currency translation
adjustments in accumulated other comprehensive income (loss) within
stockholders' equity. During Fiscal 2004, Fiscal 2003 and Fiscal 2002, foreign
exchange gain totaled $551,000, $1,377,000 and $23,000, respectively, related
to transactions of our Canadian subsidiary.
CASH AND CASH EQUIVALENTS
We consider cash in stores, deposits in banks and short-term investments with
original or remaining maturities of three months or less when purchased as cash
and cash equivalents for the purposes of the financial statements. Short-term
investments are recorded at the lower of cost or fair market value.
INVENTORIES
Inventories consist primarily of finished merchandise and are valued at the
lower of cost or market, with cost being determined based upon the weighted
average inventory method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated over the
estimated useful lives of the assets using the straight-line method over the
lives shown:
Building............... Forty years
Furniture and equipment Two to ten years
Leasehold improvements. The lesser of the life of the lease or asset
Landlord construction allowances are recorded as accrued rent and other long
term liabilities, and are amortized as a reduction of rent expense over the
life of the related lease.
We charge maintenance and repairs to expense as they are incurred. We
capitalize improvements and betterments which materially prolong the useful
lives of the assets. As property is retired or sold, we remove the cost and
related accumulated depreciation from the accounts, and we recognize gains or
losses in the statements of income.
CAPITALIZED SOFTWARE COSTS
We capitalize certain external and internal costs associated with computer
software and significant enhancements to software features of existing
products. We amortize the costs utilizing the straight-line method over the
estimated economic lives of the software, which range from three to seven
years. Total costs capitalized were $17,522,000 and $15,128,000 at January 29,
2005 and January 31, 2004, respectively. Accumulated amortization related to
these assets was $12,195,000 and $10,016,000 at January 29, 2005 and January
31, 2004, respectively.
37
<PAGE> 38
IMPAIRMENT OF LONG-LIVED ASSETS
During Fiscal 2002, we adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets. SFAS 144 requires that long-lived assets with definite
lives be evaluated for impairment whenever conditions indicate that the
carrying value of the assets may not be recoverable. In determining if an
impairment exists, assets must be grouped at the lowest level for which there
are identifiable cash flows that are largely independent of cash flows from
other groups of assets. In performing this impairment test, we group our
assets at the store level. If an impairment exists, the amount of the
impairment is measured as the difference between the carrying value and the
estimated fair value of the assets.
GOODWILL
We test goodwill for impairment at least annually, as of the end of the fiscal
year, and whenever conditions indicate that such an impairment could exist.
Goodwill is tested for impairment by comparing the estimated fair value of our
net assets to their carrying value. If the carrying value exceeds the
estimated fair value, we calculate the implied value of goodwill and recognize
an impairment loss. No impairment was recorded in Fiscal 2004, Fiscal 2003 or
Fiscal 2002.
REVENUE RECOGNITION
We recognize revenue when delivery has occurred, the sales price is fixed or
determinable, and collectibility is reasonably assured. Revenues are net of
returns and exclude sales tax.
We include in revenues amounts collected from customers for shipping and
handling orders. In Fiscal 2004, Fiscal 2003 and Fiscal 2002, these revenues
totaled $7,149,000, $6,566,000 and $4,626,000, respectively. The associated
shipping and handling expenses are included in cost of sales.
GIFT CERTIFICATES
We record proceeds from the sale of gift cards and certificates as a liability
at the time we receive them. When the holder of the card or certificate
redeems it for merchandise, we relieve the liability and recognize revenue.
COST OF SALES, BUYING AND STORE OCCUPANCY COSTS
We include in cost of sales all costs associated with the purchase of product
including, but not limited to, vendor cost, inbound transportation costs,
duties, commission, inspections, quality control, warehousing and outbound
transportation costs. Buying costs include expenses associated with our buying
department, consisting primarily of salaries, travel, product development and
product sample costs. Store occupancy costs include costs such as rent, common
area maintenance charges, utilities and depreciation and amortization of
leasehold improvements and other fixed assets relating to our retail locations.
ADVERTISING COSTS
We expense advertising costs the first time the advertising takes place.
During Fiscal 2004, Fiscal 2003 and Fiscal 2002, advertising expense was
$29,018,000, $27,604,000 and $20,258,000, respectively.
INCOME TAXES
We use the liability method of computing deferred income taxes on all material
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. We assess the
realizability of deferred tax assets based on available evidence and, if
necessary, provide a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be realized. This
assessment requires significant judgment, and the fact that a benefit may be
expected for a portion but not all of a deferred tax asset increases the
judgmental complexity.
All unremitted earnings of the foreign subsidiary are considered to be
permanently reinvested. Accordingly, no U.S. deferred taxes have been provided
on such earnings.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) represents the change in equity (net assets) of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during
a period except those resulting from investments by owners and distributions to
owners. Such amounts are included in accumulated other comprehensive income
(loss) within stockholders' equity and consist of the cumulative effect of
foreign currency translation adjustments. There is no tax effect on the
cumulative effect of foreign currency translation adjustments as undistributed
earnings of the Canadian subsidiary are considered to be permanently reinvested
and will continue to be reinvested in this subsidiary in the foreseeable
future.
38
<PAGE> 39
NEW ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation Number ("FIN") 46, Consolidation of Variable Interest Entities -
An Interpretation of ARB No. 51. FIN 46 addresses consolidation by business
enterprises of variable interest entities ("VIEs") in which the enterprise
absorbs a majority of the VIE's expected losses, receives a majority of the
VIE's expected residual returns, or both, as a result of ownership, contractual
or other financial interests in the VIE. In December 2003, the FASB amended
and clarified FIN 46 by issuing FIN 46R. During Fiscal 2004, we adopted the
provisions of FIN 46R. The adoption of FIN 46R did not have a material impact
on our consolidated financial position or results of operations.
In November 2004, the FASB issued SFAS 151, Inventory Costs. SFAS 151 requires
that fixed production costs be allocated to inventory based on the normal
capacity of production facilities and that unallocated overheads be recognized
as an expense in the periods in which they are incurred. In addition, other
items such as abnormal freight, handling costs and amounts of excess spoilage
require treatment as current-period charges rather than as a portion of the
inventory cost. SFAS 151 is effective for Fiscal 2006, at which time we will
adopt the provisions of the standard. We do not expect the adoption of the
standard to have a material impact on our consolidated financial position or
results of operations.
In December 2004, the FASB issued SFAS 123R (Revised 2004), Share-Based
Payment. SFAS 123R establishes standards for accounting for transactions in
which an entity exchanges its equity instruments for goods or services. The
primary focus of SFAS 123R is on employee services obtained in share-based
payment transactions. SFAS 123R requires that all share-based payments to
employees be recognized in the financial statements based upon their fair
values. The cost will be recognized over the period during which an employee
is required to provide services in exchange for the award. The standard is
effective for our financial statements beginning in Fiscal 2006, at which time
we will adopt its provisions. We are in the process of planning our
implementation and evaluating the impact of adoption on our consolidated
financial position and results of operations.
EARNINGS (LOSS) PER SHARE
Basic earnings per share are based upon the weighted average number of shares
outstanding. Diluted earnings per share are based upon the weighted average
number of shares outstanding plus the shares that would be outstanding assuming
exercise of dilutive stock options and distribution of deferred director
compensation.
The computation for basic and diluted earnings (loss) per share are as follows
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Fiscal Year Ended
January 29, January 31, February 1,
2005 2004 2003
(restated) (restated)
<S> <C> <C> <C>
Numerator:
Net income (loss)....... $(12,205) $9,866 $7,228
Denominator for basic earnings per share:
Average common shares outstanding 35,697 34,649 33,048
Denominator for diluted earnings per share:
Average common shares outstanding 35,697 34,649 33,048
Stock options........... * 314 227
Deferred director compensation * 3 23
35,697 34,966 33,298
Basic earnings (loss) per share $(.34) $.28 $.22
Diluted earnings (loss) per share $(.34) $.28 $.22
</TABLE>
During Fiscal 2004, we reported a net loss. Accordingly, common stock
equivalents would be anti-dilutive during the period and, thus, are not
included in the computation of diluted loss per share. At January 29, 2005,
3,114,000 stock options and 51,000 units of deferred director compensation were
potentially dilutive securities which were excluded from the computation.
39
<PAGE> 40
STOCK-BASED COMPENSATION
We apply the recognition and measurement principles of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations, and the disclosure-only provisions of SFAS 123, Accounting for
Stock-Based Compensation, in accounting for our stock-based incentive plans.
No compensation expense related to grants of stock options has been reflected
in net income (loss), as all options granted under the plans had an exercise
price equal to the market price of Bombay's common stock on the date of grant.
Compensation expense related to grants of restricted stock is measured as the
quoted market price of Bombay's common stock at the measurement date, amortized
to expense over the vesting period. The following table illustrates the effect
on net income (loss) and earnings (loss) per share if we had applied the fair
value recognition provisions of SFAS 123 to stock-based compensation. For
purposes of the pro forma disclosures below, the estimated fair value of the
options is recognized as expense over the vesting period (in thousands):
Fiscal Year Ended
<TABLE>
<CAPTION>
January 29, January 31, February 1,
2005 2004 2003
(restated) (restated)
<S> <C> <C> <C>
Net income (loss) as reported $(12,205) $ 9,866 $7,228
Stock-based compensation expense
determined under SFAS 123, net of tax (1,767) (1,196) (925)
Net income (loss), pro forma $(13,972) $ 8,670 $6,303
Basic earnings (loss) per share, as reported (.34) .28 .22
Diluted earnings (loss) per share, as reported (.34) .28 .22
Basic earnings (loss) per share, pro forma (.39) .25 .19
Diluted earnings (loss) per share, pro forma (.39) .25 .19
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model based upon the following weighted average
assumptions:
<TABLE>
<CAPTION>
Fiscal Year Ended
January 29, January 31, February 1,
2005 2004 2003
<S> <C> <C> <C>
Expected volatility 64.1% 65.7% 63.9%
Expected life years 6 5 6
Expected dividends. * * *
Risk-free interest rate 4.10% 3.57% 5.21%
</TABLE>
The weighted average fair value, as of the date of grant, of options granted
during Fiscal 2004, Fiscal 2003 and Fiscal 2002 was $3.96, $3.95 and $1.71,
respectively.
NOTE 2 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
During the fourth quarter of Fiscal 2004, we began an
evaluation of our lease accounting practices and determined that it was
appropriate to restate previously issued financial statements. Historically,
we have recognized store lease expense on a straight-line basis beginning on
the date that the store opened. This generally had the effect of excluding the
pre-opening store build out, fixturing and merchandise stocking periods during
which the Company typically had no rent payments. Based upon our evaluation of
our lease accounting practices, we have adopted an accounting policy to
capitalize rent during the construction period and recognize straight-line
rent expense upon the store becoming substantially complete and ready for its
intended use, which results in us recording rent expense during the
merchandise stocking periods.
Additionally, in prior periods, we reflected proceeds from landlord
construction allowances as a component of cash flows from investing activities
in the Consolidated Statements of Cash Flows. We have restated our historical
Fiscal 2003 and Fiscal 2002 Consolidated Statements of Cash Flows to reflect
such proceeds as a component of cash flows from operating activities.
40
<PAGE> 41
The effects of these restatements were as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended January 31, 2004
Impact of
As Reported Restatement As Restated
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
Leasehold improvements.. $103,295 $10,007 $113,302
Property and equipment, at cost 150,141 10,007 160,148
Accumulated depreciation (82,034) (5,426) (87,460)
Net property and equipment 68,107 4,581 72,688
Deferred taxes.......... 372 221 593
Total assets............ 264,933 4,802 269,735
Accrued rent and other
long term liabilities 18,217 5,172 23,389
Retained earnings....... 86,312 (370) 85,942
Total stockholders' equity 191,387 (370) 191,017
Total liabilities and stockholders' equity 264,933 4,802 269,735
CONSOLIDATED STATEMENT OF OPERATIONS
Cost of sales, buying and
store occupancy costs $421,322 $137 $421,459
Income before income taxes 16,222 (137) 16,085
Provision for income taxes 6,271 (52) 6,219
Net income.............. 9,951 (85) 9,866
Basic earnings per share $.29 $(.01) $.28
Diluted earnings per share $.28 $(.00) $.28
CONSOLIDATED STATEMENT OF CASH FLOWS
Net cash provided by (used in)
operating activities. $(8,682) $11,900 $3,218
Net cash used in
investing activities. (28,990) (11,900) (40,890)
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended February 1, 2003
Impact of
As Reported Restatement As Restated
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
Cost of sales, buying and
store occupancy costs $349,599 $(17) $349,582
Income before income taxes 12,275 17 12,292
Provision for income taxes 5,058 6 5,064
Net income............. 7,217 11 7,228
Basic earnings per share $.22 $.00 $.22
Diluted earnings per share $.22 $.00 $.22
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF CASH FLOWS
Net cash provided by
operating activities. $25,626 $ 3,525 $ 29,151
Net cash used in
investing activities. (9,935) (3,525) (13,460)
</TABLE>
The effects of the restatement on years prior to Fiscal 2002 resulted in an
adjustment to reduce stockholders' equity as of February 2, 2002 by $301,000.
41
<PAGE> 42
NOTE 3 - STORE IMPAIRMENTS
We review long-lived assets with definite lives at least annually and whenever
events or changes in circumstances indicate that the carrying value of the
asset may not be recoverable. This review includes the evaluation of
individual under-performing retail stores and assessing the recoverability of
the carrying value of the fixed assets related to the store. Future cash flows
are projected for the remaining lease life using a probability-weighted
approach to estimate the fair value of the store assets. These projections
consider such factors as future sales levels, gross margins, changes in rent
and other expenses as well as the overall operating environment specific to
that store. If the estimated future cash flows are less than the carrying
value of the assets, we record an impairment charge equal to the difference
between the assets' fair value and carrying value. Since the projection of
future cash flows involves judgment and estimates, differences in circumstances
or estimates could produce different results.
Following the holiday selling season in our fourth fiscal quarter, we reviewed
our real estate portfolio for impairment, focusing on store locations currently
operating at a loss. Of the 502 Company-owned stores open as of January 29,
2005, ten stores were identified for which the carrying amounts of the store
assets were not expected to be recoverable. As a result of the review, we
recorded an impairment charge to buying and occupancy costs of $534,000 to
reduce the carrying value of the assets to their estimated net realizable
values. Similar reviews, performed in Fiscal 2003 and Fiscal 2002, resulted in
charges to buying and occupancy costs of $244,000 and $693,000, respectively.
NOTE 4 - DEBT
Effective September 29, 2004, we entered into a secured credit agreement with a
group of banks, pursuant to a credit agreement with Wells Fargo Retail Finance,
LLC, as Arranger and Administrative Agent. The facility replaced our previous
$75 million facility, all indebtedness under which was repaid coincident with
the closing of the new facility. The new facility is comprised of separate
lines of credit in the United States and in Canada, with separate availability
bases. The United States and Canadian lines are secured by inventory,
receivables and certain other assets of the Company and its United States
subsidiaries. The Canadian line is also secured by certain assets of the
Company's Canadian subsidiary, which can borrow up to US$18 million under the
line in certain circumstances. Aggregate borrowings under the United States
and Canadian lines cannot exceed $125 million, except as noted below.
The facility may be used for working capital, inventory financing, and letter
of credit needs. Borrowings under the facility may be made, at the Company's
option and, subject to certain limitations, in the form of loans or by the
issuance of bankers' acceptances with respect to inventory purchases. Loans
under the facility bear interest, at the Company's option, at either the prime
lending rate of Wells Fargo Bank, National Association, or the LIBOR rate plus
a margin of 1.00% to 1.75%, with such margin depending on the amount by which
the average available commitment exceeds usage under the line. The available
commitment under the facility is limited to a borrowing base generally
comprised of 75% of eligible inventory and 85% of receivables, as defined in
the credit agreement and with seasonal and reserve adjustments. The aggregate
commitment under the facility can be increased to $175 million prior to
September 15, 2007, at the request of the Company. The facility expires
September 15, 2009.
The credit agreement contains no covenants regarding the maintenance of
financial ratios, but does include other customary covenants including, but not
limited to, the maintenance of certain minimum availability under the facility;
reporting of certain financial and operational information to the lender; and
limitations regarding the incurrence of other debt, creation of liens, certain
investments, sales, transfers and dispositions of assets. Throughout Fiscal
2004, and continuing, we have been in compliance with all covenants of the
credit agreement. The credit agreement allows us to pay dividends, so long as:
no default or event of default has occurred and is continuing; immediately
after giving effect thereto, availability exceeds usage under the line by at
least $25 million; and certain other conditions are satisfied. We are not
currently, nor have we been, restricted from paying such dividends.
At January 29, 2005, total availability under the facility was $70,200,000.
There were no borrowings as of January 29, 2005. Letters of credit totaling
$8,812,000, primarily to support inventory purchases, were outstanding, and
$61,388,000 was available for additional borrowings or letters of credit.
Interest expense and negotiated fees for Fiscal 2004, Fiscal 2003 and Fiscal
2002, totaled $1,334,000, $1,086,000 and $617,000, respectively.
42
<PAGE> 43
NOTE 5 - INCOME TAXES
The components of income (loss) before income taxes and the provision (benefit)
for domestic and foreign income taxes are shown below (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
January 29, January 31, February 1,
2005 2004 2003
(restated) (restated)
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic........... $(20,632) $11,790 $11,159
Foreign............ 1,966 4,295 1,133
$(18,666) $16,085 $12,292
Provision (benefit) for income taxes:
Current:
Federal........ $(2,360) $(1,019) $ 5,065
Foreign........ 717 1,729 884
State and local 303 (176) 498
(1,340) 534 6,447
Deferred (prepaid):
Federal........ (4,650) 5,009 (1,298)
Foreign........ 194 42 57
State and local (665) 634 (142)
(5,121) 5,685 (1,383)
Total provision (benefit)
for income taxes... $(6,461) $ 6,219 $ 5,064
</TABLE>
The effective tax rate differs from the federal statutory tax rate for the
following reasons:
<TABLE>
<CAPTION>
Fiscal Year Ended
January 29, January 31, February 1,
2005 2004 2003
(restated) (restated)
<S> <C> <C> <C>
Federal statutory tax rate (34.0)% 34.0% 34.0%
Increase in effective tax rate
rate due to:
Foreign income taxes 1.3 1.7 4.6
State and local taxes,
net of federal income
tax benefit (1.3) 1.9 1.9
Other, net.. (.6) 1.1 .7
Effective tax rate (34.6)% 38.7% 41.2%
</TABLE>
43
<PAGE> 44
Deferred taxes reflect the net tax impact of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
amounts used for income tax purposes. Deferred tax assets (liabilities) are
comprised of the following (in thousands):
<TABLE>
<CAPTION>
January 29, January 31,
2005 2004
(restated)
<S> <C> <C>
Deferred tax liabilities:
Depreciation............ $(5,001) $(4,432)
Other................... (2,289) (1,357)
(7,290) (5,789)
Deferred tax assets:
Accrued rent............ 5,041 4,288
NOL and credit carryforwards 5,982 *
Inventory valuation..... 2,366 2,505
Accrued insurance....... 1,385 1,314
Other................... 1,893 1,938
16,667 10,045
Net deferred tax assets $ 9,377 $ 4,256
Deferred tax assets, net of liabilities:
Current................. $4,324 $4,189
Non-current............. 5,053 67
Total.............. $9,377 $4,256
</TABLE>
As of January 29, 2005, we have recorded net deferred tax assets of $9,377,000,
including federal net operating loss carryforwards of $4,688,000, expiring in
Fiscal 2024, state net operating loss carryforwards of $589,000, expiring in
Fiscal 2005 through Fiscal 2024 and general business credits, foreign tax
credits and other tax carryforwards of $705,000, expiring in Fiscal 2013
through Fiscal 2024, recorded during Fiscal 2004 as a result of our net taxable
loss exceeding amounts for which a carryback was available.
We evaluate the realizability of our deferred tax assets on an ongoing basis,
considering all available positive and negative evidence, including the
reversal patterns of the assets, our past results, the existence of cumulative
losses in recent years, our forecast of future taxable income and on-going
prudent and feasible tax planning strategies. A significant factor impacting
our evaluation of the deferred tax assets recorded as of January 29, 2005, was
the net loss recognized for Fiscal 2004 and the likelihood that losses will
continue in future years.
Based upon our evaluation, we have concluded that it is more likely than not
that the benefit of the deferred tax assets will be realized and, thus, no
valuation allowance has been established as of January 29, 2005. However, if
our plans for the return to profitability in the future do not come to fruition
or if other conditions indicate that the benefit of the deferred tax assets is
more likely than not to be realized, we will record a valuation allowance to
reduce the assets to their realizable value. Such valuation allowance, if
established, would serve to increase our tax expense and reduce net income in
the period in which it would be recorded.
The Internal Revenue Service has completed its examination of federal income
tax returns through Fiscal 2001, and will be examining Fiscal 2002 through
Fiscal 2004 in the near future. Additionally, we are routinely involved in
state and local income tax audits and, from time to time, foreign jurisdiction
tax audits. We have paid or accrued any liabilities associated with these
audits, and do not expect them to have a material effect on the Company's
consolidated financial statements.
NOTE 6 - LEASES
We lease all of our retail locations and distribution centers under non-
cancelable operating leases whose initial terms typically have 10-year terms,
expiring between 2005 and 2016, and may include options that permit renewal for
additional periods. We also lease certain equipment and our field office
facilities under non-cancelable operating leases whose terms typically range
from 3 to 5 years. During the fourth quarter of Fiscal 2004, we began an
evaluation of our lease accounting
practices and have revised our lease accounting practices to capitalize rent
during the construction period and recognize straight-line expense upon the
store becoming substantially complete and ready for its intended use, which
results in us recording rent expense during the merchandise stocking periods.
As a result, we restated our consolidated financial statements for Fiscal 2003
and Fiscal 2002. See further discussion in Note 2.
44
<PAGE> 45
Minimum rental commitments include step rent provisions, escalation clauses,
capital improvement funding and other lease concessions, which are recognized
on a straight-line basis over the primary lease term which includes the pre-
opening store build out, fixturing and merchandise stocking period. In
addition to minimum rental payment, certain leases require additional
contingent rentals based on a percentage of the store's sales volumes exceeding
specified levels as well as reimbursement for real estate taxes, common area
maintenance, insurance and certain other costs.
Rental expense included in the accompanying consolidated statements of
operations for operating leases was (in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
2004 2003 2002
(restated)(restated)
<S> <C> <C> <C>
Minimum rentals. $58,286 $58,470 $50,543
Contingent rentals 296 482 211
Total......... $58,582 $58,952 $50,754
</TABLE>
Minimum rental commitments that have initial or remaining noncancelable lease
terms in excess of one year for future fiscal years are as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal
<S> <C>
2005....... $ 45,447
2006....... 43,836
2007....... 42,433
2008....... 39,426
2009....... 37,129
Thereafter. 110,729
$319,000
</TABLE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES
As of January 29, 2005, we have outstanding unconditional purchase orders
totaling $163,784,000 relating to the acquisition of inventory in Fiscal 2005.
We have certain contingent liabilities resulting from litigation and claims
incident to the ordinary course of business. Management believes that the
probable resolution of such contingencies will not materially affect our
financial position, results of operations or cash flows.
We are party to employment agreements with certain executives which provide for
compensation and certain other benefits. The agreements also provide for
severance payments under certain circumstances.
NOTE 8 - EMPLOYEE BENEFIT PLANS
The Bombay Company, Inc. Employee 401(k) Savings and Stock Ownership Plan
("401(k) Plan") is open to substantially all employees who have been employed
for one year and who work at least 1,000 hours per year. Under the 401(k)
Plan, a participant may contribute up to 75% of earnings with Bombay matching
100% of the initial 3% contribution, and 50% of the next 2% contributed by the
participant. Participant contributions and Company match are paid to a
corporate trustee and invested in various funds or Bombay stock, as directed by
the participant. Company matching contributions made to participants' accounts
are fully vested immediately. Similar benefit plans are in effect for eligible
foreign employees.
To the extent employees are unable to contribute up to 5% of their earnings to
the 401(k) Plan because of limitations imposed by IRS regulations, a
Supplemental Stock Program was adopted. Under this program, employee
contributions in excess of IRS limitations, along with Company matching
contributions, are distributed annually in the form of Bombay common stock.
The Bombay Company, Inc. Stock Purchase Program ("SPP") is open to all full-
time employees who have at least 90 days of service. Each participant may
contribute 1% to 10% of qualifying compensation, to a maximum annual
contribution of $21,250. Contributions are used to purchase shares of Bombay
common stock at a discount of 15% from the lesser of the fair market price
45
<PAGE> 46
at
the beginning or at the end of the investment period. The participants' shares
are fully vested upon purchase. Participants' shares are held by a third-party
administrator until the respective participant requests a distribution.
Total Bombay contributions to these plans for Fiscal 2004, Fiscal 2003 and
Fiscal 2002 were $756,000, $714,000 and $723,000, respectively.
NOTE 9 - COMMON STOCK AND STOCK OPTIONS
Our Board of Directors has authorized a stock repurchase program to purchase up
to an aggregate of $30 million of Bombay's stock. The shares may be purchased
from time to time, through open market purchases and privately negotiated
transactions. During Fiscal 2003 and Fiscal 2002, 9,000 and 13,000 shares,
respectively, were acquired at an aggregate cost of $69,000 and $31,000,
respectively. Treasury shares are used for various employee and director stock
plans as the need arises.
The Bombay Company, Inc. 1996 Long Term Incentive Stock Plan ("Employee Plan")
provides for the granting of options and other types of stock-related awards
under the 1996 plan to officers and key management employees. At January 29,
2005, the option shares reserved for the Employee Plan was 4,511,002. The
option price is fixed at the market price or higher on the date of the grant.
Options are generally exercisable annually at a rate of 33% per year beginning
one year after the grant date. Shares available for additional grants were
1,458,720; 1,795,138 and 2,432,019 at January 29, 2005, January 31, 2004 and
February 1, 2003, respectively.
The Bombay Company, Inc. Non-Employee Director Equity Plan ("Director Plan")
provides for the granting of options to members of the Board of Directors who
are neither Bombay employees nor officers. At January 29, 2005, the option
shares reserved for the Director Plan were 451,444. The option price is fixed
at the market price on the date of the grant. The option grant, initial and
annual, is 10,000 shares, with an additional 2,500 shares for the Lead Director
and each of the committee chairs. The initial grant becomes exercisable at
a rate of 20% per year beginning one year after the grant date. Each
additional annual grant becomes fully exercisable six months after the grant
date. Shares available for additional grants were 55,185; 116,469 and 325,196
at January 29, 2005, January 31, 2004 and February 1, 2003, respectively.
The Director Plan also allows directors the option to receive retainer and
meeting fees in the form of Bombay common stock or to defer receipt of such
fees in the form of stock units. To the extent that a director elects to defer
at least 50% of the annual retainer, the director is paid an additional 25% of
the amount of the deferral, also in the form of stock units. Deferred amounts
are credited to an account for such director in units equivalent to Bombay
common stock.
The following table includes option information for the Employee Plans and
Director Plan:
<TABLE>
<CAPTION>
Weighted
Number Option Price Average
Stock Option Activity Of Shares Per Share Option Price
<S> <C> <C> <C>
February 2, 2002. 4,230,585 $1.75 - 25.75 $4.59
Options granted 1,200,388 2.38 - 5.02 2.71
Options exercised (595,703) 2.65 - 5.44 3.91
Options canceled (1,547,000) 2.38 - 25.75 4.55
February 1, 2003. 3,288,270 1.75 - 25.75 4.05
Options granted 1,248,800 4.54 - 13.52 6.75
Options exercised (1,603,784) 1.75 - 15.88 3.93
Options canceled (221,966) 1.75 - 25.75 8.53
January 31, 2004. 2,711,320 2.06 - 15.88 5.03
Options granted 1,005,500 4.52 - 7.07 6.42
Options exercised (252,883) 1.75 - 5.48 3.27
Options canceled (349,941) 2.38 - 15.88 5.78
January 29, 2005. 3,113,996 2.06 - 13.52 5.55
Exercisable at:
February 1, 2003 1,821,900 1.75 - 25.75 4.96
January 31, 2004 786,709 2.06 - 15.88 4.43
January 29, 2005 1,408,467 2.06 - 13.52 4.72
</TABLE>
46
<PAGE> 47
The following table summarizes stock options outstanding at January 29, 2005:
<TABLE>
<CAPTION>
Outstanding Exercisable
Weighted Weighted Weighted
Exercise Average Average Average
Price Remaining Exercise Exercise
Range Shares Life Price Shares Price
<S> <C> <C> <C> <C> <C>
$2.06 - 2.48 345,483 7.0 $ 2.39 192,608 $ 2.34
2.55 - 2.94 291,139 6.5 2.75 263,990 2.74
3.00 - 3.94 203,913 5.8 3.42 197,246 3.42
4.00 - 4.97 505,985 6.9 4.65 286,873 4.62
5.00 - 5.90 635,142 8.7 5.67 117,977 5.49
6.00 - 7.89 641,200 8.4 6.87 175,637 6.73
9.13 - 13.52 491,134 8.1 9.39 174,136 9.38
3,113,996 7.7 $ 5.55 1,408,467 $ 4.72
</TABLE>
The exercise of non-qualified stock options in Fiscal 2004, Fiscal 2003 and
Fiscal 2002 resulted in income tax benefits of $212,000, $3,283,000 and
$155,000, respectively, which were credited to additional paid-in capital. The
income tax benefits are the tax effect of the difference between the market
price on the date of exercise and the option price.
The Bombay Company, Inc. 1996 Long Term Incentive Stock Plan provides for the
granting of restricted stock to officers and key management employees.
Restricted stock grants are generally issued in separate tranches, which vest
in designated increments, generally 12 to 36 months, contingent upon continued
employment of the award recipient. The market value of the restricted stock at
the date of grant is recorded as deferred compensation, a component of
stockholders' equity, and is charged to expense over the respective vesting
periods. If restricted stock is unvested at the time when an award recipient
leaves the employment of the Company, the shares are canceled, the related
amounts are removed from deferred compensation and amounts previously expensed
for the unvested shares are reversed. The following table summarizes
restricted stock issued under the 1996 Long Term Incentive Stock Plan:
<TABLE>
<CAPTION>
Weighted
Number Average
Restricted Stock Activity Of Shares Grant Price
<S> <C> <C>
Unvested at February 2, 2002 200,000
Shares granted......... 75,000 $4.89
Shares vested and distributed (65,000)
Shares canceled........ (120,000)
Unvested at February 1, 2003 90,000
Shares granted......... 131,256 $9.05
Shares vested and distributed (15,000)
Shares canceled........ (50,000)
Unvested at January 31, 2004 156,256
Shares granted......... 280,480 $6.29
Shares vested and distributed (35,000)
Shares canceled........ (75,000)
Unvested at January 29, 2005 326,736
</TABLE>
During Fiscal 2004, Fiscal 2003 and Fiscal 2002, $691,000, $329,000 and $66,000
was recognized as net compensation expense in conjunction with the restricted
stock grants.
NOTE 10 - SHAREHOLDERS' RIGHTS PLAN
We have a shareholders' rights plan under which each share of Bombay common
stock includes one Preferred Share Purchase Right ("Right") entitling the
holder to buy one one-thousandth of a share of Series A Junior Participating
Preferred Stock of the Company at an exercise price of $50. The Rights, which
have ten year terms expiring in 2005, are exercisable if a person or group
acquires 15% or more of the common stock of Bombay or announces a tender offer
for 15% or more of the common stock. If a person or group acquires 15% or more
of the outstanding common stock of Bombay, each Right will entitle the holder
to purchase, at the Right's exercise price, a number of shares of Bombay common
stock having a market value of twice the Right's exercise price. If Bombay is
acquired in a merger or other business combination transaction after a person
or group acquires 15% or more
47
<PAGE> 48
of our common stock, each Right will entitle its
holder to purchase, at the Right's exercise price, a number of shares of the
acquiring company's common stock having a market value of twice the Right's
exercise price. The Rights are redeemable at one cent per Right at any time
before they become exercisable. We are currently evaluating what action, if
any, we will take upon the expiration of this Plan.
NOTE 11 - STOCK PURCHASE LOANS
On May 16, 2002, the Board of Directors elected to abolish our Executive Stock
Loan Program, which originated in August 1999. At that date, participants
owned 189,031 shares of Bombay common stock purchased under the program. We
reacquired, at then current market prices aggregating $864,000, the Bombay
common stock that was previously purchased by the executive officers under the
program, and the notes were extinguished. Amounts owed to Bombay or the
participants as a result of the difference between the market value of the
stock and the loan balance plus accrued interest were paid in full.
During Fiscal 2002, $17,000 in interest income was recognized related to the
loans.
NOTE 12- PLANNED DIVESTITURE OF BAILEY STREET TRADING COMPANY
On November 17, 2004, our Board of Directors approved the divestiture of our
Bailey Street Trading Company (" Bailey Street") wholesale operations. This
action was taken to allow management to focus on improving the performance of
our core businesses as well as to provide capital to support the continued
expansion of those businesses. Substantially all of the assets of Bailey
Street consist of inventory and receivables. As a result of the decision to
exit the operations, we expect to take a non-cash charge of approximately $2
million in connection with vacating our 200,000 square foot leased distribution
center in Gilbertsville, PA. Other charges in connection with the divestiture
are not expected to be material. We are currently in the process of assessing
sale and liquidation scenarios as well as a combination of both. We would
expect to complete the disposal of the operations and/ or liquidation of
substantially all of the Bailey Street assets during Fiscal 2005.
NOTE 13 - GEOGRAPHIC AREAS
We operate primarily in one industry segment, specialty retailing. Greater
than 90% of all revenues results from the sale of home furnishings and
accessories through retail stores in the United States and Canada. The
remaining portion of our revenues results from the sale of home furnishings and
accessories through our wholesale operations, direct-to-customer retail
operations and related shipping charges. Our wholesale and direct-to-customer
operations have been immaterial to our operations and financial results to-
date. Long-lived assets include all non-current assets except deferred taxes.
The following table shows net revenues and long-lived assets by geographic area
(in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
January 29, January 31, February 1,
2005 2004 2003
(restated) (restated)
<S> <C> <C> <C>
Net revenues:
United States $505,499 $526,219 $442,339
Canada..... 70,588 70,216 51,661
Total.. $576,087 $596,435 $494,000
Long-lived assets:
United States $91,093 $72,356 $49,435
Canada..... 7,136 6,247 4,253
Total... $98,229 $78,603 $53,688
</TABLE>
48
<PAGE> 49
UNAUDITED QUARTERLY FINANCIAL DATA
The Bombay Company, Inc. and Subsidiaries
(In thousands, except per share amounts)
The following table contains selected quarterly consolidated financial data for
Fiscal 2004 and Fiscal 2003 that was prepared on a basis consistent with the
audited consolidated financial statements and includes all adjustments
necessary for a fair statement, in all material respects, of the information
set forth herein on a consistent basis. As discussed in Note 2, the Company
has restated its previously issued financial statements to reflect revisions to
our lease accounting policy. The following table includes the effect of the
restatement on previous periods:
<TABLE>
<CAPTION>
January 29, October 30, July 31, May 1,
2005 2004 2004 2004
(restated) (restated)(restated)
<S> <C> <C> <C> <C>
Net revenues........ $203,358 $126,669 $122,479 $123,581
Gross profit........ 58,421 31,747 27,399 29,959
Net income (loss)... 7,198 (7,328) (6,332) (5,743)
Basic earnings (loss) per share .20 (.20) (.18) (.16)
Diluted earnings (loss) per share .20 (.20) (.18) (.16)
January 31, November 1, August 2, May 3,
2004 2003 2003 2003
(restated) (restated) (restated)(restated)
<S> <C> <C> <C> <C>
Net revenues........ $211,564 $135,361 $130,273 $119,237
Gross profit........ 67,158 39,091 35,381 33,346
Net income (loss)... 12,145 (225) (786) (1,268)
Basic earnings (loss) per share .34 (.01) (.02) (.04)
Diluted earnings (loss) per share .33 (.01) (.02) (.04)
</TABLE>
The following table contains selected quarterly consolidated financial data for
Fiscal 2003 and the first three fiscal quarters of Fiscal 2004 as previously
reported in the Company's Quarterly Reports on Form 10-Q as filed with the SEC:
<TABLE>
<CAPTION>
October 30, July 31, May 1,
2004 2004 2004
(as reported) (as reported) (as reported)
<S> <C> <C> <C>
Net revenues........ $126,669 $122,479 $123,581
Gross profit........ 31,813 27,405 29,955
Net loss............ (7,286) (6,328) (5,746)
Basic loss per share (.20) (.18) (.16)
Diluted loss per share (.20) (.18) (.16)
January 31, November 1, August 2, May 3,
2004 2003 2003 2003
(as reported) (as reported) (as reported) (as reported)
<S> <C> <C> <C> <C>
Net revenues........ $211,564 $135,361 $130,273 $119,237
Gross profit........ 67,150 39,215 35,410 33,338
Net income (loss)... 12,140 (148) (768) (1,273)
Basic earnings (loss) per share .34 (.00) (.02) (.04)
Diluted earnings (loss) per share .33 (.00) (.02) (.04)
</TABLE>
49
<PAGE> 50
INDEX TO EXHIBITS
The Bombay Company, Inc. and Subsidiaries
Filed with the Annual Report on Form 10-K for the fiscal year ended January 29,
2005.
<TABLE>
<CAPTION>
Number Description
<S> <C>
3(a) - Restated Certificate of Incorporation dated January 1, 1993 and Certificate of Amendment of the Restated Certificate of
Incorporation dated March 31, 1993.
3(b) - Bylaws, as amended and restated effective May 21, 1997.
4(a) - Preferred Stock Purchase Rights Plan.
4(b) - Amendment to Preferred Stock Purchase Rights Plan. (5)
10(a) - Form of Indemnification Agreement. (7)
10(b) - The Bombay Company, Inc. Supplemental Stock Program.
10(c) - Executive Long Term Disability Plan.
10(d) - The Bombay Company, Inc. 1996 Long-Term Incentive Stock Plan.
10(e) - Form of Option Award Agreement under the 1996 Long-Term Incentive Stock Plan.
10(f) - Form of Restricted Stock Agreement under the 1996 Long-Term Incentive Stock Plan.
10(g) - The Bombay Company, Inc. Amended and Restated 2001 Non-Employee Directors'
Equity Plan. (2)
10(h) - Form of Option Award Agreement under the Amended and Restated 2001 Non-Employee Directors' Equity Plan. (2)
10(i) - Executive Management Incentive Compensation Plan. (4)
10(j) - Employment Letter with Donald V. Roach. (3)
10(k) - Employment Letter with Brian N. Priddy. (3)
10(l) - Employment Agreement with James D. Carreker. (6)
10(m) - Restricted Stock Agreement with James D. Carreker. (6)
10(n) - Restricted Stock Agreement with James D. Carreker. (8)
10(o) - Stock Option Agreement with James D. Carreker. (6)
10(p) - Employment Letter with Lucretia D. Doblado. (7)
10(q) - Employment Letter with Steven C. Woodward. (8)
10(r) - Loan and Security Agreement by and among The Bombay Company, Inc. and each of its subsidiaries that are signatories
thereto as Borrowers, the lenders that are signatories thereto as Lenders, and Wells Fargo Retail Finance, LLC as
Arranger and Administrative Agent, dated September 29, 2004. (9)
10(s) - First Amendment to Loan and Security Agreement, dated November 24, 2004.
14 - Code of Business Conduct and Ethics. (7)
</TABLE>
50
<PAGE> 51
INDEX TO EXHIBITS (CONT.)
The Bombay Company, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Number Description
<S> <C>
21 - Subsidiaries of the Registrant. (1)
22 - Definitive Proxy Statement of the Company relating to Annual Meeting of Shareholders (certain portions of such Proxy
Statement are incorporated herein by reference and are identified by reference to caption in the text of this report).
(10)
23 - Consent of PricewaterhouseCoopers LLP.
31(a) - Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31(b) - Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 - Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
</TABLE>
51
<PAGE> 52
________________
(1)Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended January 29, 2000. Such Exhibit is incorporated
herein by reference.
(2)Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended January 2, 2002. Such Exhibit is incorporated
herein by reference.
(3)Filed with the Commission as an Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended August 3, 2002. Such Exhibit
is incorporated herein by reference.
(4)Filed with the Commission as an Exhibit to the Company's Definitive Proxy
Statement dated April 10, 2003, which Proxy Statement was filed with the
Commission as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended February 1, 2003. Such Exhibit is incorporated herein by
reference.
(5)Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended February 1, 2003. Such Exhibit is incorporated
herein by reference.
(6)Filed with the Commission as an Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended August 2, 2003. Such Exhibit
is incorporated herein by reference.
(7)Filed with the Commission as an Exhibit to the Company's Annual Report on
Form 10-K for the year ended January 31, 2004. Such Exhibit is incorporated
herein by reference.
(8)Filed with the Commission as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended July 31, 2004.
(9)Filed with the Commission as an Exhibit to the Company's Form 8-K/A on
October 29, 2004. Such Exhibit is incorporated herein by reference.
(10)To be filed with the Commission on or about May 6, 2005.
52
</PAGE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>2
<FILENAME>ex3arestatedcertofinc.txt
<DESCRIPTION>EX 3A - RESTATED CERT OF INCORPORATION
<TEXT>
EXHIBIT 3(A)
RESTATED
CETIFICATE OF INCORPORATION
OF
THE BOMBAY COMPANY, INC.
AS OF JANUARY 1, 1993
THE BOMBAY COMPANY, INC., a corporation duly organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), does hereby certify that the original Certificate of
Incorporation of the Corporation was filed with the Secretary of State of
Delaware on June 10, 1975, a Restated Certificate of Incorporation was filed
with the Secretary of State of Delaware on December 6, 1985 and the following
RESTATED CERTIFICATE OF INCORPORATION was adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware:
ARTICLE I
The name of the Corporation is The Bombay Company, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, County of
Kent. The name of the Corporation's registered agent at such address is The
Prentice-Hall Corporation System, Inc.
ARTICLE III
The purposes of this Corporation are to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware. The Corporation will have perpetual existence.
ARTICLE IV
Section 1. The total number of shares which the Corporation shall have
authority to issue is twenty-six million (26,000,000) shares, of which one
million (1,000,000) shares, of the par value of One Dollar ($1.00) shall be
Preferred Stock, and twenty-five million (25,000,000) shares of the par value
of One Dollar ($1.00) per share shall be Common Stock. The Preferred Stock
shall be issued from time to time in one or more series with distinctive serial
designations and (a) may have such voting powers; (b) may be subject to
redemption at such time or times and at such prices; (c) may be entitled to
receive dividends (which may be cumulative or noncumulative) at such rate or
rates, on such conditions, and at such times, and payable in preference to, or
in such relation to, the dividends payable on any other class or classes of
stock (d) may have such rights upon the dissolution of, or upon any
distribution of the assets of the Corporation; (e) may be made convertible into
or exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the Corporation,
at such price or prices or at such rates of exchange and with such adjustments;
and (f) have such other relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof, all as hereafter
be stated and expressed in the resolution or resolutions providing for the
issue of such Preferred Stock from time to time adopted by the Board of
Directors pursuant to authority so to do which is hereby granted to and vested
in the Board of Directors.
Section 2. Shares of the Common Stock may be issued from time to time
for such consideration as may be fixed from time to time by the Board of
Directors, but not less than par value, and any and all such shares, the full
consideration for which shall be paid or delivered, shall be fully paid and
nonassessable stock and not liable to any further call or assessment thereon.
Each share of Common Stock shall entitle the holder thereof to one vote, in
person or by proxy, at any and all meetings of the stockholders of the
Corporation.
Section 3. No stockholder, as such, shall have any preemptive right to
subscribe for or purchase any additional shares of stock or securities
convertible into or carrying warrants or options to acquire shares of stock of
the Corporation. Any and all right, title, interest and claim in or to any
dividends declared by the Corporation, whether in cash, stock or otherwise,
which are unclaimed by the stockholder entitled thereto for a period of six
years after the close of business on the payment date, shall be and be deemed
to be extinguished and abandoned; and such unclaimed dividends in the
possession of the Corporation, its transfer agents or other agents or
depositories, shall at such time become the absolute property of the
Corporation, free and clear of any and all claims of any persons whatsoever.
ARTICLE V
The vote of stockholders of the Corporation required to approve Business
Combinations (as hereinafter defined) shall be as set forth in this Article V.
Section 1. In addition to any affirmative vote required by law or by
this Certificate if Incorporation or any resolution or resolutions of the Board
of Directors adopted pursuant to Article IV of this Certificate of
Incorporation, and except as otherwise expressly provided in Section 3 of this
Article V:
(a) any merger or consolidation of the Corporation with (i) any
Interested Stockholder (as hereinafter defined) or (ii) any corporation
or other person (whether or not itself an Interested Stockholder) which
is, or after such merger or consolidation would be, an Affiliate or
Associate (each as hereinafter defined) of any Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or
with any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder of (i) all or substantially all the assets of the
Corporation or (ii) assets of the Corporation or any of its Subsidiaries
(as hereinafter defined) representing in the aggregate more than 75% of
the total value of the assets of the Corporation and its consolidated
Subsidiaries as reflected on the most recent consolidated balance sheet
of the Corporation and its consolidated Subsidiaries prepared in
accordance with general accepted accounting principles then in effect; or
(c) (i) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or
with any Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder of any assets of the Corporation or of any
Subsidiary having an aggregate Fair Market Value (as hereinafter defined)
of $5,000,000 or more, but less than the amount set forth in clause (ii)
of paragraph (b) of this Section 1, or (ii) any merger or consolidation
of any Subsidiary of the Corporation having assets with an aggregate Fair
Market Value of $5,000,000 or more in a transaction not covered by
paragraph (b) of this Section 1 with (x) any Interested Stockholder or
(y) any corporation or other person (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate or Associate of any Interested Stockholder; or
(d) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) to any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of any securities of the Corporation or any Subsidiary in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate Fair Market Value of $5,000,000 or more,
other than the issuance of securities upon the conversion of convertible
securities of the Corporation or any Subsidiary which were not acquired
by such Interested Stockholder or such Affiliate or Associate from the
Corporation or a Subsidiary; or
(e) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder;
or
(f) any reclassification of securities (including any reverse
stock split) or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries, or any
other transaction (whether or not with or into or otherwise involving any
Interested Stockholder), which in any such case has the effect, directly
or indirectly, of increasing the proportionate share of the outstanding
shares of any class or series of stock or securities convertible into
stock of the Corporation or any Subsidiary which is directly or
indirectly beneficially owned by any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder; or
(g) any contract calling for or contemplating any of the above
transactions;
shall not be consummated without the affirmative vote of the holders of at
least 66-2/3% of the combined voting power of the then outstanding shares of
stock of all classes and series of the Corporation entitled to vote generally
in the election of directors (the "Voting Stock") voting together as a single
class (it being understood that for purposes of this Article V, each share of
Voting Stock shall have the number of votes granted to it pursuant to Article
IV of this Certificate of Incorporation). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a
lesser percentage may be specified, by law or by this Certificate of
Incorporation or any resolution or resolutions of the Board of Directors
adopted pursuant to Article IV of this Certificate of Incorporation or in any
agreement with any national securities exchange or otherwise.
Section 2. The term "Business Combination" as used in this Article V
shall mean any transaction which is referred to in any one or more paragraphs
(a) through (g) of Section 1 of this Article V.
Section 3. The provisions of Section 1 of this Article V shall not be
applicable to a Business Combination, and such Business Combination shall
require only such affirmative vote as is required by law and any other
provisions of this Certificate of Incorporation, if all the conditions
specified in any one of the following paragraphs (a), (b), (c) or (d) are met:
(a) (i) such Business Combination shall have been approved by a
majority of the Disinterested Directors (as hereinafter defined) and (ii)
the Interested Stockholder involved in such Business Combination (x)
acquired such status as an Interested Stockholder in a manner
substantially consistent with an agreement, arrangement or understanding
approved by the Board of Directors prior to the time such Interested
Stockholder became an Interested Stockholder and (y) had complied with
all requirements imposed by such agreement, arrangement or understanding;
or
(b) in the case of any Business Combination described in
paragraph (a) or (f) of Section 1 of this Article V, (i) such Business
Combination shall have been approved by a majority of the Disinterested
Directors, (ii) such Business Combination shall not have resulted,
directly or indirectly, in an increase of more than 10% of the total
amount of shares of any class or series of stock or securities
convertible into stock of the Corporation or any Subsidiary which was
directly or indirectly beneficially owned by any Interested Stockholder
and all Affiliates and Associates of such Interested Stockholder at the
time of the approval of such Business Combination by a majority of the
Disinterested Directors, and (iii) such Business Combination shall not
have been consummated within a period of two years after the consummation
of any other Business Combination described in paragraph (a), (b), (c),
(d), (e), (f) or (g) of Section 1 of this Article V (whether or not such
other Business Combination shall have been approved by a majority of the
Disinterested Directors) which had the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
or series of stock or securities convertible into stock of the
Corporation or any Subsidiary which was directly or indirectly
beneficially owned by such Interested Stockholder or any Affiliate or
Associate of such Interested Stockholder; or
(c) in the case of any Business Combination described in
paragraph (c)
or (d) of Section 1 of this Article V, such Business Combination shall
have been approved by a majority of the Disinterested Directors; or
(d) all of the six conditions specified in the following clauses
(i) through (vi) shall have been met:
(i) the transaction constituting the Business
Combination shall provide for consideration to be received by
holders of Common Stock in exchange for all their shares of Common
Stock, and the aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business
Combination of any consideration other than cash to be received
per share by holders of Common Stock in such Business Combination
shall be at least equal to the highest of the following (it being
intended that the requirements of this clause (d)(i) shall be
required to be met with respect to all shares of Common Stock
outstanding, whether or not the Interested Stockholder
beneficially owns any shares of Common Stock);
(A) (if applicable) the highest per share
price (including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by the Interested
Stockholder, or by an Affiliate or Associate thereof, in
order to acquire any shares of Common Stock beneficially
owned by the Interested Stockholder which were acquired (i)
within the two-year period immediately prior to the
Announcement Date (as hereinafter defined) or (ii) in the
transaction in which the Interested Stockholder became an
Interested Stockholder, whichever is higher; and
(B) the Fair Market Value per share of Common
Stock on the Announcement Date or on the Determination Date
(as hereinafter defined), whichever is higher; and
(ii) if the transaction constituting the
Business Combination shall provide for a consideration to be
received by holders of any class or series of outstanding Voting
Stock other than Common Stock, the aggregate amount of the cash
and the Fair Market Value as of the date of the consummation of
the Business Combination of any consideration other than cash to
be received per share by holders of shares of such Voting Stock
shall be at least equal to the highest of the following (it being
intended that the requirements of this clause (d)(ii) shall be
required to be met with respect to every class and series of such
outstanding Voting Stock, whether or not the Interested
Stockholder beneficially owns any shares of a particular class or
series of Voting Stock):
(A) (if applicable) the highest per share
price (including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by the Interested
Stockholder, or an Affiliate or Associate thereof, in order
to acquire any shares of such class or series or Voting
Stock beneficially owned by the Interested Stockholder which
were acquired (i) within the two-year period immediately
prior to the Announcement Date or (ii) in the transaction in
which the Interested Stockholder became an Interested
Stockholder, whichever is higher; and
(B) (if applicable) the highest preferential
amount per share to which the holders of shares of such
class or series of Voting Stock are entitled in the event of
any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; and
(C) the Fair Market Value per share of such
class or series of Voting Stock on the Announcement Date or
on the Determination Date, whichever is higher; and
(iii) the consideration to be received by holders of
a particular class or series of outstanding Voting Stock
(including Common Stock) shall be in cash or in the same form as
was previously paid in order to acquire shares of such class or
series of Voting Stock which are beneficially owned by the
Interested Stockholder and, if the Interested Stockholder
beneficially owns shares of any class or series of Voting Stock
which were acquired with varying forms of consideration, the form
of consideration to be received by holders of such class or series
of Voting Stock shall be either cash or the form used to acquire
the largest number of shares of such class or series of Voting
Stock beneficially owned by it; and
(iv) after such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combination:
(A) except as approved by a majority of
Disinterested Directors, there shall have been no failure to
declare and pay at the regular dates therefore the full
amount of any dividends (whether or not cumulative) payable
on the Preferred Stock as to dividends or upon liquidation;
(B) there shall have been (x) no reduction in
the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the
Common Stock), except as approved by a majority of the
Disinterested Directors, and (y) an increase in such annual
rate of dividends (as necessary to prevent any such
reduction) in the event of any reclassification (including
any reverse stock split), recapitalization, reorganization
or any similar transaction which has the effect of reducing
the number of outstanding shares of the Common Stock, unless
the failure so to increase such annual rate is approved by a
majority of the Disinterested Directors; and
(C) such Interested Stockholder shall not
have become the beneficial owner of any additional shares of
Voting Stock except as part of the transaction in which it
became an Interested Stockholder; and
(v) after such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not have
received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or
otherwise; and
(vi) a proxy or information statement
describing the proposed Business Combination and complying with
the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations
thereunder (or any subsequent provisions replacing the Exchange
Act or such rules or regulations) shall be mailed to public
stockholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant
to the Exchange Act or such subsequent provisions).
Section 4. For purposes of this Article V:
(a) A "person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
(b) "Interested Stockholder" shall mean any person (other
than the Corporation, any Subsidiary, any employee benefit plan of
the Corporation or any Subsidiary or a trustee under any such
plan) who or which:
(1) is the beneficial owner, directly or
indirectly, of 5% or more of the combined voting power of
the then outstanding shares of the Voting Stock; or
(2) is an Affiliate of the Corporation and, at any
time within the two-year period immediately prior to the
date in question, was the beneficial owner, directly or
indirectly, of 5% or more of the combined voting power of
the then outstanding shares of Voting Stock; or
(3) is an assignee of or has otherwise succeeded to
the beneficial ownership of any shares of Voting Stock which
were at any time within the two-year period immediately
prior to the date in question beneficially owned by an
Interested Stockholder, or Affiliate or Associate thereof,
if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not
involving either a public offering within the meaning of the
Securities Act of 1933, as amended, or normal market
transactions.
(c) A person shall be a "beneficial owner" of any Voting
Stock:
(1) which such person or any of such person's
Affiliates or Associates beneficially owns directly or
indirectly; or
(2) which such person or any of such person's
Affiliates or Associates has (a) the right to acquire
(whether such right is exercisable immediately or only after
the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b)
the right to vote or to direct the vote pursuant to any
agreement, arrangement or understanding; or
(3) which is beneficially owned, directly or
indirectly, by any other person with which such person or
any of such person's Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of
Voting Stock.
(d) For the purposes of determining whether a person is an
Interested Stockholder pursuant to paragraph (b) of this Section
4, the number of shares of Voting Stock deemed to be outstanding
shall include shares deemed owned by such person through
application of paragraph (c) of this Section 4 but shall not
include any other shares of Voting Stock which may be issuable to
other persons pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, exchange
rights, warrants or options, or otherwise.
(e) An "Affiliate" of a specified person shall mean a
person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the person specified.
(f) An "Associate" of any person shall mean (1) any
corporation or organization (other than the Corporation or a
Subsidiary) of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any
class of equity securities, (2) any trust or other estate in which
such person has substantial beneficial interest or as to which
such person serves as trustee or in a similar fiduciary capacity,
and (3) any relative or spouse of such person, or any relative of
such spouse, who has the same home as such person.
(g) "Subsidiary" shall mean any corporation more than 50%
of whose outstanding stock having ordinary voting power in the
election of directors is owned by the Corporation, by a Subsidiary
of the Corporation or in the aggregate by the Corporation and one
or more Subsidiaries; provided, however, that for the purposes of
the definition of Interested Stockholder set forth in paragraph
(b) of this Section 4, the term "Subsidiary" shall mean only a
corporation of which a majority of each class of equity security
is owned by the Corporation, by a Subsidiary or by the Corporation
and one or more Subsidiaries.
(h) "Disinterested Director" means any member of the Board
of Directors of the Corporation who is not an Affiliate or
Associate of, is not a nominee of, and is not employed or engaged
by the Interested Stockholder and was a member of the Board of
Directors prior to the time that the Interested Stockholder became
an Interested Stockholder, and any successor of a Disinterested
Director who is not an Affiliate or Associate of, not a nominee
of, and is not employed or engaged by the Interested Stockholder
and who is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of
Directors.
(i) "Fair Market Value" means: (1) in the case of stock,
the highest closing sales price during the 30-day period
immediately preceding the date in question of a share of such
stock on the New York Stock Exchange Composite Tape, or, if such
stock is not quoted on such Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the
Exchange Act on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing sale price or
bid quotation with respect to a share of such stock during the 30-
day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations
System or any other system in use generally, or if not such
quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of
the Disinterested Directors in good faith; and (2) in the case of
stock of any class or series which is not traded on any registered
securities exchange or in the over-the-counter market or in the
case of property other than cash or stock, the fair market value
of such stock or property, as the case may be, on the date in
question as determined by a majority of the Disinterested
Directors in good faith.
(j) "Announcement Date" means the date of the first public
announcement of the proposed Business Combination.
(k) "Determination Date" means the date on which the
Interested Stockholder became an Interested Stockholder.
Section 5. A majority of the Disinterested Directors of the Corporation
shall have the power to determine, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine compliance with this
Article V, including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Voting Stock beneficially owned by any
person, (c) whether a person is an Affiliate or Associate of another person,
(d) whether the requirements of Section 3 of this Article V have been met with
respect to any Business Combination, and (e) whether the assets which are the
subject of any Business Combination, or the consideration to be received for
the issuance or transfer of securities by the Corporation or any Subsidiary in
any Business Combination, (i) have an aggregate Fair Market Value of $5,000,000
or more or (ii) represent in the aggregate more than 75% of the total value of
the assets of the Corporation and its consolidated Subsidiaries determined in
accordance with generally accepted accounting principles then in effect; and
the good faith determination of a majority of the Disinterested Directors on
such matters shall be conclusive and binding for all purposes of this Article
V.
Section 6. Nothing contained in this Article V shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by
law.
Section 7. Notwithstanding any other provisions of this Certificate of
Incorporation, the provisions set forth in this Article V may not be repeated
or amended in any respect unless such action is approved by the affirmative
vote of the holders of voting shares entitling them to exercise not less than
two-thirds of the total voting power of all outstanding voting shares of this
Corporation, subject to the provisions of any series of Preferred Stock which
may at any time be outstanding.
ARTICLE VI
Section 1. Any direct or indirect purchase or other acquisition by the
Corporation of any shares of Common Stock at a price above the market value
from any Interested Stockholder (as hereinafter defined), or Affiliate (as
hereinafter defined) or Associate (as hereinafter defined) thereof, who has
been the beneficial owner of such shares for less than two years prior to the
date of such purchase or other acquisition or any agreement in respect thereof
shall require authorization by the affirmative vote of the holders of at least
a majority of the then outstanding shares of Voting Stock held by stockholders
other than the Interested Stockholder and Affiliates and Associates of such
Interested Stockholder; provided, however, the provisions of this Section 1
shall not be applicable with respect to any purchase or other acquisition of
Common Stock made as part of a Tender Offer (as hereinafter defined) by the
Corporation, which Tender Offer is made either on the same terms to all
stockholders or only for "odd-lot" holdings of Common Stock.
Section 2. For purposes of this Article VI:
(a) A "person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
(b) "Interested Stockholder" shall mean any person (other than
the Corporation, any Subsidiary, any employee benefit plan of the Corporation
or any Subsidiary or a trustee under any such plan) who or which:
(1) is the beneficial owner, directly or indirectly, of 5%
or more of the combined voting power of the then outstanding
shares of Voting Stock; or
(2) is an Affiliate of the Corporation and, at any time
within the two-year period immediately prior to the date in
question, was the beneficial owner, directly or indirectly of 5%
or more of the combined voting power of the then outstanding
shares of Voting Stock; or
(3) is an assignee of or has otherwise succeeded to the
beneficial ownership of any shares of Voting Stock which were at
any time within the two-year period immediately prior to the date
in question beneficially owned by an Interested Stockholder, or
Affiliate or Associate thereof, if such assignment or succession
shall have occurred in the courser of a transaction or series of
transactions not involving either a public offering within the
meaning of the Securities Act of 1933, as amended, or normal
market transactions.
(c) A person shall be a "beneficial owner" of any Voting Stock:
(1) which such person or any of such person's Affiliates
or Associates beneficially owns directly or indirectly; or
(2) which such person or any of such person's Affiliates
or Associates has (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (b) the right to vote or to direct the
vote pursuant to any agreement, arrangement or understanding; or
(3) which is beneficially owned, directly or indirectly,
by any other person with which such person or any of such person's
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
(d) For the purposes of determining whether a person is an
Interested Stockholder pursuant to paragraph (b) of this Section 2, the
number of shares of Voting Stock deemed to be outstanding shall include
shares deemed owned by such person through application of paragraph (c)
of this Section 2 but shall not include any other shares of Voting Stock
which may be issuable to other persons pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights,
exchange rights, warrants or options, or otherwise.
(e) An "Affiliate" of a specified person shall mean a person
that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the
person specified.
(f) An "Associate" of any person shall mean (1) any corporation
or organization (other than the Corporation or a Subsidiary) of which
such person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities, (2)
any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a
similar fiduciary capacity, and (3) any relative or spouse of such
person, or any relative of such spouse, who has the same home as such
person.
(g) "Subsidiary" shall mean any corporation more than 50% of
whose outstanding stock having ordinary voting power in the election of
directors is owned by the Corporation, by a Subsidiary of the Corporation
or in the aggregate by the Corporation and one or more Subsidiaries;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph (b) of this Section 2, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned by the Corporation, by a Subsidiary or
by the Corporation and one or more Subsidiaries.
(h) "Disinterested Director" means any member of the Board of
Directors of the Corporation who is not an Affiliate or Associate of, is
not a nominee of, and is not employed or engaged by the Interested
Stockholder and was a member of the Board of Directors prior to the time
that the Interested Stockholder became an Interested Stockholder, and any
successor of a Disinterested Director who is not an Affiliate or
Associate of, not a nominee of, and is not employed or engaged by the
Interested Stockholder and who is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the Board of
Directors.
(i) "Tender Offer" shall mean a tender offer made in accordance
with the then applicable rules and regulations of the Securities and
Exchange Commission issued pursuant to Sections 14(d) and (e) of the
Exchange Act (or any subsequent provisions replacing such Sections of the
Exchange Act or such applicable rules and regulations).
Section 3. A majority of the Disinterested Directors of the Corporation
shall have the power to determine, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine compliance with this
Article VI, including, without limitation, (a) whether a person is an
Interested Stockholder, (b) the number of shares of Voting Stock beneficially
owned by any person, and (c) whether a person is an Affiliate or Associate of
another person; and the good faith determination of a majority of the
Disinterested Directors on such matters shall be conclusive and binding for all
purposes of this Article VI.
Section 4. Notwithstanding any other provisions of this Certificate of
Incorporation, the provisions set forth in this Article VI may not be repealed
or amended in any respect unless such action is approved by the affirmative
vote of the holders of voting shares entitling them to exercise not less than
two-thirds of the total voting power of all outstanding voting shares of this
Corporation, subject to the provisions of any series of Preferred Stock which
may at the time be outstanding.
ARTICLE VII
Section 1. The number of directors of the Corporation, and the number
of directors in each class, shall be fixed from time to time by or pursuant to
the Bylaws of the Corporation but the number of directors of the Corporation
shall not be less than three or more than nine, except as otherwise fixed by or
pursuant to the provisions of Article IV hereof relating to the rights of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation. The directors shall be divided into
three classes, as nearly equal in number as possible, as shall be provided in
the Bylaws of the Corporation. Unless otherwise provided in the Bylaws, at the
annual meeting of stockholders held in 1985, one class of two directors shall
be elected for a term expiring at the annual meeting of stockholders to be held
in 1986, another class of two directors shall be elected for a term expiring at
the annual meeting of stockholders to be held in 1987 and another class of two
directors shall be elected for a term expiring at the annual meeting of
stockholders to be held in 1988, with each class to hold office until its
successors are elected and qualified. At each annual meeting of stockholders
subsequent to 1985, the successors of the class of directors whose term expires
at that meeting shall be elected to hold office for a term expiring at the
annual meeting of stockholders held in the third year following the year of
election. The election of directors need not be by written ballot. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 2. Except as otherwise provided for or fixed by or pursuant to
the provisions of Article IV hereof relating to the rights of the holders of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board of Directors
resulting from death, resignation, removal or other cause shall only be filled
by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors, or by a sole
remaining director. Any director elected in accordance with the preceding
sentence of this Section 2 shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected
and qualified.
Section 3. Subject to the rights of the holders of the Preferred Stock
or any other class or series of stock having a preference over the Common Stock
as to dividends or upon liquidation, any director may be removed from office
only for cause and only by the affirmative vote of the holders of a majority of
the combined voting power of the then outstanding shares of Voting Stock,
voting together as a single class. For purposes of this Section 3, "cause"
shall mean the willful and continuous failure of a director to substantially
perform such director's duties to the Corporation (other than any such failure
resulting from incapacity due to physical or mental illness) or the willful
engaging by a director in gross misconduct materially and demonstrably
injurious to the Corporation.
Section 4. Notwithstanding any other provisions of this Certificate of
Incorporation, the provisions set forth in this Article VII may not be repealed
or amended in any respect, and no article imposing cumulative voting in the
election of directors may be added, unless such action is approved by the
affirmative vote of the holders of voting shares entitling them to exercise not
less than two-thirds of the total voting power of all outstanding voting shares
of this Corporation, subject to the provisions of any series of Preferred Stock
which may at the time be outstanding.
ARTICLE VIII
Section 1. Subject to the rights of the holders of the Preferred Stock
or any other class or series of stock having a preference over the Common Stock
as to dividends or upon liquidation, any action required or permitted to be
taken by the stockholders of the Corporation must be effected (a) at a duly
called annual or special meeting of stockholders of the Corporation or (b) by
the unanimous written consent of all stockholders of the Corporation. Except
as otherwise required by law and subject to the rights of the holders of the
Preferred Stock or any other class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation, special meetings of
stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors.
Section 2. Nominations by stockholders for any directorship must be
submitted to the Board of Directors by written notice received by the Board of
Directors not later than 45 days prior to the date of the annual meeting of
stockholders at which the election is to be held or, if later, within seven
days after the date the Corporation mails, or otherwise gives, notice of the
date of such meeting, which notice shall state the name of the nominating
stockholder, the name of the nominee, the addresses of the nominee's business
and residence, the nominee's principal occupation, the name and address of the
nominee's employer or business if self-employed, and the number of shares of
Common Stock and Preferred Stock which are beneficially owned by such nominee,
if any, and by the nominating stockholder.
Section 3. In addition to any requirements of law and any other
provision of this Certificate of Incorporation or any resolution or resolutions
of the Board of Directors adopted pursuant to Article IV of this Certificate of
Incorporation (and notwithstanding the fact that a lesser percentage may be
specified by law, this Certificate of Incorporation or any such resolution or
resolutions), the Bylaws of the Corporation may be adopted, repealed, altered
or amended (i) by the stockholders of the Corporation only by the affirmative
vote of the holders of 66-2/3% or more of the combined voting power of the then
outstanding shares of Voting Stock, voting together as a single class and cast
at a meeting of the stockholders called for that purpose (provided that such
notice of such proposed adoption, repeal, alteration or amendment is included
in the notice of such meeting); or (ii) by the Board of Directors, in
furtherance and not in limitation of the powers conferred upon it by law, by
the vote of a majority of the entire Board of Directors.
Section 4. Notwithstanding any other provisions of this Certificate of
Incorporation, the provisions set forth in this Article VIII may not be
repealed or amended in any respect unless such action is approved by the
affirmative vote of the holders of voting shares entitling them to exercise not
less than two-thirds of the total voting power of all outstanding voting shares
of this Corporation, subject to the provisions of any series of Preferred Stock
which may at the time be outstanding.
ARTICLE IX
A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the Delaware General
Corporation Law; or (iv) for any transaction from which the director derived an
improper personal benefit.
IN WITNESS WHEREOF, THE BOMBAY COMPANY, INC. has caused this Restated
Certificate of Incorporation to be signed by Robert E.M. Nourse, its President,
and attested by Michael J. Veitenheimer, its Secretary, as of the 5th day of
January, 1993.
THE BOMBAY COMPANY, INC.
By: /S/ Robert E.M. Nourse
Robert E.M. Nourse
President
ATTEST:
/S/ Michael J. Veitenheimer
Michael J. Veitenheimer
Secretary
1
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION OF
THE BOMBAY COMPANY, INC.
THE BOMBAY COMPANY, INC., a corporation duly organized and existing under
the General Corporation Law of the State of Delaware, does hereby certify that
the following AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION was
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware and does hereby delete the first
sentence of Article IV in its entirety and replaces such sentence with the
following:
ARTICLE IV
Section 1. The total number of shares which the Corporation shall have
authority to issue is fifty-one million (51,000,000) shares, of which one
million (1,000,0000) shares, of the par value of one dollar ($1.00) per share,
shall be Preferred Stock, and fifty million (50,000,000) shares, of the par
value of one dollar ($1.00) per share, shall be Common Stock.
THE BOMBAY COMPANY, INC.
By: /S/ Robert E.M. Nourse
Robert E.M. Nourse
President and Chief
Executive Officer
ATTEST:
/S/ Michael J. Veitenheimer
Michael J. Veitenheimer
Secretary
2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>3
<FILENAME>ex3bbombaybylaws.txt
<DESCRIPTION>EX 3B - BYLAWS
<TEXT>
EXHIBIT 3(b)
THE BOMBAY COMPANY, INC.
BYLAWS
(RESTATED - EFFECTIVE MAY 21, 1997)
ARTICLE I
OFFICES.
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation in the State of Delaware shall be located in the City of Dover,
County of Kent, State of Delaware, and the name of the resident agent in charge
thereof shall be The Prentice-Hall Corporation System, Inc.
SECTION 2. OTHER OFFICES. The principal office of the Corporation and
such other offices as may be deemed appropriate shall be at such place or
places
as the Board of Directors may from time to time appoint or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS.
SECTION 1. PLACE OF MEETING. All meetings of the stockholders for the
election of directors shall be held at such place within or without the State
of
Delaware as the Board of Directors may designate, provided that at least ten
(10) days' notice must be given to the stockholders entitled to vote thereat of
the place so fixed. Meetings of stockholders for any other purpose may be held
at such place and time as shall be stated in the notice of the meeting.
SECTION 2. ANNUAL MEETING. The Annual Meeting of Shareholders shall be
held annually on such a date and at such time as shall be designated from time
to time by the Board of Directors and stated in the Notice of Meeting in
accordance with the General Corporation Laws of the State of Delaware, at which
meeting the shareholders shall elect directors by plurality vote and shall
transact such other business as may properly be brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or the
Certificate of Incorporation, may be called by the directors by resolution
adopted by a vote of the majority.
SECTION 4. NOTICE. Written or printed notice of every meeting of
stockholders, annual or special, stating the time and place thereof, and, if a
special meeting, the purpose or purposes in general terms for which the meeting
is called, shall not be less than ten (10) days before such meeting be served
upon or mailed to each stockholder entitled to vote thereat, at his address as
it appears upon the books of the Corporation, or, if such stockholder shall
have
filed with the Secretary of the Corporation a written request that notices
intended for him be mailed to some other address, then to the address
designated
in such request.
SECTION 5. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the presence in person or by proxy at any meeting
of stockholders of the holders of a majority of the shares of the capital stock
of the Corporation issued and outstanding and entitled to vote thereat shall be
requisite and shall constitute a quorum. If, however, such majority shall not
be represented at any meeting of the stockholders regularly called, the holders
of a majority of the shares present in person or by proxy and entitled to vote
thereat shall have power to adjourn the meeting to another time, or to another
time and place, without notice other than announcement of adjournment at the
meeting, and there may be successive adjournments for like cause and in like
manner until the requisite amount of shares entitled to vote at such meeting
shall be represented. At such adjourned meeting at which the requisite amount
of shares entitled to vote thereat shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
notified.
SECTION 6. VOTES. At each meeting of stockholders every stockholder
shall have one vote for each share of Common Stock entitled to vote and the
vote, if any, which was fixed pursuant to the Certificate of Incorporation for
each share of Preferred Stock which is registered in the stockholder's name on
the books of the Corporation on the date on which the transfer books were
closed, if closed, or on the date set by the Board of Directors for the
determination of stockholders entitled to vote at such meeting. At each such
meeting, every stockholder shall be entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such stockholder and
bearing
a date not more than three (3) years prior to the meeting in question, unless
said instrument provides for a longer period during which it is to remain in
force.
At all meetings of the stockholders, a quorum being present, all matters
shall be decided by a majority vote of the shares of stock entitled to vote
held
by stockholders present in person or by proxy, except as otherwise required by
the Certificate of Incorporation or the laws of the State of Delaware. Unless
so directed by the chairman of the meeting, or required by the laws of the
State
of Delaware, the vote thereat on any question need not be by ballot.
On a vote by ballot, each ballot shall be signed by the stockholder
voting,
or in his name by his proxy, if there be such proxy, and shall state the number
of shares voted by him and the number of votes to which each share is entitled.
On a vote by ballot, the chairman shall appoint two inspectors of election, who
shall first take and subscribe an oath or affirmation faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of their ability and who shall take charge of the polls and after the
balloting shall make a certificate of the result of the vote taken; but no
director or candidate for the office of director shall be appointed as such
inspector.
SECTION 7. STOCK LIST. At least ten (10) days before every election of
directors, a complete list of stockholders entitled to vote at such election,
arranged in alphabetical order, with the residence of each and the number of
voting shares held by each shall be prepared by the Secretary. Such list shall
be open at the place where the election is to be held for said ten (10) days,
to
the examination of any stockholder entitled to vote at that election and shall
be produced and kept at the time and place of election during the whole time
thereof, and subject to the inspection of any stockholder who may be present.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER. The business and property of the Corporation shall
be
conducted and managed by a Board consisting of such number of directors, but
not
less than three (3) nor more than nine (9), as may be fixed from time to time
by
resolution adopted by the Board or as set forth in the Articles of
Incorporation. Directors need not be stockholders.
SECTION 2. TERM OF OFFICE. Except as otherwise provided by law or the
Certificate of Incorporation, each director shall hold office until the annual
meeting of stockholders held in the third year following the year of such
director's election, and until such director's successor is duly elected and
qualified or until such director's earlier death or resignation. Directors
shall retire from the Board at the Board meeting held in conjunction with the
annual stockholders meeting following such director's 70th birthday.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and of the Board of Directors.
SECTION 4. VACANCIES. If any vacancy shall occur among the directors,
or
if the number of directors shall at any time be increased, the directors in
office, although less than a quorum, by a majority vote may fill the vacancies
or newly created directorships. When one or more directors shall resign from
the Board of Directors, effective at a future date, a majority of the directors
then in office, including those who have so resigned, shall have power to fill
such vacancy or vacancies, the vote thereon to take effect when such
resignation
or resignations shall become effective, and each director so chosen shall hold
office as herein provided in the filling of other vacancies.
SECTION 5. MEETING. Meetings of the Board of Directors shall be held at
such place within or without the State of Delaware as may from time to time be
fixed by resolution of the Board of Directors or by the Chairman of the Board,
or by the President or as may be specified in the notice or waiver of notice of
any meeting. Meetings may be held at any time upon the call of the Chairman of
the Board, the President or the Secretary or any two (2) of the directors in
office by oral, telegraphic, or written notice, duly served or sent or mailed
to
each director not less than one (1) day before such meeting. Meetings may be
held at any time and place without notice if all the directors are present, or
if those not present shall in writing or by telegram or cable waive notice
thereof. A regular meeting of the Board of Directors may be held without
notice
immediately following the annual meeting of stockholders at the place where
such
annual meeting is held. Regular meetings of the Board may also be held without
notice at such time and place as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 6. QUORUM. One-third, but not less than two (2), of the
directors shall constitute a quorum for the transaction of business. If at any
meeting of the Board of Directors there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time without
notice other than announcement of the adjournment at the meeting, and at such
adjourned meeting at which a quorum is present any business may be transacted
which might have been transacted at the meeting as originally notified.
SECTION 7. COMPENSATION. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors, a fixed sum for
attendance at each meeting of the Board of Directors and/or a stated fee as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of the Executive Committee and/or of other committees may be allowed like
compensation and reimbursement of expenses for attending committee meetings.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES.
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may, by
resolution passed by a majority of the whole Board, appoint an Executive
Committee of two (2) or more members, to serve during the pleasure of the Board
of Directors, to consist of such directors as the Board of Directors may from
time to time designate. The Chairman of the Executive Committee shall be
designated by the Board of Directors.
SECTION 2. PROCEDURE. The Executive Committee, by a vote of a majority
of its members, shall fix its own times and places of meeting, shall determine
the number of its members constituting a quorum for the transaction of
business,
and shall prescribe its own rules of procedure, no change in which shall be
made
save by a majority vote of its members.
SECTION 3. POWERS. The Executive Committee shall have the
responsibility
to act for the Board of Directors, within the specified limits of its
authority.
The Executive Committee shall formulate an Executive Committee Charter, to be
approved by the Board of Directors, setting forth the Committee's duties and
responsibilities and establishing the limits of its authority.
SECTION 4. MINUTES. The Executive Committee shall keep regular minutes
of its proceedings and all action by the Executive Committee shall be reported
to the Board of Directors at its next meeting. Such action shall be subject to
review by the Board of Directors, provided that no rights of third parties
shall
be affected by such review.
SECTION 5. OTHER COMMITTEES. From time to time the Board of Directors,
by the affirmative vote of a majority of the whole Board of Directors, may
appoint other committees for any purpose or purposes, and such committees shall
have such powers as shall be conferred by the resolution of appointment, and as
shall be permitted by law.
ARTICLE V
OFFICERS.
SECTION 1. OFFICERS. The Board of Directors shall elect, as officers, a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Treasurer and a Secretary, and in their discretion
one or more Assistant Secretaries, and Assistant Treasurers. Such officers
shall be elected annually by the Board of Directors at its first meeting
following the annual meeting of stockholders, and each shall hold office until
the corresponding meeting of the Board of Directors in the next year and until
his successor shall have been duly elected and qualified, or until he shall
have
died or resigned or shall have been removed in the manner provided herein. The
powers and duties of two or more offices may be exercised and performed by the
same person, except the offices of President and Secretary.
SECTION 2. VACANCIES. Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors at any regular or
special meeting.
SECTION 3. PRESIDENT. The President shall be either the Chief Executive
Officer or the Chief Operating Officer of the Corporation. Subject to the
direction of the Board of Directors, he shall have and exercise direct charge
of
and general supervision over the business and affairs of the Corporation and
shall perform such other duties as may be assigned to him from time to time by
the Board of Directors.
SECTION 4. VICE PRESIDENTS. The Vice Presidents shall, in the order of
their seniority or in such order as may be specified by the Board of Directors,
have and perform all the powers and duties of the President, in his absence or
disability, and shall in addition have and exercise such powers and shall
perform such duties as from time to time may be conferred upon or assigned to
them by the Board of Directors or as may be delegated to them by the Chairman
of
the Board or the President.
SECTION 5. TREASURER. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all monies or other valuable effects in such banks, trust
companies
or other depositaries as shall, from time to time, be selected by the Board of
Directors; he may endorse for collection on behalf of the Corporation, checks,
notes and other obligations; he may sign receipts and vouchers for payments
made
to the Corporation; singly or jointly with another person as the Board of
Directors may authorize, he may sign checks of the Corporation and pay out and
dispose of the proceeds under the direction of the Board of Directors; he shall
cause to be kept correct books of account of all the business and transactions
of the Corporation, shall see that adequate audits thereof are currently and
regularly made, and shall examine and certify the accounts of the Corporation;
he shall render to the Board of Directors, the Executive Committee, the
Chairman
of the Board or to the President, whenever requested, an account of the
financial condition of the Corporation; he may sign with the President or a
Vice
President, certificates of stock of the Corporation; and, in general, shall
perform all the duties incident to the office of a treasurer of a corporation,
and such other duties as from time to time may be assigned to him by the Board
of Directors.
SECTION 6. ASSISTANT TREASURERS. The Assistant Treasurers in order of
their seniority shall, in the absence or disability of the Treasurer, perform
the duties and exercise the powers of the Treasurer and shall perform such
other
duties as the President or the Board of Directors shall prescribe.
SECTION 7. SECRETARY. The Secretary shall keep the minutes of all
meetings of the stockholders and of the Board of Directors in books provided
for
the purpose; he shall see that all notices are duly given in accordance with
the
provisions of law and these Bylaws; he shall be custodian of the records and of
the corporate seal or seals of the Corporation; he shall see that the corporate
seal is affixed to all documents, the execution of which, on behalf of the
Corporation, under its seal, is duly authorized and when the seal is so affixed
he may attest the same; he may sign, with the President or a Vice President,
certificates of stock of the
Corporation; and, in general, he shall perform all duties incident to the
office
of a secretary of a corporation, and such other duties as from time to time may
be assigned to him by the Board of Directors.
SECTION 8. ASSISTANT SECRETARIES. The Assistant Secretaries in order of
their seniority shall, in the absence or disability of the Secretary, perform
the duties and exercise the powers of the Secretary and shall perform such
other
duties as the President or the Board of Directors shall prescribe.
SECTION 9. SUBORDINATE OFFICERS. The Board of Directors may appoint
such
subordinate officers as it may deem desirable. Each such officer shall hold
office for such period, have such authority and perform such duties as the
Board
of Directors may prescribe. The Board of Directors may, from time to time,
authorize any officer to appoint and remove subordinate officers and to
prescribe the powers and duties thereof.
SECTION 10. COMPENSATION. The Board of Directors shall have power to
fix
the compensation of all officers of the Corporation. It may authorize any
officer, upon whom the power of appointing subordinate officers may have been
conferred, to fix the compensation of such subordinate officers.
SECTION 11. REMOVAL. Any officer of the Corporation may be removed,
with
or without cause, by a majority vote of the Board of Directors at a meeting
called for that purpose.
SECTION 12. BONDS. The Board of Directors may require any officer of
the
Corporation to give a bond to the Corporation, conditional upon the faithful
performance of his duties, with one or more sureties and in such amount as may
be satisfactory to the Board of Directors.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. FORM AND EXECUTION OF CERTIFICATES. The interest of each
stockholder of the Corporation shall be evidenced by a certificate or
certificates for shares of stock in such form as may be prescribed from time to
time by law and by the Board of Directors. The certificates of stock of each
class and series now authorized or which may hereafter be authorized by the
Certificate of Incorporation shall be consecutively numbered and signed by
either the President or a Vice President together either with the Secretary or
an Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation, and may be countersigned and registered in such manner as the
Board
of Directors may prescribe, and shall bear the corporate seal or a printed or
engraved facsimile thereof. Where any such certificate is signed by a transfer
agent or transfer clerk and by a registrar, the signatures of any such
President, Vice President, Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary upon such certificate may be facsimiles engraved or
printed.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall have been placed upon, such certificate or
certificates shall have ceased to be such, whether because of death,
resignation
or otherwise, before such certificate or certificates shall have been issued
and
delivered, such certificate or certificates may nevertheless be issued and
delivered with the same effect as if such officer or officers had not ceased to
be such at the date of its issue and delivery.
SECTION 2. TRANSFER OF SHARES. The shares of the stock of the
Corporation shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney lawfully constituted, upon surrender for
cancellation of certificates for the same number of shares, with an assignment
and power of transfer endorsed thereon or attached thereto, duly executed, with
such proof or guaranty of the authenticity of the signature as the Corporation
or its agents may reasonably require. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in
fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
SECTION 3. CLOSING OF TRANSFER BOOKS AND RECORD DATES. The Board of
Directors may in its discretion prescribe, in advance, a record date not
exceeding sixty (60) nor less than ten (10) days prior to the date of any
meeting of the stockholders or prior to the last day on which the consent or
dissent of stockholders may be effectively expressed for any purpose without a
meeting, during which no transfer of stock on the books of the Corporation may
be made; or in lieu of prohibiting the transfer of stock, may fix, in advance,
a
record date not more than sixty (60) nor less than ten (10) days prior to the
date of any meeting of stockholders or prior to the last day on which the
consent or dissent of stockholders may be effectively expressed for any purpose
without a meeting, as the time as of which stockholders entitled to notice of
and to vote at such a meeting or whose consent or dissent is required or may be
expressed for any purpose, as the case may be, shall be determined; and all
persons who were holders of record of voting stock at such time and no others
shall be entitled to notice of and to vote at such meeting or to express their
consent or dissent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any record date fixed as aforesaid.
The Board of Directors may also, in its discretion, fix in advance a date not
exceeding sixty (60) days preceding the date fixed for the payment of any
dividend or the making of any distribution, or for the delivery of evidence of
rights, or evidences of interests arising out of any issuance, change,
conversion or exchange of capital stock, as a record date for the determination
of the stockholders entitled to receive or participate in any such dividend,
distribution, rights or interests, notwithstanding any transfer of any stock on
the books of the Corporation after any record date fixed as aforesaid, or, at
its option, in lieu of so fixing a record date, may prescribe in advance a
period not exceeding sixty (60) days prior to the date for such payment,
distribution or delivery during which no transfer of stock on the books of the
Corporation may be made.
SECTION 4. LOST OR DESTROYED CERTIFICATES. In case of the loss or
destruction of any outstanding certificate of stock, a new certificate may be
issued upon the following conditions:
The owner of said certificate shall file with the Secretary of the
Corporation an affidavit giving the facts in relation to the ownership, and in
relation to the loss or destruction of said certificate, stating its number and
the number of shares represented thereby; such affidavit to be in such form and
contain such statements as shall satisfy the President and Secretary that said
certificate has been accidentally destroyed or lost, and that a new certificate
ought to be issued in lieu thereof. Upon being so notified, the President and
Secretary shall require such owner to file with the Secretary a bond in such
penal sum and in such form as they may deem advisable, and with a surety or
sureties approved by them, to indemnify and save harmless the Corporation from
any claim, loss, damage or liability which may be occasioned by the issuance of
a new certificate in lieu thereof. Upon such bond being so filed, a new
certificate for the same number of shares shall be issued to the owner of the
certificate so lost or destroyed; and the transfer agent and registrar of
stock,
if any, shall countersign and register such new certificate upon receipt of a
written order signed by the said President and Secretary, and thereupon the
Corporation will save harmless said transfer agent and registrar in the
premises. Any Vice President may act hereunder in the stead of the President,
and an Assistant Secretary in the stead of the Secretary. In case of the
surrender of the original certificate, in lieu of which a new certificate has
been issued, or the surrender of such new certificate, for cancellation, the
bond of indemnity given as a condition of the issue of such new certificate may
be surrendered. A new certificate may be issued without requiring any bond
when
in the judgment of the Board of Directors it is proper to do so.
ARTICLE VII
CHECKS, NOTES, ETC.
SECTION 1. EXECUTION OF CHECKS, NOTES, ETC. All checks and drafts on
the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money,
shall be signed by such officer or officers, agent or agents, as shall be
thereunto authorized from time to time by the Board of Directors.
SECTION 2. EXECUTION OF CONTRACTS, ASSIGNMENTS, ETC. All contracts,
agreements, endorsements, assignments, transfers, stock powers, or other
instruments (except as provided in Sections 1 and 3 of this Article VII) shall
be signed by the President or any Vice President and by the Secretary or any
Assistant Secretary or the Treasurer or any Assistant Treasurer, or by such
other officer or officers, agent or agents, as shall be thereunto authorized
from time to time.
SECTION 3. EXECUTION OF PROXIES. The President or a Vice President of
the Corporation may authorize from time to time the signature and issuance of
proxies to vote upon shares of stock of other companies standing in the name of
the Corporation. All such proxies shall be signed in the name of the
Corporation by the President or a Vice President and by the Secretary or an
Assistant Secretary.
ARTICLE VIII
WAIVERS AND CONSENTS
SECTION 1. WAIVERS. Whenever under the provisions of any law or under
the provisions of the Certificate of Incorporation of the Corporation or these
Bylaws, the Corporation, or the Board of Directors or any committee thereof, is
authorized to take any action after notice to stockholders or the directors or
the members of such committee, or after the lapse of a prescribed period of
time, such action may be taken without notice and without the lapse of any
period of time if, at any time before or after such action be completed, such
requirements be waived in writing by the person or persons entitled to said
notice or entitled to participate in this action to be taken, or, in the case
of
a stockholder, by his attorney thereunto authorized.
SECTION 2. CONSENTS. Any action required or permitted to be taken at
any
meeting of the Board of Directors or of any committee of the Board of Directors
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the Board of Directors or of such committee
as the case may be, and such written consent is filed with the minutes of
proceedings of the Board of Directors or of such committee.
ARTICLE IX
DIVIDENDS AND RESERVE FUNDS.
SECTION 1. DIVIDENDS. Except as otherwise provided by law or by the
Certificate of Incorporation, the Board of Directors may declare dividends out
of the surplus of the Corporation at such times and in such amounts as it may
from time to time designate.
SECTION 2. RESERVE FUNDS. Before crediting net profits to the surplus
in
any year, there may be set aside out of the net profits of the Corporation for
that year such sum or sums as the Board of Directors from time to time in its
absolute discretion may deem proper as a reserve fund or funds to meet
contingencies or for equalizing dividends or for repairing or maintaining any
property of the Corporation or for such other purpose as the Board of Directors
shall deem conducive to the interests of the Corporation.
ARTICLE X
INSPECTION OF BOOKS.
The Board of Directors shall determine from time to time whether, and if
allowed when and under what conditions and regulations, the accounts and books
of the Corporation (except such as may by statute be specifically open to
inspection) or any of them shall be open to the inspection of the stockholders;
and the stockholders' rights in this respect are and shall be restricted and
limited accordingly.
ARTICLE XI
FISCAL YEAR.
The fiscal year of the Corporation shall end on the Saturday closest to
the
end of January of each year unless another date shall be fixed by resolution of
the Board of Directors. After such date is fixed, it may be changed for future
fiscal years at any time or from time to time by further resolution of the
Board
of Directors.
ARTICLE XII
SEAL.
The corporate seal shall be circular in form and shall contain the name of
the Corporation, the State of incorporation, and the words "Corporate Seal".
ARTICLE XIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation agrees to hold harmless and indemnify each director and
officer, whether or not then in office (and his heirs and administrators), to
the full extent permitted by Section 145 of the General Corporation Law of the
State of Delaware or by any amendment thereof or other statutory provision
authorizing or permitting such indemnification adopted hereafter, for all
liability, including reasonable expenses, incurred by, imposed upon him in
connection with, or resulting from any action, suit or proceeding to which he
may be made a party by reason of his being or having been a director or officer
of the Corporation or any of its subsidiaries, or of any other corporation at
the request of the Corporation. The foregoing right of reimbursement shall not
be exclusive of other rights to which such director or officer may be entitled
as a matter of law or contract.
ARTICLE XIV
AMENDMENTS.
SECTION 1. BY STOCKHOLDERS. Except as otherwise provided in the
Certificate of Incorporation, these Bylaws may be amended by the affirmative
vote of the holders of 66 2/3% or more of the combined voting power of the
outstanding voting stock, voting together as a single class and cast at any
annual or special meeting of the stockholders if notice of the proposed
amendment shall have been contained in the notice of the meeting.
SECTION 2. BY DIRECTORS. Except as otherwise specifically provided
herein, these Bylaws may be amended by the affirmative vote of a majority of
the
Board of Directors, at any regular or special meeting thereof, if notice of the
proposed amendment shall have been contained in the notice of such meeting. If
any Bylaw regulating an impending election of directors is adopted or amended
or
repealed by the Board of Directors, there shall be set forth in the notice of
the next meeting of the stockholders for the election of directors, the Bylaw
so
adopted or amended or repealed together with a concise statement of the changes
made.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>4
<FILENAME>ex4a1995preferredrightsagrmt.txt
<DESCRIPTION>EX 4A - PREFERRED STOCK RIGHTS PLAN
<TEXT>
EXHIBIT 4(a)
_________________________________________________
THE BOMBAY COMPANY, INC.
and
THE FIRST NATIONAL BANK OF BOSTON, as Rights Agent
_________________________________________________
RIGHTS AGREEMENT
Dated as of June 1, 1995
_________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
..............Section 1......................................Certain Definitions
1
..............Section 2..............................Appointment of Rights Agent
5
..............Section 3..............................Issue of Right Certificates
6
..............Section 4...............................Form of Right Certificates
7
..............Section 5........................Countersignature and Registration
8
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
..............Certificates.....................................................8
..............Section 7.Exercise of Rights, Purchase Price; Expiration Date of
Rights............................................................
9
..............Section 8.......Cancellation and Destruction of Right Certificates
10
..............Section 9................Availability of Shares of Preferred Stock
11
..............Section 10.............................Preferred Stock Record Date
12
Section 11. Adjustment of Purchase Price, Number of Shares and Number
..............of Rights.......................................................12
..............Section 12.Certificate of Adjusted Purchase Price or Number of
Shares............................................................
20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
..............Earnings Power..................................................21
..............Section 14.................Fractional Rights and Fractional Shares
24
..............Section 15........................................Rights of Action
25
..............Section 16..............................Agreement of Right Holders
26
..............Section 17.......Right Certificate Holder Not Deemed a Stockholder
26
..............Section 18.............................Concerning the Rights Agent
26
..............Section 19.Merger or Consolidation or Change of Name of Rights
Agent.............................................................
27
..............Section 20..................................Duties of Rights Agent
28
..............Section 21..................................Change of Rights Agent
30
..............Section 22......................Issuance of New Right Certificates
31
..............Section 23..............................................Redemption
31
..............Section 24................................................Exchange
32
..............Section 25................................Notice of Certain Events
33
..............Section 26.................................................Notices
34
..............Section 27..............................Supplements and Amendments
34
..............Section 28..............................................Successors
35
Section 29...........................................Benefits of this Agreement
35
Section 30.................Determinations and Actions by the Board of Directors
35
Section 31.........................................................Severability
35
Section 32........................................................Governing Law
35
Section 33.........................................................Counterparts
36
Section 34.................................................Descriptive Headings
36
RIGHTS AGREEMENT
Rights Agreement, dated as of June 1, 1995 ("Agreement"), between
The Bombay Company, Inc., a Delaware corporation (the "Company"), and The First
National Bank of Boston, as Rights Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared
a dividend of one preferred share purchase right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding as of the
Close of Business (as defined below) on June 15, 1995 (the "Record Date"), each
Right representing the right to purchase one one-thousandth (subject to
adjustment) of a share of Preferred Stock (as hereinafter defined), upon the
terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right (subject to adjustment as
provided herein) with respect to each share of Common Stock that shall become
outstanding between the Record Date and the earlier of the Distribution Date
and the Expiration Date (as such terms are hereinafter defined); provided,
however, that Rights may be issued with respect to shares of Common Stock that
shall become outstanding after the Distribution Date and prior to the Expira-
tion Date in accordance with Section 22.
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
the following terms have the meaning indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which shall be the Beneficial Owner (as such term
is hereinafter defined) of 15% or more of the shares of Common Stock then
outstanding, but shall not include an Exempt Person (as such term is
hereinafter defined); provided, however, that if the Board of Directors of the
Company determines in good faith that a Person who would otherwise be an
"Acquiring Person" became such inadvertently (including, without limitation,
because (i) such Person was unaware that it beneficially owned a percentage of
Common Stock that would otherwise cause such Person to be an "Acquiring Person"
or (ii) such Person was aware of the extent of its Beneficial Ownership of
Common Stock but had no actual knowledge of the consequences of such Beneficial
Ownership under this Agreement) and without any intention of changing or
influencing control of the Company, and if such Person as promptly as
practicable divested or divests itself of Beneficial Ownership of a sufficient
number of shares of Common Stock so that such Person would no longer be an
"Acquiring Person," then such Person shall not be deemed to be or to have
become an "Acquiring Person" for any purposes of this Agreement. Notwith-
standing the foregoing, no Person shall become an "Acquiring Person" as the
result of an acquisition of shares of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number
of shares of Common Stock beneficially owned by such Person to 15% or more of
the shares of Common Stock then outstanding, provided, however, that if a
Person shall become the Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding by reason of such share acquisitions by the Company and
shall thereafter become the Beneficial Owner of any additional shares of Common
Stock, then such Person shall be deemed to be an "Acquiring Person" unless upon
the consummation of the acquisition of such additional shares of Common Stock
such Person does not own 15% or more of the shares of Common Stock then
outstanding. For all purposes of this Agreement, any calculation of the number
of shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date hereof.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Rights
Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, shall be
deemed to have "Beneficial Ownership" of and shall be deemed to "beneficially
own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates is deemed to beneficially own, directly or indirectly, within the
meaning of Rule 13d-3 of the General Rules and Regulations under the Exchange
Act as in effect on the date of this Rights Agreement;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable imme-
diately or only after the passage of time) pursuant to any agreement, arrange-
ment or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own, (x)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase, (y) securities which such Person
has a right to acquire upon the exercise of Rights at any time prior to the
time that any Person becomes an Acquiring Person or (z) securities issuable
upon the exercise of Rights from and after the time that any Person becomes an
Acquiring Person if such Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof ("original Rights") or pursuant to Section
11(i) or Section 11(n) with respect to an adjustment to original Rights; or (B)
the right to vote pursuant to any agreement, arrangement or understanding;
provided, however, that a Person shall not be deemed the Beneficial Owner of,
or to beneficially own, any security by reason of such agreement, arrangement
or understanding if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations promulgated under
the Exchange Act and (2) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person with which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
Section 1(c)(ii)(B)) or disposing of any securities of the Company;
provided, however, that no Person who is an officer, director or employee of an
Exempt Person shall be deemed, solely by reason of such Person's status or
authority as such, to be the "Beneficial Owner" of, to have "Beneficial
Ownership" of or to "beneficially own" any securities that are "beneficially
owned" (as defined in this Section 1(c)), including, without limitation, in a
fiduciary capacity, by an Exempt Person or by any other such officer, director
or employee of an Exempt Person.
(d) "Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of Texas or the city
in which the principal office of the Rights Agent is located are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Fort Worth, Texas time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., Fort Worth, Texas time, on the next
succeeding Business Day.
(f) "Common Stock" when used with reference to the Company
shall mean the Common Stock, presently par value $1.00 per share, of the
Company. "Common Stock" when used with reference to any Person other than the
Company shall mean the common stock (or, in the case of an unincorporated
entity, the equivalent equity interest) with the greatest voting power of such
other Person or, if such other Person is a subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.
(g) "Common Stock equivalents" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(h) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(i) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
(j) "equivalent preferred shares" shall have the meaning set
forth in Section 11(b) hereof.
(k) "Exempt Person" shall mean the Company or any Subsidiary (as
such term is hereinafter defined) of the Company, in each case including,
without limitation, in its fiduciary capacity, or any employee benefit plan of
the Company or of any Subsidiary of the Company, or any entity or trustee
holding Common Stock for or pursuant to the terms of any such plan or for the
purpose of funding any such plan or funding other employee benefits for
employees of the Company or of any Subsidiary of the Company.
(l) "Exchange Ratio" shall have the meaning set forth in Section
24 hereof.
(m) "Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(n) "Flip-In Event" shall have the meaning set forth in Section
11(a)(ii) hereof.
(o) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
(p) "NASDAQ" shall mean The NASDAQ Stock Market.
(q) "New York Stock Exchange" shall mean the New York Stock
Exchange, Inc.
(r) "Person" shall mean any individual, firm, corporation,
partnership, trust or other entity, and shall include any successor (by merger
or otherwise) to such entity.
(s) "Preferred Stock" shall mean the Series A Junior
Participating Preferred Stock, par value $1.00 per share, of the Company having
the rights and preferences set forth in the Form of Certificate of Designations
attached to this Rights Agreement as Exhibit A.
(t) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(u) "Redemption Date" shall have the meaning set forth in
Section 7 hereof.
(v) "Redemption Price" shall have the meaning set forth in
Section 23 hereof.
(w) "Right Certificate" shall have the meaning set forth in
Section 3 hereof.
(x) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(y) "Section 11(a) (ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(z) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
(aa) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such, or
such earlier date as a majority of the Board of Directors shall become aware of
the existence of an Acquiring Person.
(bb) "Subsidiary" of any Person shall mean any corporation or
other entity of which securities or other ownership interests having ordinary
voting power sufficient to elect a majority of the board of directors or other
persons performing similar functions are beneficially owned, directly or
indirectly, by such Person, and any corporation or other entity that is
otherwise controlled by such Person.
(cc) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(dd) "Summary of Rights" shall have the meaning set forth in
Section 3 hereof.
(ee) "Trading Day" shall have the meaning set forth in Sec-
tion 11(d)(i) hereof.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date be the holders of Common Stock) in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the Close of Business on the earlier of (i) the tenth
day after the Stock Acquisition Date or (ii) the tenth Business Day (or such
later date as may be determined by action of the Board of Directors prior to
such time as any Person becomes an Acquiring Person) after the date of the
commencement by any Person (other than an Exempt Person) of, or of the first
public announcement of the intention of such Person (other than an Exempt
Person) to commence, a tender or exchange offer the consummation of which would
result in any Person (other than an Exempt Person) becoming the Beneficial
Owner of shares of Common Stock aggregating 15% or more of the Common Stock
then outstanding (including any such date which is after the date of this
Agreement and prior to the issuance of the Rights; the earlier of such dates
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of Section 3(b) hereof) by the
certificates for Common Stock registered in the names of the holders thereof
and not by separate Right Certificates, and (y) the Rights will be transferable
only in connection with the transfer of Common Stock. As soon as practicable
after the Distribution Date, the Company will prepare and execute, the Rights
Agent will countersign and the Company will send or cause to be sent (and the
Rights Agent will, if requested, send) by first-class, insured, postage-prepaid
mail, to each record holder of Common Stock as of the close of business on the
Distribution Date (other than any Acquiring Person or any Associate or
Affiliate of an Acquiring Person), at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the form of
Exhibit B hereto (a "Right Certificate"), evidencing one Right (subject to
adjustment as provided herein) for each share of Common Stock so held. As of
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Shares of Preferred
Stock, in substantially the form of Exhibit C hereto (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common Stock as
of the Close of Business on the Record Date (other than any Acquiring Person or
any Associate or Affiliate of any Acquiring Person), at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Stock outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates registered in the names of
the holders thereof together with the Summary of Rights. Until the Distribu-
tion Date (or, if earlier, the Expiration Date), the surrender for transfer of
any certificate for Common Stock outstanding on the Record Date, with or
without a copy of the Summary of Rights, shall also constitute the transfer of
the Rights associated with the Common Stock represented thereby.
(c) Certificates issued for Common Stock (including, without
limitation, upon transfer of outstanding Common Stock, disposition of Common
Stock out of treasury stock or issuance or reissuance of Common Stock out of
authorized but unissued shares) after the Record Date but prior to the earlier
of the Distribution Date and the Expiration Date shall have impressed on,
printed on, written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between The
Bombay Company, Inc. and The First National Bank of Boston, as
Rights Agent, dated as of June 1, 1995 as the same may be amended
from time to time (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of The Bombay Company,
Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate. The Bombay
Company, Inc. will mail to the holder of this certificate a copy
of the Rights Agreement without charge after receipt of a written
request therefor. Under certain circumstances, as set forth in
the Rights Agreement, Rights owned by or transferred to any Person
who is or becomes an Acquiring Person (as defined in the Rights
Agreement) and certain transferees thereof will become null and
void and will no longer be transferable.
With respect to such certificates containing the foregoing legend, until the
Distribution Date the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the
Common Stock represented thereby. In the event that the Company purchases or
otherwise acquires any Common Stock after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Stock shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Stock which are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall
not affect the enforceability of any part of this Agreement or the rights of
any holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates
(and the forms of election to purchase shares and of assignment to be printed
on the reverse thereof) shall be substantially in the form set forth in Exhibit
B hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange or interdealer quotation system on which the Rights may from time to
time be listed or quoted, or to conform to usage. Subject to the provisions of
Sections 11, 13 and 22 hereof, the Right Certificates shall entitle the holders
thereof to purchase such number of one one-thousandths of a share of Preferred
Stock as shall be set forth therein at the price per one one-thousandth of a
share of Preferred Stock set forth therein (the "Purchase Price"), but the
number of such one one-thousandths of a share of Preferred Stock and the
Purchase Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the
Company by the President of the Company, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile thereof
and shall be attested by the Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned.
In case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before countersigna-
ture by the Rights Agent and issuance and delivery by the Company, such Right
Certificates, nevertheless, may be countersigned by the Rights Agent and issued
and delivered by the Company with the same force and effect as though the
Person who signed such Right Certificates had not ceased to be such officer of
the Company; and any Right Certificate may be signed on behalf of the Company
by any Person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such
Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at an office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Sections 7(e), 11(a)(ii) and 14
hereof, at any time after the Distribution Date and prior to the Expiration
Date, any Right Certificate or Right Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-
thousandths of a share of Preferred Stock as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any regis-
tered holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the office
or agency of the Rights Agent designated for such purpose. Thereupon the
Rights Agent shall countersign and deliver to the Person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.
(b) Subject to the provisions of Section 11(a)(ii) hereof, at any
time after the Distribution Date and prior to the Expiration Date, upon receipt
by the Company and the Rights Agent of evidence reasonably satisfactory to them
of the loss, theft, destruction or mutilation of a Right Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and, at the Company's request, reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered holder in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights, Purchase Price; Expiration Date of
Rights.
(a) Except as otherwise provided herein, the Rights shall become
exercisable on the Distribution Date, and thereafter the registered holder of
any Right Certificate may, subject to Section 11(a)(ii) hereof and except as
otherwise provided herein, exercise the Rights evidenced thereby in whole or in
part upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office or agency of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which the Rights are exercised, at any
time which is both after the Distribution Date and prior to the time (the
"Expiration Date") that is the earliest of (i) the Close of Business on June 1,
2005 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date") or (iii) the
time at which such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price shall be initially $50.00 for each one
one-thousandth of a share of Preferred Stock purchasable upon the exercise of a
Right. The Purchase Price and the number of one one-thousandths of a share of
Preferred Stock or other securities or property to be acquired upon exercise of
a Right shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the aggregate Purchase Price
for the shares of Preferred Stock to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, in cash or by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Stock certificates for the number of shares of Preferred Stock to
be purchased and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) requisition from the depositary agent
depositary receipts representing interests in such number of one one-
thousandths of a share of Preferred Stock as are to be purchased (in which case
certificates for the Preferred Stock represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
promptly after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such
Right Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, promptly deliver such
cash to or upon the order of the registered holder of such Right Certificate.
(d) Except as otherwise provided herein, in case the registered
holder of any Right Certificate shall exercise less than all of the Rights
evidenced thereby, a new Right Certificate evidencing Rights equivalent to the
exercisable Rights remaining unexercised shall be issued by the Rights Agent to
the registered holder of such Right Certificate or to his duly authorized
assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of any
purported transfer or exercise of Rights pursuant to Section 6 hereof or this
Section 7 unless such registered holder shall have (i) completed and signed the
certificate contained in the form of assignment or form of election to purchase
set forth on the reverse side of the Rights Certificate surrendered for such
transfer or exercise and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Right Certificates to the Company, or shall,
at the written request of the Company, destroy such canceled Right
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Availability of Shares of Preferred Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock or any shares of Preferred Stock held in its treasury, the
number of shares of Preferred Stock that will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
time that any Person becomes an Acquiring Person, shares of Common Stock and
other securities) issuable upon the exercise of Rights may be listed or
admitted to trading on any national securities exchange, or quoted on NASDAQ,
the Company shall use its best efforts to cause, from and after such time as
the Rights become exercisable, all shares reserved for such issuance to be
listed or admitted to trading on such exchange, or quoted on NASDAQ, upon
official notice of issuance upon such exercise.
(c) From and after such time as the Rights become exercisable,
the Company shall use its best efforts, if then necessary to permit the
issuance of shares of Preferred Stock (and, following the time that any Person
becomes an Acquiring Person, shares of Common Stock and other securities) upon
the exercise of Rights, to register and qualify such shares of Preferred Stock
(and, following the time that any Person becomes an Acquiring Person, shares of
Common Stock and other securities) under the Securities Act and any applicable
state securities or "Blue Sky" laws (to the extent exemptions therefrom are not
available), cause such registration statement and qualifications to become
effective as soon as possible after such filing and keep such registration and
qualifications effective until the earlier of the date as of which the Rights
are no longer exercisable for such securities and the Expiration Date. The
Company may temporarily suspend, for a period of time not to exceed 90 days,
the exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration
statement under the Securities Act (if required) shall have been declared
effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock (and,
following the time that any Person becomes an Acquiring Person, shares of
Common Stock and other securities) delivered upon exercise of Rights shall, at
the time of delivery of the certificates therefor (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Right
Certificates or of any shares of Preferred Stock (or shares of Common Stock or
other securities) upon the exercise of Rights. The Company shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Stock (or shares of Common Stock or other securities) in a name other than that
of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or deliver any certificates or depositary
receipts for Preferred Stock (or shares of Common Stock or other securities)
upon the exercise of any Rights until any such tax shall have been paid (any
such tax being payable by that holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name
any certificate for Preferred Stock is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the shares of
Preferred Stock represented thereby on, and such certificate shall be dated,
the date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock transfer books of the Company
are closed, such Person shall be deemed to have become the record holder of
such shares on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Stock transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate shall not be entitled to any rights of a holder of Preferred
Stock for which the Rights shall be exercisable, including, without limitation,
the right to vote or to receive dividends or other distributions, and shall not
be entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares and Number of Rights. The Purchase Price, the number of shares of
Preferred Stock or other securities or property purchasable upon exercise of
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i)In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares of
Preferred Stock or (D) issue any shares of its capital stock in a reclassifi-
cation of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise provided in this
Section 11(a), the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock issuable
on such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and
kind of shares of capital stock which, if such Right had been exercised immedi-
ately prior to such date and at a time when the Preferred Stock transfer books
of the Company were open, the holder would have owned upon such exercise and
been entitled to receive by virtue of such dividend, subdivision, combination
or reclassification; provided, however, that in no event shall the consider-
ation to be paid upon the exercise of one Right be less than the aggregate par
value of the shares of capital stock of the Company issuable upon exercise of
one Right.
(ii) Subject to Section 24 of this Agreement, in the event
any Person becomes an Acquiring Person (the first occurrence of such event
being referred to hereinafter as the "Flip-In Event"), then (A) the Purchase
Price shall be adjusted to be the Purchase Price in effect immediately prior to
the Flip-In Event multiplied by the number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
Flip-In Event, whether or not such Right was then exercisable, and (B) each
holder of a Right, except as otherwise provided in this Section 11(a)(ii) and
Section 11(a)(iii) hereof, shall thereafter have the right to receive, upon
exercise thereof at a price equal to the Purchase Price (as so adjusted), in
accordance with the terms of this Agreement and in lieu of shares of Preferred
Stock, such number of shares of Common Stock as shall equal the result obtained
by dividing the Purchase Price (as so adjusted) by 50% of the current per share
market price of the Common Stock (determined pursuant to Section 11(d) hereof)
on the date of such Flip-In Event; provided, however, that the Purchase Price
(as so adjusted) and the number of shares of Common Stock so receivable upon
exercise of a Right shall, following the Flip-In Event, be subject to further
adjustment as appropriate in accordance with Section 11(f) hereof.
Notwithstanding anything in this Agreement to the contrary, however, from and
after the Flip-In Event, any Rights that are beneficially owned by (x) any
Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
becomes a transferee after the Flip-In Event or (z) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a transferee
prior to or concurrently with the Flip-In Event pursuant to either (I) a
transfer from the Acquiring Person to holders of its equity securities or to
any Person with whom it has any continuing agreement, arrangement or understand-
ing regarding the transferred Rights or (II) a transfer which the Board of
Directors has determined is part of a plan, arrangement or understanding which
has the purpose or effect of avoiding the provisions of this paragraph, and
subsequent transferees of such Persons, shall be void without any further
action and any holder of such Rights shall thereafter have no rights whatso-
ever with respect to such Rights under any provision of this Agreement. The
Company shall use all reasonable efforts to ensure that the provisions of this
Section 11(a)(ii) are complied with, but shall have no liability to any holder
of Right Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder. From and after the Flip-In Event, no Right
Certificate shall be issued pursuant to Section 3 or Section 6 hereof that
represents Rights that are or have become void pursuant to the provisions of
this paragraph, and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the provisions of
this paragraph shall be canceled. From and after the occurrence of an event
specified in Section 13(a) hereof, any Rights that theretofore have not been
exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable
only in accordance with Section 13 and not pursuant to this Section 11(a)(ii).
(iii) The Company may at its option substitute for a share
of Common Stock issuable upon the exercise of Rights in accordance with the
foregoing subparagraph (ii) a number of shares of Preferred Stock or fraction
thereof such that the current per share market price of one share of Preferred
Stock multiplied by such number or fraction is equal to the current per share
market price of one share of Common Stock. In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Board of Directors shall, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party (A) determine the excess (such excess, the "Spread") of
(1) the value of the shares of Common Stock issuable upon the exercise of a
Right in accordance with the foregoing subparagraph (ii) (the "Current Value")
over (2) the Purchase Price (as adjusted in accordance with the foregoing
subparagraph (ii)), and (B) with respect to each Right (other than Rights which
have become void pursuant to the foregoing subparagraph (ii)), make adequate
provision to substitute for the shares of Common Stock issuable in accordance
with the foregoing subparagraph (ii) upon exercise of the Right and payment of
the Purchase Price (as adjusted in accordance therewith), (1) cash, (2) a
reduction in such Purchase Price, (3) shares of Preferred Stock or other equity
securities of the Company (including, without limitation, shares or fractions
of shares of preferred stock which, by virtue of having dividend, voting and
liquidation rights substantially comparable to those of the shares of Common
Stock, are deemed in good faith by the Board of Directors to have substantial-
ly the same value as the shares of Common Stock (such shares of Preferred Stock
and shares or fractions of shares of preferred stock are hereinafter referred
to as "Common Stock equivalents")), (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having a value which,
when added to the value of the shares of Common Stock actually issued upon
exercise of such Right, shall have an aggregate value equal to the Current
Value (less the amount of any reduction in such Purchase Price), where such
aggregate value has been determined by the Board of Directors upon the advice
of a nationally recognized investment banking firm selected in good faith by
the Board of Directors; provided, however, that if the Company shall not make
adequate provision to deliver value pursuant to clause (B) above within thirty
(30) days following the Flip-In Event (the "Section 11(a) (ii) Trigger Date"),
then the Company shall be obligated to deliver, to the extent permitted by
applicable law and any material agreements then in effect to which the Company
is a party, upon the surrender for exercise of a Right and without requiring
payment of such Purchase Price, shares of Common Stock (to the extent
available), and then, if necessary, such number or fractions of shares of
Preferred Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If, upon the
occurrence of the Flip-In Event, the Board of Directors shall determine in good
faith that it is likely that sufficient additional shares of Common Stock could
be authorized for issuance upon exercise in full of the Rights, then, if the
Board of Directors so elects, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days after the
Section 11(a) (ii) Trigger Date, in order that the Company may seek stock-
holder approval for the authorization of such additional shares (such thirty
(30) day period, as it may be extended, is herein called the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the second and/or third sentence of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 11(a)(ii) hereof and the last
sentence of this Section 11(a)(iii) hereof, that such action shall apply
uniformly to all outstanding Rights and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such second sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a) (iii),
the value of the shares of Common Stock shall be the current per share market
price (as determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii)
Trigger Date and the per share or fractional value of any "Common Stock
equivalent" shall be deemed to equal the current per share market price of the
Common Stock. The Board of Directors of the Company may, but shall not be
required to, establish procedures to allocate the right to receive shares of
Common Stock upon the exercise of the Rights among holders of Rights pursuant
to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Stock (or shares having the same rights,
privileges and preferences as the Preferred Stock ("equivalent preferred
shares")) or securities convertible into Preferred Stock or equivalent
preferred shares at a price per share of Preferred Stock or equivalent
preferred shares (or having a conversion price per share, if a security
convertible into shares of Preferred Stock or equivalent preferred shares) less
than the then current per share market price of the Preferred Stock (determined
pursuant to Section 11(d) hereof) on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock and
equivalent preferred shares outstanding on such record date plus the number of
shares of Preferred Stock and equivalent preferred shares which the aggregate
offering price of the total number of shares of Preferred Stock and/or
equivalent preferred shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which shall be the number
of shares of Preferred Stock and equivalent preferred shares outstanding on
such record date plus the number of additional shares of Preferred Stock and/or
equivalent preferred shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible);
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
Shares of Preferred Stock and equivalent preferred shares owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such
a record date is fixed; and in the event that such rights, options or warrants
are not so issued, the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of the Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the then current per share market price of the
Preferred Stock (determined pursuant to Section 11(d) hereof) on such record
date, less the fair market value (as determined in good faith by the Board of
Directors of the Company whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one share of Preferred Stock, and the denominator of which shall
be such current per share market price (determined pursuant to Section 11(d)
hereof) of the Preferred Stock; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be issued
upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution
is not so made, the Purchase Price shall again be adjusted to be the Purchase
Price which would then be in effect if such record date had not been fixed.
(d)(i)Except as otherwise provided herein, for the purpose of any
computation hereunder, the "current per share market price" of any security (a
"Security" for the purpose of this Section 11(d)(i)) on any date shall be
deemed to be the average of the daily closing prices per share of such Security
for the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that in the event that the
current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security, and prior to the expiration of 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the current per share market price shall be appropriately
adjusted to reflect the current market price per share equivalent of such
Security. The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported by the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the
Security is not listed or admitted to trading on the New York Stock Exchange,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Company. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or, if
the Security is not listed or admitted to trading on any national securities
exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the
Preferred Stock is publicly traded, the "current per share market price" of the
Preferred Stock shall be determined in accordance with the method set forth in
Section 11(d)(i). If the Preferred Stock is not publicly traded but the Common
Stock is publicly traded, the "current per share market price" of the Preferred
Stock shall be conclusively deemed to be the current per share market price of
the Common Stock as determined pursuant to Section 11(d)(i) multiplied by one
thousand (appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof). If neither the Common
Stock nor the Preferred Stock is publicly traded, "current per share market
price" shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one hundred-thousandth
of a share of Preferred Stock or share of Common Stock or other share or
security as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which requires
such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than the
Preferred Stock, thereafter the Purchase Price and the number of such other
shares so receivable upon exercise of a Right shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Preferred Stock contained in Sections
11(a), 11(b), 11(c), 11(e), 11(h), 11(i) and 11(m) hereof, as applicable, and
the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of
a share of Preferred Stock purchasable from time to time hereunder upon exer-
cise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a share of Preferred Stock (calculated to the nearest
one hundred-thousandth of a share of Preferred Stock) obtained by (i)
multiplying (x) the number of one one-thousandths of a share covered by a Right
immediately prior to such adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price pursuant to Sections 11(a)(i), 11(b) or 11(c) hereof to
adjust the number of Rights, in substitution for any adjustment in the number
of one one-thousandths of a share of Preferred Stock purchasable upon the exer-
cise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of one one-thousandths of
a share of Preferred Stock for which a Right was exercisable immediately prior
to such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-hundredth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the Pur-
chase Price is adjusted or any day thereafter, but, if the Right Certificates
have been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company may, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Right Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Right Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein and
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a share of Preferred Stock issu-
able upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the Purchase Price and the number of
one one-thousandths of a share of Preferred Stock which were expressed in the
initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the fraction
of Preferred Stock or other shares of capital stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Preferred Stock or other
such shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
of the Preferred Stock and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any shares of Preferred Stock at less than the current
market price, issuance wholly for cash of Preferred Stock or securities which
by their terms are convertible into or exchangeable for Preferred Stock,
dividends on Preferred Stock payable in shares of Preferred Stock or issuance
of rights, options or warrants referred to hereinabove in Section 11(b),
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) Anything in this Agreement to the contrary notwithstanding,
in the event that at any time after the date of this Rights Agreement and prior
to the Distribution Date, the Company shall (i) declare or pay any dividend on
the Common Stock payable in Common Stock or (ii) effect a subdivision, combina-
tion or consolidation of the Common Stock (by reclassification or otherwise
than by payment of a dividend payable in Common Stock) into a greater or lesser
number of shares of Common Stock, then, in each such case, the number of Rights
associated with each share of Common Stock then outstanding, or issued or deliv-
ered thereafter, shall be proportionately adjusted so that the number of Rights
thereafter associated with each share of Common Stock following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each share of Common Stock immediately prior to such event by a fraction
the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
(o) The Company agrees that, after the earlier of the
Distribution Date or the Stock Acquisition Date, it will not, except as
permitted by Sections 23, 24 or 27 hereof, take (or permit any Subsidiary to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or eliminate the bene-
fits intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Stock and the Preferred Stock a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with
Section 25 hereof (if so required under Section 25 hereof). The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of any
such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earnings Power.
(a) In the event, directly or indirectly, at any time after the
Flip-In Event (i) the Company shall merge with and into any other Person, (ii)
any Person shall consolidate with the Company, or any Person shall merge with
and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or of the Company) or cash or any other
property, or (iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more wholly owned Subsidiaries
of the Company), then upon the first occurrence of such event, proper provision
shall be made so that: (A) each holder of a Right (other than Rights which
have become void pursuant to Section 11(a)(ii) hereof) shall thereafter have
the right to receive, upon the exercise thereof at the Purchase Price (as
theretofore adjusted in accordance with Section 11(a)(ii) hereof), in
accordance with the terms of this Agreement and in lieu of shares of Preferred
Stock or Common Stock of the Company, such number of validly authorized and
issued, fully paid, non-assessable and freely tradeable shares of Common Stock
of the Principal Party (as such term is hereinafter defined), not subject to
any liens, encumbrances, rights of first refusal or other adverse claims, as
shall equal the result obtained by dividing the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof) by 50% of the current per
share market price of the Common Stock of such Principal Party (determined
pursuant to Section 11(d) hereof) on the date of consummation of such consolida-
tion, merger, sale or transfer; provided, however, that the Purchase Price (as
theretofore adjusted in accordance with Section 11(a)(ii) hereof) and the
number of shares of Common Stock of such Principal Party so receivable upon
exercise of a Right shall be subject to further adjustment as appropriate in
accordance with Section 11(f) hereof to reflect any events occurring in respect
of the Common Stock of such Principal Party after the occurrence of such
consolidation, merger, sale or transfer; (B) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Company
pursuant to this Rights Agreement; (C) the term "Company" shall thereafter be
deemed to refer to such Principal Party; and (D) such Principal Party shall
take such steps (including, but not limited to, the reservation of a sufficient
number of its shares of Common Stock in accordance with Section 9 hereof) in
connection with such consummation of any such transaction as may be necessary
to assure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to the shares of its Common Stock thereafter
deliverable upon the exercise of the Rights; provided that, upon the subsequent
occurrence of any consolidation, merger, sale or transfer of assets or other
extraordinary transaction in respect of such Principal Party, each holder of a
Right shall thereupon be entitled to receive, upon exercise of a Right and
payment of the Purchase Price as provided in this Section 13(a), such cash,
shares, rights, warrants and other property which such holder would have been
entitled to receive had such holder, at the time of such transaction, owned the
Common Stock of the Principal Party receivable upon the exercise of a Right
pursuant to this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with
the terms hereof for such cash, shares, rights, warrants and other property.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (i) or
(ii) of the first sentence of Section 13(a) hereof: (A) the Person that is the
issuer of the securities into which the shares of Common Stock are converted in
such merger or consolidation, or, if there is more than one such issuer, the
issuer the shares of Common Stock of which have the greatest aggregate market
value of shares outstanding, or (B) if no securities are so issued, (x) the
Person that is the other party to the merger, if such Person survives said
merger, or, if there is more than one such Person, the Person the shares of
Common Stock of which have the greatest aggregate market value of shares
outstanding or (y) if the Person that is the other party to the merger does not
survive the merger, the Person that does survive the merger (including the
Company if it survives) or (z) the Person resulting from the consolidation; and
(ii) in the case of any transaction described in (iii) of
the first sentence in Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions, or, if each Person that is a
party to such transaction or transactions receives the same portion of the
assets or earning power so transferred or if the Person receiving the greatest
portion of the assets or earning power cannot be determined, whichever of such
Persons as is the issuer of Common Stock having the greatest aggregate market
value of shares outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Stock of such Person is not at such time or
has not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Stock of all of which is and has been so registered, the
term "Principal Party" shall refer to whichever of such Persons is the issuer
of Common Stock having the greatest aggregate market value of shares outstand-
ing, or (3) if such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by
the same Person, the rules set forth in clauses (1) and (2) above shall apply
to each of the owners having an interest in the venture as if the Person owned
by the joint venture was a Subsidiary of both or all of such joint venturers,
and the Principal Party in each such case shall bear the obligations set forth
in this Section 13 in the same ratio as its interest in such Person bears to
the total of such interests.
(c) The Company shall not consummate any consolidation, merger,
sale or transfer referred to in Section 13(a) hereof unless prior thereto the
Company and the Principal Party involved therein shall have executed and
delivered to the Rights Agent an agreement confirming that the requirements of
Sections 13(a) and (b) hereof shall promptly be performed in accordance with
their terms and that such consolidation, merger, sale or transfer of assets
shall not result in a default by the Principal Party under this Agreement as
the same shall have been assumed by the Principal Party pursuant to Sections
13(a) and (b) hereof and providing that, as soon as practicable after executing
such agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the
Securities Act, if necessary, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, use its best
efforts to cause such registration statement to become effective as soon as
practicable after such filing and use its best efforts to cause such registra-
tion statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date and similarly
comply with applicable state securities laws;
(ii) use its best efforts, if the Common Stock of the
Principal Party shall be listed or admitted to trading on the New York Stock
Exchange or on another national securities exchange, to list or admit to
trading (or continue the listing of) the Rights and the securities purchasable
upon exercise of the Rights on the New York Stock Exchange or such securities
exchange, or, if the Common Stock of the Principal Party shall not be listed or
admitted to trading on the New York Stock Exchange or a national securities
exchange, to cause the Rights and the securities receivable upon exercise of
the Rights to be authorized for quotation on NASDAQ or on such other system
then in use;
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act; and
(iv) obtain waivers of any rights of first refusal or
preemptive rights in respect of the Common Stock of the Principal Party subject
to purchase upon exercise of outstanding Rights.
(d) In case the Principal Party has provision in any of its
authorized securities or in its certificate of incorporation or by-laws or
other instrument governing its corporate affairs, which provision would have
the effect of (i) causing such Principal Party to issue (other than to holders
of Rights pursuant to this Section 13), in connection with, or as a conse-
quence of, the consummation of a transaction referred to in this Section 13,
shares of Common Stock of such Principal Party at less than the then current
market price per share thereof (determined pursuant to Section 11(d) hereof) or
securities exercisable for, or convertible into, Common Stock of such Principal
Party at less than such then current market price, or (ii) providing for any
special payment, tax or similar provision in connection with the issuance of
the Common Stock of such Principal Party pursuant to the provisions of Section
13, then, in such event, the Company hereby agrees with each holder of Rights
that it shall not consummate any such transaction unless prior thereto the
Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that
the authorized securities shall be redeemed, so that the applicable provision
will have no effect in connection with, or as a consequence of, the consum-
mation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any
time after the Flip-In Event, enter into any transaction of the type described
in clauses (i) through (iii) of Section 13(a) hereof if (i) at the time of or
immediately after such consolidation, merger, sale, transfer or other
transaction there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, (ii)
prior to, simultaneously with or immediately after such consolidation, merger,
sale, transfer or other transaction, the stockholders of the Person who consti-
tutes, or would constitute, the Principal Party for purposes of Section 13(a)
hereof shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates or Associates or (iii) the form or nature of
organization of the Principal Party would preclude or limit the exercisability
of the Rights.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional Rights (except
prior to the Distribution Date in accordance with Section 11(n) hereof). In
lieu of such fractional Rights, there shall be paid to the registered holders
of the Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Rights are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Rights selected by the Board of Directors of the
Company. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith
by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Stock (other than fractions which are integral multiples of one one-
thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). Interests in fractions of Preferred Stock in
integral multiples of one one-thousandth of a share of Preferred Stock may, at
the election of the Company, be evidenced by depositary receipts, pursuant to
an appropriate agreement between the Company and a depositary selected by it;
provided, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they
are entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-thousandth of a share of Preferred Stock, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current per share market price of one share of Preferred
Stock (as determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Stock), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate (or, prior to
the Distribution Date, such Common Stock) in the manner provided therein and in
this Agreement. Without limiting the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this
Agreement and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened violations of, the
obligations of any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right,
by accepting the same, consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or agency of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the
Person in whose name the Right Certificate (or, prior to the Distribution Date,
the Common Stock certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificates or the Common Stock certificate made by
anyone other than the Company or the Rights Agent) for all purposes what-
soever, and neither the Company nor the Rights Agent shall be affected by any
notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in this Agreement), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability or expense, incurred without gross negligence, bad
faith or willful misconduct on the part of the Rights Agent, for anything done
or omitted by the Rights Agent in connection with the acceptance and administra-
tion of this Agreement, including the costs and expenses of defending against
any claim of liability arising therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Right Certificate or certificate for the Preferred Stock or Common Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust powers of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided, that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates shall have the full force provided in
the Right Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersigna-
ture under its prior name and deliver Right Certificates so countersigned; and
in case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right Certifi-
cates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agree-
ment the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the President and the Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or
any adjustment in the terms of the Rights provided for in Sections 3, 11, 13,
23 and 24, or the ascertaining of the existence of facts that would require any
such change or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of a certificate furnished
pursuant to Section 12, describing such change or adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Preferred Stock or other
securities to be issued pursuant to this Agreement or any Right Certificate or
as to whether any shares of Preferred Stock or other securities will, when
issued, be validly authorized and issued fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowl-
edge and deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person reasonably believed by the Rights Agent to be one of the President or
the Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions. Any application by the Rights Agent for written instructions
from the Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken or omitted by the Rights Agent under this
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any
action taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the
date any officer of the Company actually receives such application unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate contained in the
form of assignment or the form of election to purchase set forth on the reverse
thereof, as the case may be, has not been completed to certify the holder is
not an Acquiring Person (or an Affiliate or Associate thereof), a Rights Agent
shall not take any further action with respect to such requested exercise of
transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock or Preferred Stock by registered or
certified mail, and, following the Distribution Date, to the holders of the
Right Certificates by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock or Preferred Stock by registered or
certified mail, and, following the Distribution Date, to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or
by such a court, shall be a corporation organized and doing business under the
laws of the United States or the laws of any state of the United States or the
District of Columbia, in good standing, having an office in the State of Texas,
which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock, and, following the Distribution Date, mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. Issuance of New Right Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such forms as may be approved by its Board of Directors to reflect any adjust-
ment or change in the Purchase Price and the number or kind or class of shares
or other securities or property purchasable under the Right Certificates made
in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of Common Stock following the Distribution
Date and prior to the Expiration Date, the Company may with respect to shares
of Common Stock so issued or sold pursuant to (i) the exercise of stock
options, (ii) under any employee plan or arrangement, (iii) upon the exercise,
conversion or exchange of securities notes or debentures issued by the Company
or (iv) a contractual obligation of the Company, in each case existing prior to
the Distribution Date, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale.
Section 23. Redemption.
(a) The Board of Directors of the Company may, at any time prior
to the Flip-In Event, redeem all but not less than all the then outstanding
Rights at a redemption price of $.01 per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (the redemption price being hereinafter referred to as the
"Redemption Price"). The redemption of the Rights may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23 (or at such later time as the Board of Directors may establish for the
effectiveness of such redemption), and without any further action and without
any notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within 10 days after such action of
the Board of Directors ordering the redemption of the Rights (or such later
time as the Board of Directors may establish for the effectiveness of such
redemption), the Company shall mail a notice of redemption to all the holders
of the then outstanding Rights at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption shall state the
method by which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at
any time after the Flip-In Event, exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for Common Stock at an
exchange ratio of one share of Common Stock per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (such amount per Right being hereinafter referred to as
the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effect such exchange at any time after any Person
(other than an Exempt Person), together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of shares of Common Stock aggregating
50% or more of the shares of Common Stock then outstanding. From and after the
occurrence of an event specified in Section 13(a) hereof, any Rights that
theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be exercisable only in accordance with Section 13 and may not be
exchanged pursuant to this Section 24(a). The exchange of the Rights by the
Board of Directors may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
(b) Immediately upon the effectiveness of the action of the
Board of Directors of the Company ordering the exchange of any Rights pursuant
to paragraph (a) of this Section 24 and without any further action and without
any notice, the right to exercise such Rights shall terminate and the only
right thereafter of a holder of such Rights shall be to receive that number of
shares of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give, or
any defect in, such notice shall not affect the validity of such exchange. The
Company shall promptly mail a notice of any such exchange to all of the holders
of the Rights so exchanged at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the
exchange of the shares of Common Stock for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
11(a)(ii) hereof) held by each holder of Rights.
(c) The Company may at its option substitute, and, in the event
that there shall not be sufficient shares of Common Stock issued but not
outstanding or authorized but unissued to permit an exchange of Rights for
Common Stock as contemplated in accordance with this Section 24, the Company
shall substitute to the extent of such insufficiency, for each share of Common
Stock that would otherwise be issuable upon exchange of a Right, a number of
shares of Preferred Stock or fraction thereof (or equivalent preferred shares,
as such term is defined in Section 11(b)) such that the current per share
market price (determined pursuant to Section 11(d) hereof) of one share of
Preferred Stock (or equivalent preferred share) multiplied by such number or
fraction is equal to the current per share market price of one share of Common
Stock (determined pursuant to Section 11(d) hereof) as of the date of the Flip-
In Event.
(d) The Company shall not, in connection with any exchange
pursuant to this Section 24, be required to issue fractions of shares of Common
Stock or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of such fractional shares of Common Stock, the Company shall
pay to the registered holders of the Right Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable an amount in
cash equal to the same fraction of the current per share market price of a
whole share of Common Stock (as determined pursuant to Section 11(d) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall at any time after the earlier of
the Distribution Date or the Stock Acquisition Date propose (i) to pay any
dividend payable in stock of any class to the holders of its Preferred Stock or
to make any other distribution to the holders of its Preferred Stock (other
than a regular quarterly cash dividend), (ii) to offer to the holders of its
Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of
its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding Preferred Stock), (iv) to effect the liquidation,
dissolution or winding up of the Company, or (v) to declare or pay any dividend
on the Common Stock payable in Common Stock or to effect a subdivision, combi-
nation or consolidation of the Common Stock (by reclassification or otherwise
than by payment of dividends in Common Stock), then, in each such case, the
Company shall give to each holder of a Right Certificate, in accordance with
Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, or distribution of rights
or warrants, or the date on which such liquidation, dissolution or winding up
is to take place and the date of participation therein by the holders of the
Common Stock and/or Preferred Stock, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or
(ii) above at least 10 days prior to the record date for determining holders of
the Preferred Stock for purposes of such action, and in the case of any such
other action, at least 10 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the Common Stock
and/or Preferred Stock, whichever shall be the earlier.
(b) In case any event described in Section 11(a)(ii) or Section
13 shall occur then the Company shall as soon as practicable thereafter give to
each holder of a Right Certificate (or if occurring prior to the Distribution
Date, the holders of the Common Stock) in accordance with Section 26 hereof, a
notice of the occurrence of such event, which notice shall describe such event
and the consequences of such event to holders of Rights under Section 11(a)(ii)
and Section 13 hereof.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
The Bombay Company, Inc.
550 Bailey Avenue, Suite 700
Fort Worth, Texas 76107
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
The First National Bank of Boston
150 Royall Street
45-02-62
Canton, MA 02021
Attention: Shareholder Services Administrator
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Except as provided in the
penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of
this Agreement in any respect without the approval of any holders of the
Rights. At any time when the Rights are no longer redeemable, except as
provided in the penultimate sentence of this Section 27, the Company may, and
the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
to (i) cure any ambiguity, (ii) correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) shorten or lengthen any time period hereunder, or (iv) change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable; provided that no such supplement or amendment shall
adversely affect the interests of the holders of Rights as such (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person), and no
such amendment may cause the rights again to become redeemable or cause the
Agreement again to become amendable other than in accordance with this
sentence. Notwithstanding anything contained in this Agreement to the
contrary, no supplement or amendment shall be made which changes the Redemption
Price. Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agree-
ment shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior
to the Distribution Date, the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Stock).
Section 30. Determinations and Actions by the Board of Directors.
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise the rights and powers
specifically granted to the Board of Directors of the Company or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including,
without limitation, a determination to redeem or not redeem the Rights or to
amend this Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) that are done or made by the Board of Directors of
the Company in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights, as such, and all other
parties, and (y) not subject the Board of Directors to any liability to the
holders of the Rights.
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and attested, all as of the day and year first above
written.
THE BOMBAY COMPANY, INC.
By______________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON,
as Rights Agent
By______________________________
Name:
Title:
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
THE BOMBAY COMPANY, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The Bombay Company, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware, in accordance with
the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Restated Certificate of Incorporation of
the said Corporation, the said Board of Directors on June 1, 1995 adopted the
following resolution creating a series of 400,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions
of the Restated Certificate of Incorporation, a series of
Preferred Stock, par value $1.00 per share, of the Corporation be
and hereby is created, and that the designation and number of
shares thereof and the voting and other powers, preferences and
relative, participating, optional or other rights of the shares of
such series and the qualifications, limitations and restrictions
thereof are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of
Preferred Stock that shall be designated as "Series A Junior Participating
Preferred Stock," and the number of shares constituting such series shall be
400,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors; provided, however, that no decrease shall reduce the
number of shares of Series A Junior Participating Preferred Stock to less than
the number of shares then issued and outstanding plus the number of shares
issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation.
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the
holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Junior Participating Preferred Stock with
respect to dividends, the holders of shares of Series A Junior Participating
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Series A Junior Participating
Preferred Stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of May, August, November and
February in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a share of Series A
Junior Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) the Adjustment Number
(as defined below) times the aggregate per share amount of all cash dividends,
and the Adjustment Number times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock,
par value $1.00 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. The
"Adjustment Number" shall initially be 1000. In the event the Corporation
shall at any time after June 1, 1995 (the "Rights Declaration Date") (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Junior Participating Preferred Stock as provided
in paragraph (A) above immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series A Junior Participating Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Junior Participating Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Junior Participating Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 60 days prior to the date
fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred
Stock shall entitle the holder thereof to a number of votes equal to the
Adjustment Number on all matters submitted to a vote of the stockholders of the
Corporation.
(B) Except as required by law and by Section 10 hereof,
holders of Series A Junior Participating Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series A Junior Participating Preferred Stock outstanding shall have been paid
in full, the Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Junior Participating Preferred Stock, except dividends paid ratably on the
Series A Junior Participating Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled; or
(iii) purchase or otherwise acquire for consideration
any shares of Series A Junior Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A Junior Participating Preferred
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of Series
A Junior Participating Preferred Stock, or to such holders and holders of any
such shares ranking on a parity therewith, upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Junior Participat-
ing Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired promptly after the acquisition thereof. All
such shares shall upon their retirement become authorized but unissued shares
of Preferred Stock and may be reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of Directors,
subject to any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) the Adjustment Number. Following the payment of the full
amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of (1) Series A Junior Participating
Preferred Stock and (2) Common Stock, respectively, (a) holders of Series A
Junior Participating Preferred Stock and (b) holders of shares of Common Stock
shall, subject to the prior rights of all other series of Preferred Stock, if
any, ranking prior thereto, receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to (x) the Series A Junior Participating Preferred Stock and (y)
the Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, that rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) Neither the merger or consolidation of the Corporation
into or with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6.
7. Consolidation, Merger, Etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior Participating
Preferred Stock shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's Preferred Stock as
to the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise, and shall rank senior to the Common
Stock as to such matters.
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds of the outstanding
shares of Series A Junior Participating Preferred Stock, voting separately as a
class.
11. Fractional Shares. Series A Junior Participating Preferred
Stock may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this ____ day of __________, 1995.
THE BOMBAY COMPANY, INC.
By:
Name:
Title:
Exhibit B
Form of Right Certificate
Certificate No. R- ____
NOT EXERCISABLE AFTER June 1, 2005 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO
IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREE-
MENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID
AND WILL NO LONGER BE TRANSFERABLE.
Right Certificate
THE BOMBAY COMPANY, INC.
This certifies that _______________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of June 1, 1995, as the same may be amended from
time to time (the "Rights Agreement"), between The Bombay Company, Inc., a
Delaware corporation (the "Company"), and The First National Bank of Boston, as
Rights Agent (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M., Fort Worth, Texas time, on June 1, 2005 at the office
or agency of the Rights Agent designated for such purpose, or of its successor
as Rights Agent, one one-thousandth of a fully paid non-assessable share of
Series A Junior Participating Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), of the Company, at a purchase price of $50.00 per one one-
thousandth of a share of Preferred Stock (the "Purchase Price"), upon presenta-
tion and surrender of this Right Certificate with the Form of Election to
Purchase duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of one one-thousandths of a share of Preferred
Stock which may be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of June
15, 1995, based on the Preferred Stock as constituted at such date. As
provided in the Rights Agreement, the Purchase Price, the number of one one-
thousandths of a share of Preferred Stock (or other securities or property)
which may be purchased upon the exercise of the Rights and the number of Rights
evidenced by this Right Certificate are subject to modification and adjustment
upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned office or agency of the Rights Agent. The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates,
upon surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a
like aggregate number of shares of Preferred Stock as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a
redemption price of $.01 per Right or (ii) may be exchanged in whole or in part
for shares of the Company's Common Stock, par value $1.00 per share, or shares
of Preferred Stock.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock,
which may, at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement) or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of ________________ __, 199_.
THE BOMBAY COMPANY, INC.
ATTEST: By:_______________________
[Title]
__________________________
[Title]
Countersigned:
THE FIRST NATIONAL BANK OF BOSTON,
as Rights Agent
By _______________________
[Title]
B-7
<PAGE>
<1>
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED __________________________ hereby sells,
assigns and transfers unto
(Please print name and address of transferee)
Rights represented by this Right Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
Attorney, to transfer said Rights on the books of the within-named Company,
with full power of substitution.
Dated: ______________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, trust company, broker,
dealer or other eligible institution participating in a recognized signature
guarantee medallion program.
................................................................................
(To be completed)
The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by, were not acquired by the
undersigned from, and are not being assigned to an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
Signature
B-7
<PAGE>
<2>
<PAGE>
Form of Reverse Side of Right Certificate - continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
To THE BOMBAY COMPANY, INC.:
The undersigned hereby irrevocably elects to exercise ___________
Rights represented by this Right Certificate to purchase the shares of
Preferred Stock (or other securities or property) issuable upon the exercise of
such Rights and requests that certificates for such shares of Preferred Stock
(or such other securities) be issued in the name of:
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
Dated: ________________
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed:
Signature must be guaranteed by a bank, trust company, broker,
dealer or other eligible institution participating in a recognized signature
guarantee medallion program.
B-7
<PAGE>
<3>
<PAGE>
Form of Reverse Side of Right Certificate - continued
(To be completed)
The undersigned certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).
Signature
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, such Assignment or Election to Purchase will not be honored.
Exhibit C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREE-
MENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BE-
COMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND
CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO
LONGER BE TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF PREFERRED STOCK OF
THE BOMBAY COMPANY, INC.
On June 1, 1995, the Board of Directors of The Bombay Company,
Inc. (the "Company") declared a dividend of one preferred share purchase right
(a "Right") for each outstanding share of common stock, par value $1.00 per
share, of the Company (the "Common Stock"). The dividend is payable on
June 15, 1995 (the "Record Date") to the stockholders of record on that date.
Each Right entitles the registered holder to purchase from the Company one one-
thousandth of a share of Series A Junior Participating Preferred Stock, par
value $1.00 per share (the "Preferred Stock") of the Company at a price of
$50.00 per one one-thousandth of a share of Preferred Stock (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement dated as of June 1, 1995, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and The
First National Bank of Boston, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock or (ii) 10 business days (or such later date
as may be determined by action of the Board of Directors prior to such time as
any person or group of affiliated persons becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the outstanding
shares of Common Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate together with a copy of this Summary of Rights.
The Rights Agreement provides that, until the Distribution Date
(or earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the Common Stock. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Common Stock
certificates issued after the Record Date upon transfer or new issuances of
Common Stock will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for shares of
Common Stock outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights, will also constitute the transfer of the Rights
associated with the shares of Common Stock represented by such certificate. As
soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution Date
and such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on June 1, 2005 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of the Rights is
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase Preferred Stock at a
price, or securities convertible into Preferred Stock with a conversion price,
less than the then-current market price of the Preferred Stock or (iii) upon
the distribution to holders of the Preferred Stock of evidences of indebtedness
or assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights is subject to adjustment in the
event of a stock dividend on the Common Stock payable in shares of Common Stock
or subdivisions, consolidations or combinations of the Common Stock occurring,
in any such case, prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights
will not be redeemable. Each share of Preferred Stock will be entitled, when,
as and if declared, to a minimum preferential quarterly dividend payment of
$1.00 per share but will be entitled to an aggregate dividend of 1000 times the
dividend declared per share of Common Stock. In the event of liquidation, the
holders of the Preferred Stock will be entitled to a minimum preferential
liquidation payment of $100 per share (plus any accrued but unpaid dividends)
but will be entitled to an aggregate payment of 1000 times the payment made per
share of Common Stock. Each share of Preferred Stock will have 1000 votes,
voting together with the Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Common Stock are
converted or exchanged, each share of Preferred Stock will be entitled to
receive 1000 times the amount received per share of Common Stock. These rights
are protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend,
liquidation and voting rights, the value of the one one-thousandth interest in
a share of Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right at the then-
current exercise price of the Right, that number of shares of Common Stock
having a market value of two times the exercise price of the Right.
In the event that, after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are
sold, proper provisions will be made so that each holder of a Right (other than
Rights beneficially owned by an Acquiring Person which will have become void)
will thereafter have the right to receive, upon the exercise thereof at the
then-current exercise price of the Right, that number of shares of common stock
of the person with whom the Company has engaged in the foregoing transaction
(or its parent), which number of shares at the time of such transaction will
have a market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person
and prior to the earlier of one of the events described in the previous
paragraph or the acquisition by such person or group of 50% or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group which will
have become void), in whole or in part, for shares of Common Stock or Preferred
Stock (or a series of the Company's preferred stock having equivalent rights,
preferences and privileges), at an exchange ratio of one share of Common Stock,
or a fractional share of Preferred Stock (or other preferred stock) equivalent
in value thereto, per Right.
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1%
in such Purchase Price. No fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), and in lieu thereof an adjustment in cash
will be made based on the market price of the Preferred Stock on the last
trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such,
the Board of Directors of the Company may redeem the Rights in whole, but not
in part, at a price of $.01 per Right (the "Redemption Price"). The redemption
of the Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
For so long as the Rights are then redeemable, the Company may,
except with respect to the redemption price, amend the Rights in any manner.
After the Rights are no longer redeemable, the Company may, except with respect
to the redemption price, amend the Rights in any manner that does not adversely
affect the interests of holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated Monday, June 12, 1995. A copy of the Rights Agreement is available free
of charge from the Company. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, as the same may be amended from time to time, which is hereby
incorporated herein by reference.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>ex10bsupplementalstock.txt
<DESCRIPTION>EX 10B - SUPPLEMENTAL STOCK PLAN
<TEXT>
Exhibit 10(b)
THE BOMBAY COMPANY, INC
SUPPLEMENTAL STOCK PROGRAM
(As Amended February 1993, February 1994 and February 1995 and March 1997)
WHEREAS, The Bombay Company, Inc. ("Bombay" or "Company") desires to
establish, on behalf of its eligible employees, a program for the purposes of
enhancing such individuals' investment in the Common Stock of the Company
("Bombay Stock"); and
WHEREAS, to meet this goal, a plan has been designed and adopted with the
following plan features: (i) 401(k) Excess Feature, whereby its eligible
employees who, due to benefit limitations in applicable tax laws under the
Internal Revenue Code or Revenue Canada, are unable to have further
contributions made on their behalf under The Bombay Company, Inc. Employee
401(k) Savings and Stock Ownership Plan or its Canadian equivalent ("401(k)
Plan") may continue their contributions and obtain Bombay Stock; (ii) Excess
Bonus Feature whereby selected employees whose earned bonuses exceed a
specified multiple of target bonus levels will be paid such amounts in Bombay
Stock rather than cash; and (iii) Foreign Employee Investment Feature, whereby
eligible employees of the Company employed by or in any of its foreign
subsidiaries, branch offices or operations which do not have a stock plan
comparable to the Company's 401(k) Plan may elect to invest in the Common Stock
of the Company through this Program.
I
NAME, EFFECTIVE DATE AND PROGRAM YEAR
A. NAME OF PLAN: The plan herein created, and sometimes for
convenience referred to herein as the "Program", shall be known as "The Bombay
Company, Inc. Supplemental Stock Program".
B. EFFECTIVE DATE: The effective date of the 401(k) Excess Feature
and the Excess Bonus Feature shall be the 24th day of June, 1992. The
effective date of the Foreign Employee Feature shall be the 18th day of
February 1993.
C. PROGRAM YEAR: The Program Year shall end on December 31 of each
year.
II
ADMINISTRATION
A. ADMINISTRATIVE COMMITTEE: The Program shall be administered by the
Compensation and Human Resources Committee of the Board of Directors (the
"Committee").
B. POWERS AND DUTIES: The Committee shall administer the Program in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Program. Without limiting the generality of the foregoing,
the Committee shall have the following powers:
(1) To make and publish such rules and regulations as it may deem
necessary to carry out the provisions of the Program;
(2) To determine all questions arising in the administration,
interpretation and application of the Program, including questions
of eligibility of Employees and directors and of the status and
rights of Participants, Beneficiaries and any other person
hereunder;
(3) To deliver funds and purchase Bombay Stock for the accounts of the
Participants, as more particularly specified hereinafter;
(4) To decide any dispute arising hereunder;
(5) To construe the provisions of the Program and to correct any
defects therein; and
(6) To provide procedures for the determination of claims for benefits.
The determination of the Committee as to any questions arising hereunder
shall be conclusive and binding on all persons.
C. ORGANIZATION AND OPERATION OF THE COMMITTEE: The Committee shall
act by a majority of its members at the time in office, and such action may be
taken either by a vote at a meeting or in writing without a meeting. The
Committee may authorize any one or more of its members to execute any document
or documents on behalf of the Committee.
The Committee may adopt such bylaws and regulations as it deems desirable
for the conduct of its affairs, and may appoint such accountants, counsel,
specialists, and other persons as it deems necessary or desirable in connection
with the administration of the Program. The Committee shall be entitled to
rely conclusively upon, and shall be fully protected in any action taken by it
in good faith in relying upon any opinions or reports which shall be furnished
to it by any such accountants, counsel, or other specialists.
The Committee may arrange for the Company to perform any of the Program's
ministerial functions, including but not limited to the maintenance of records
of accounts of each Participant, preparation and distribution of Internal
Revenue Service, Securities and Exchange Act, or Labor Department forms or
documents required to be provided to each Participant, and delivery of Bombay
Stock or cash to the Participants. The Company shall furnish such clerical
assistance on a full or part time basis as shall from time to time be
reasonable or desirable to assist in the administration of the Program, and
shall pay all costs and expenses, including fees and expenses, incurred in the
administration of the Program, save and except those costs and expenses,
including attorneys' fees, which are charged to the accounts of Participants by
a court of competent jurisdiction in any litigation in which the Program or any
of its fiduciaries are a party.
D. RECORDS AND REPORTS: The Committee shall keep a record of all its
proceedings and acts, and shall keep all such books of account, records, and
other data as may be necessary for the proper administration of the Program.
The Committee shall notify the Board of Directors of any action taken by the
Committee, and, when required, shall notify any other interested person or
persons. Separate records as to each Participant's account shall be
maintained. Where appropriate, within a reasonable period of time after the
end of each calendar quarter, each Participant shall receive a statement
setting forth the total number of shares credited to his account which will
include the Employee's contributions, Company contributions, other
contributions, if any, and the cost basis of said shares.
E. IMMUNITY FROM LIABILITY: No member of the Committee shall incur
any liability for any action or failure to act, excepting liability for his own
gross negligence or willful misconduct. The Company shall indemnify each
member of the Committee against any and all claims, losses, damages, expenses
and liabilities, including any amounts paid in settlement with the Committee's
approval, arising from any action or failure to act, except when the same is
judicially determined to be due to the gross negligence or willful misconduct
of such member. The Committee may, at its discretion, require the written
approval or disapproval of the Company prior to taking action in any particular
matter made the subject of its responsibility hereunder.
F. REVERSION AND DIVERSION: Only in the event of manifest error shall
the Company recover any part of the contributions made to this Program and
credited to a Participant's account. None of the contributions to this
Program, except as required to pay taxes and administrative expenses, shall be
used or diverted to purposes other than for the exclusive benefit of the
Participants or their beneficiaries or estates.
III
PARTICIPATION IN THE PROGRAM
A. ADOPTION OF PROGRAM. The Company and each of its subsidiaries may
adopt the Program for all or part of its Employees as the Board of Directors
may in its discretion approve. Bombay and each of its subsidiaries adopting
the Program are hereinafter collectively referred to as "Company".
B. ELIGIBILITY. Subject to the provisions of Section XVII, with
respect to union-represented Employees, only Employees selected by the
Committee are eligible to participate in the Program. For purposes of the
401(k) Excess Feature, selected Employees are eligible only if their
contributions are limited in any 401(k) Plan plan year ("401(k) Plan Year") as
a result of Internal Revenue Code Sections 402(g), 415(c), 401(a)(17) and/or
401(k)(3) or similar limitations imposed in Canada by Revenue Canada and
following such Employee's election to participate being received in the
Program's administrative office. Thereafter, the Employee may make
contributions to the Program through Employee Payroll Deductions as a
Participant for the remainder of any 401(k) Plan Year after the date on which
the contribution limit is reached. Participation in the 401(k) Excess Feature
is entirely voluntary and an election to participate must be made pursuant to
Section III(C)(1). For purposes of the Excess Bonus Feature, only Employees
selected by the Committee or its designated representative shall be eligible to
participate. For purposes of the Foreign Employee Feature, only employees
employed in foreign operations (except any corporate officer who shall not be
eligible for this Foreign Employee Feature) shall be eligible to participate
upon completion of one (1) year of service to the Company during which such
employee worked a minimum of 1,000 hours. To remain as a Participant in the
Program, an Employee must continue to be an Employee engaged in service to the
Company.
C. APPLICATION FOR PARTICIPATION.
1. 401(k) Excess Feature. In order to become a Participant
under the 401(k) Excess Feature, each eligible Employee shall
execute a written application stating the following:
a. The intent to participate in the Program;
b. The consent for Employee Payroll Deductions as set
forth below; and
c. The acknowledgment and consent to the withholding of
taxes resulting from the Company Contribution during
the Taxable Year in which the Company Contribution is
made.
The Employee shall have thirty (30) days from eligibility of
participation in the Program to file a written application for participation.
Participation in the Program shall become effective on the start of the next
pay period after the application is received by the Company or after a
Participant has reached the contribution limit in any 401(k) Plan Year
following the year of initial enrollment in the Program.
In the event that an eligible Employee elects not to participate in the
Program or fails to file a written application for participation during the
required period, payroll deductions shall cease upon reaching the 401(k) limit
and no further Company contribution will be credited to Participant for the
remainder of the 401(k) Plan Year.
Participants shall designate their participation and desire to
participate through payroll deductions authorized by the completed application
form. The initial authorization shall continue in effect, notwithstanding any
change in Participant's Earnings, until the Participant becomes ineligible for
the Program. Deductions made subject to such authorization are called
"Employee Payroll Deductions".
After receipt of a completed application form by the Program
administration office Participants shall have Employee Payroll Deductions
withheld at the rate of up to 5% of Earnings, in excess of the maximum amount
of Earnings needed to reach one of the contribution limits to the 401(k) Plan,
as set out in the Internal Revenue Code of 1986, or as otherwise set forth by
the Committee. Contributions may be made to the Program for the remainder of
the 401(k) Plan Year.
2. Excess Bonus Feature. In order to become a Participant under
the Excess Bonus Feature, each eligible Employee shall
execute a written application stating the following:
a. The intention to participate in the Excess Bonus
Feature;
b. The consent for any bonus payments due in excess of a
specified multiple of the Participant's target level to
be paid in Bombay Stock; and
c. The acknowledgment that the distribution of Bombay
Stock in lieu of bonus shall be net of federal income
tax withholding at the maximum marginal rate.
3. Foreign Employee Feature. In order to become a Participant
under the Foreign Employee Feature, each eligible Employee
shall execute a written application stating the following:
a. The intention to participate in the Foreign Employee
Feature;
b. The consent for Employee Payroll Deductions as set
forth below; and
c. The acknowledgment and consent to the withholding of
any applicable taxes attributable to any contribution
made, including the Company contribution, during the
Taxable Year in which such contributions are made.
Once an Employee has met the necessary eligibility requirements for
participation in the Program, contributions under Section IV shall begin upon
receipt of a completed written application form by the Program Administration
office. Participation in the Program shall become effective on the start of
the next pay period after the application is received and processed by the
Company. Participants shall designate their payroll deductions in the written
application form. The initial
deduction percentage, which may be up to 5% of Earnings, shall continue in
effect, notwithstanding any change in Participant's Earnings, until the
Participant changes the deduction percentage or becomes ineligible for the
Program. Deductions made subject to such authorization are called "Employee
Payroll Deductions".
IV
CREDITS TO PARTICIPANTS
A. 401(k) EXCESS FEATURE AND FOREIGN EMPLOYEE FEATURE: As soon as
practicable after the end of each calendar month after eligibility and
participation election, the following credits shall be made to each
Participant's account:
1. Employee Payroll Deduction. The amount of Employee Payroll
Deductions withheld during such month;
2. Company Contribution. A monthly amount (the "Company
Contribution") calculated by multiplying the Employee Payroll
Deduction by 75%.
3. Application of Credits. The Employee Payroll Deductions and
Company Contributions are to be applied to the acquisition of
Bombay Stock monthly and shall be credited to the
Participant's account as soon as practicable thereafter in
the form of Bombay Stock and any Fractional Share (as defined
in Section XVI) based upon the number of shares of Bombay
Stock purchasable at a price equal to the average closing
price of Bombay Stock as reported for the New York Stock
Exchange composite transactions for each trading day of the
calendar month for which the deductions or contributions are
made (the "Stock Price"). Except for excess contributions
made because of fraud or mistake of fact and returned within
one (1) year after payment to the Company under this Program,
no part of the contributions of the Company shall be
recoverable by it under any circumstances.
B. EXCESS BONUS FEATURE: Upon final computation of annual bonus
amounts due to Participants of the Excess Bonus Feature, the number of shares
of Bombay Stock to be distributed shall be determined by taking the dollar
amount of the bonus in excess of a Committee-designated multiple of target
bonus, less federal income tax withholding at the maximum marginal rate,
divided by the closing price of Bombay Stock on the date of final approval of
such bonus by the Board of Directors, or otherwise for non-executive officers.
C. OTHER CONTRIBUTIONS-DIVIDEND INCOME ON STOCK. All cash dividends
paid on shares credited to the Participant's account on the record date
designated by the Company for such dividend shall be allocated when paid to
each Participant's account as other contributions ("Other Contributions") and
applied to the purchase of Bombay Stock. These Other Contributions will not be
subject to matching contributions by the Company.
D. STOCK DIVIDEND OR SPLIT-UP. Any Bombay Stock issuable by the
Company as a stock dividend or split-up on the Bombay Stock and any Fractional
Share to the credit of the Participant on the record date designated by the
Company for such stock dividend or split-up shall be credited to each
Participant's account (in an amount per share equivalent to any stock dividend
or split-up actually paid by the Company on its Bombay Stock then outstanding)
as soon as practicable after the distribution date of such stock dividend or
split-up.
E. EXCESS 401(k) CONTRIBUTION REFUNDS. Any refund of excess 401(k)
contributions from the 401(k) Plan issuable to a Participant in the Program may
be deposited by such Participant into the Program with written notice to the
Administrative Committee. Such refund contribution shall be credited to
Participant's account for the purchase of Stock at the Stock Price applicable
for the month in which the deposit is made.
V
INVESTMENT
A. BOMBAY STOCK.
1. The Committee will invest all or substantially all of the
contributions to the Program in Bombay Stock.
2. Any Bombay Stock required for the Program may be treasury
shares or original issue shares.
3. Bombay Stock may be held by the Company, as custodian, at its
discretion, either in its name or in the name of one or more
nominees.
B. OTHER INTEREST AND INCOME. Except as herein expressly provided, no
interest or other income will be paid or credited on account of Employee
Payroll Deductions, Company Contributions, Other Contributions or any other
amount payable or credited to Participants.
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VI
HOLDING PERIOD
A. DURATION. The Company shall retain for the "Holding Period" all
Bombay Stock credited to the Participant's account under the Program. The
Holding Period with respect to any Bombay Stock shall commence on the date the
Bombay Stock is credited to the Participant's account and shall end on the
401(k) Excess Distribution Date or the Excess Bonus Distribution Date or the
Foreign Employee Distribution Date, whichever is applicable.
B. DISTRIBUTION. As promptly as practicable after the Holding Period,
the Company shall distribute the full shares of Bombay Stock then held which
was credited to the Participant's account under the Program since the Holding
Period began. At the option of the Company, Fractional Shares, if any, shall
be paid in cash or shall be carried forward into the next Program Year in the
Participant's account.
VII
DISTRIBUTIONS AND PAYMENTS
A. 401(k) EXCESS FEATURE AND FOREIGN EMPLOYEE FEATURE:
1. During employment, an annual distribution of a Participant's
account shall occur approximately 45 days following the
completion of the Program Year (the "401(k) Excess
Distribution Date" or "Foreign Employee Distribution Date,"
whichever is applicable to Participant). The full
distribution of all Bombay Stock in a Participant's account
will also be made promptly upon receipt of a written Notice
of Withdrawal at the Program administration office or if the
Company records have evidence of the Participant's (a) death
or (b) termination of Employment, either voluntarily,
involuntarily or by retirement at age 65 or older.
2. Employee Payroll Deductions, Company Contributions and Other
Contributions not yet used to purchase Bombay Stock will be
paid over to the withdrawing Participant in cash.
3. Upon withdrawal, no Fractional Share will be distributed. In
lieu of distribution of such Fractional Share the Participant
will be paid cash for the value of the Fractional Share based
upon the Stock Price for the previous month.
4. The number of shares of Bombay Stock to be distributed will
be determined by the number of shares credited to a
Participant's account:
a. At the end of the calendar month preceding the receipt
of the written Notice of Withdrawal by the Program
administration office; or
b. In the absence of receipt by the Program administration
office of a Notice of Withdrawal from the Participant,
Alternate Payee(s), or the Participant's Beneficiary,
at the end of the month preceding the month in which
one of the two withdrawal events is recorded in the
records of the Program administration office,
regardless of the month in which such event occurred.
5. In the event a Participant eligible for the 401(k) Plan
ceases participation or makes a withdrawal from the 401(k)
Plan, the Participant will be suspended from participation in
the Program until participation in the 401(k) Plan resumes.
B. EXCESS BONUS FEATURE: The Bombay Stock credited to the Participant
pursuant to the Excess Bonus Feature shall be distributed to such Participant
within 30 days following the final determination of the number of shares (the
"Excess Bonus Distribution Date") as set forth in Section IV(B).
C. RECIPIENT OF DISTRIBUTION. All distributions will be made to the
Participant except distributions resulting from death or divorce of the
Participant. In the event of death, payment will be made to the Beneficiary
designated by the Participant or as otherwise provided by the Program and the
Participant's Beneficiary may act on behalf of the Participant. In the event
of a Participant's divorce, a certified copy of the divorce decree or Qualified
Domestic Relations Order (collectively referred to hereinafter as "Court
Order") must be submitted to the Program administration office together with
any other identifying information as required by the Program administration
office. The Participant's account will then be divided as specifically ordered
in the Court Order and the shares awarded to the Alternate Payee(s) will be
withdrawn. Distribution to the Participant, the Alternate Payee(s), or
Beneficiary shall be made as soon as practicable after the event permitting
withdrawal.
VIII
BENEFICIARY
A. DESIGNATION OF BENEFICIARY. Participants shall file with the
Company a written designation of Beneficiary designating who is to receive any
Bombay Stock, Fractional Share payment, and any cash to the Participant's
credit under the Program in the event of death prior to delivery to him of such
Bombay Stock, Fractional Share payment or cash due to Participant.
B. CHANGE OF BENEFICIARY. A Participant may change a prior
Beneficiary designation at any time by written notice being delivered to the
Program administration office. Such change shall take effect as of the date
the Participant signed such written notice, whether or not Participant is
living at the time of receipt of such notice by the Program administration
office, except that the change of Beneficiary shall not be effective if the
Program has distributed the Participant's account prior to receipt of the
change of Beneficiary form.
C. DISTRIBUTION TO BENEFICIARY. Upon the death of a Participant and
upon receipt of proof deemed adequate by the Program administration office of
the identity and existence at the Participant's death of a Beneficiary or
Beneficiaries validly designated under the Program, distribution will be made
to the Beneficiary or Beneficiaries in the manner and form as set forth in
Section VII hereof.
D. ABSENCE OF BENEFICIARY. In the absence of a Beneficiary designated
under the Program who is living at the time of Participant's death,
distribution shall be made to the executor or administrator of the estate of
the Participant. If no executor or administrator has been appointed to the
knowledge of the Program administration office (or in the event such executor
or administrator has been disqualified), the distribution may be made to such
person or persons as the Program administration office shall be satisfied is or
are legally entitled thereto.
E. INTEREST OF BENEFICIARY IN PROGRAM. No designated Beneficiary
shall, prior to the death of the Participant, acquire any interest in the
Bombay Stock, Fractional Share, or cash credited to the Participant under the
Program or in the assets of the Program.
IX
VOTING OF STOCKS
A. Voting Rights - In General.
While Bombay Stock is held by the Company as custodian, the Company will
cause to be delivered to each Participant all notices of meetings, proxy
statements and other materials distributed by the Company to its shareholders.
The full shares of Bombay Stock in each Participant's account will be voted in
accordance with the Participant's signed proxy instructions timely delivered to
the Company or its agent. Fractional Shares shall be voted on a combined basis
in order to comply, to the extent possible, with all timely written
instructions received from Participants. If timely written instructions are
not received from a Participant, the Company shall vote such Participant's
shares in the same proportion as those shares of stock with respect to which
timely written instructions were received.
2
<PAGE>
B. Voting Rights and Tender Rights - After Commencement of a Tender
Offer.
Notwithstanding anything to the contrary in the Program, the following
provisions shall govern after the Commencement Date of a Tender Offer (each as
hereafter defined):
l. For purposes of this Section IX, the terms set forth below
shall have the following meanings:
"Affiliate" shall mean, with respect to the Company,
any person or entity that directly or indirectly,
through one or more intermediaries controls, is
controlled by or is under common control with The
Bombay Company, Inc.
"Commencement Date" shall mean the date of public
announcement of the commencement of any Tender Offer.
"Credited Shares" shall mean, with respect to a
Participant, any and all shares of Bombay Stock
credited to such Participant's account that have been
transferred to the Special Custodian in accordance with
Section IX(B)(2) hereof.
"Special Custodian" shall mean the bank, trust company
or other entity appointed as such by the Company in
accordance with Section IX(B)(2) hereof.
"Tender Offer" shall mean any tender offer for, or
request or invitation for tenders of, shares of Bombay
Stock, whether the consideration proposed to be
exchanged for such shares is cash, the securities of
any person or any other form of property.
"Tender Rights" shall mean any and all rights to tender
or exchange shares of Bombay Stock pursuant to a Tender
Offer.
"Voting Rights" shall mean any and all rights to vote
or consent with respect to shares of Bombay Stock.
2. As promptly as practicable following any Commencement Date,
the Company shall (a) appoint a bank, trust company or other
entity that is not an Affiliate of the Company to act as
Special Custodian for Bombay Stock held by the Company as
custodian under the Program and (b) irrevocably transfer all
shares of Bombay Stock then held by the Company as custodian
to the Special Custodian. Thereafter, the Company shall,
until the date on which the Tender Offer is consummated or
abandoned, irrevocably transfer any and all additional shares
of Bombay Stock acquired by it as custodian to the Special
Custodian. Cash held by the Company as custodian shall not
be transferred to the Special Custodian.
3. Except as otherwise expressly provided in Section IX(B)(4)
hereof, the Special Custodian shall hold shares of Bombay
Stock transferred to it by the Company on such terms and
conditions of the Program, as shall be agreed upon by the
Company and the Special Custodian; provided, however, that,
with respect to the rights of a Participant to shares of
Bombay Stock, the terms and conditions under which the
Special Custodian shall hold shares of Bombay Stock
transferred to it shall be at least as favorable as those
available to a Participant under the Program.
4. The following provisions shall govern the exercise by the
Special Custodian of Voting Rights and Tender Rights with
respect to shares of Bombay Stock transferred to it by the
Company:
a. The Special Custodian shall exercise Tender Rights with
respect to a Participant's Credited Shares in
accordance with timely written instructions delivered
by such Participant to the Special Custodian. Tender
Rights with respect to Fractional Shares shall be
exercised on a combined basis in order to comply, to
the extent possible, with all timely written
instructions received from Participants. If timely
written instructions are not received from a
Participant, the Special Custodian shall not exercise
Tender Rights with respect to such Participant's
Credited Shares.
b. The Special Custodian shall exercise Voting Rights with
respect to a Participant's Credited Shares in
accordance with timely written instructions delivered
by such Participant to the Special Custodian. Voting
Rights with respect to Fractional Shares shall be
exercised on a combined basis in order to comply, to
the extent possible, with all timely written
instructions received from Participants. If timely
written instructions are not received from a
Participant, the Special Custodian shall exercise
Voting Rights with respect to such Participant's
Credited Shares in the same proportion as those shares
of Bombay Stock with respect to which timely written
instructions were received.
c. The Special Custodian shall use its best efforts to
ensure that Participants are able to direct the
exercise of Voting Rights and Tender Rights on the
basis of the same information, and in accordance with
substantially the same procedures, as are available to
the holders of shares of Bombay Stock. Without
limiting the generality of the foregoing, the Special
Custodian shall take the following actions:
i. Give prior written notice to each Participant of
any occasion upon which Voting Rights or Tender
Rights may be exercised;
ii. Transmit to each Participant any written
information relating to the exercise of Voting
Rights or Tender Rights that is distributed by
the management of the Company or any other
person;
iii. Request written instructions from each
Participant as to the manner in which Voting
Rights or Tender Rights should be exercised; and
iv. Exercise Voting Rights or Tender Rights in
accordance with the written instructions
delivered by the Participant to the Special
Custodian.
d. The Special Custodian shall not disclose to the
Company, and shall maintain strict confidentiality with
respect to, any information regarding the exercise of
Voting Rights or Tender Rights, including, without
limitation, information regarding the identity of any
Participant who exercises or fails to exercise such
rights.
e. Any cash or other property received by the Special
Custodian upon consummation of a Tender Offer shall be
distributed to Participants as promptly as practicable
following receipt thereof.
3
<PAGE>
X
PARTICIPATION BY AFFILIATED COMPANIES
This Program shall apply to any corporation a portion of whose voting
stock is owned directly or indirectly by the Company, and any of its
affiliates, if such company or corporation shall elect to participate and if,
and so long as, such participation shall be approved by the Board of Directors
of the Company. Each participating Company shall be bound by the terms of this
document.
XI
NO WARRANTY OF SECURITY VALUES
Neither the Company, its officers, directors, agents or servants, or the
Committee warrants or represents in any way that the value of Bombay Stock in
which the Participant may have an interest will increase or will not decrease.
Each Participant assumes all risk in connection with any changes in the value
of Bombay Stock to the extent he may have an interest therein.
XII
GENERAL PROVISIONS
A. EXTENT OF CERTAIN RIGHTS OF PARTICIPANTS. Participation in the
Program shall not entitle any Employee to be retained in the service of Company
for any period of time or to continue the present or any other rate of
compensation. The at-will employment right and power of Company to dismiss or
discharge any Employee is specifically reserved.
B. LIMITATION OF PARTICIPANT'S RIGHTS. No Participant nor any person
claiming under or through them shall have any right or interest under the
Program that is not herein expressly granted.
C. ASSIGNMENT. No interest in any Bombay Stock or cash held under the
Program prior to delivery to the Participant as hereinabove provided, shall be
assigned, alienated, pledged, or otherwise encumbered in whole or in part,
either directly by operation of law, or otherwise. If any attempt is made by a
Participant to assign, alienate, pledge, or otherwise encumber his interest in
such Bombay Stock or cash, prior to such delivery, for his debts, liabilities
in tort or contract, or otherwise, then the Committee (in its absolute
discretion) may treat such attempt as an election by the Participant to
withdraw from the Program permanently and submit to any loss of rights as
provided in the Program, except that a Court Order to pay an Alternate
Payee(s), issued by a court of competent jurisdiction, shall not be a violation
under this paragraph which requires a Participant's withdrawal.
D. QUARTERLY STATEMENT OF ACCOUNTS. As soon as practicable after the
end of each calendar quarter in which any contributions are made to the
Program, each Participant shall be furnished with a statement of Bombay Stock
credited to his account.
E. REGISTRATION OF STOCK. Each Participant, Beneficiary or Alternate
Payee shall, at such time as the Program administration office or Bombay may
reasonably request, furnish written instructions for the registration of the
Bombay Stock to be delivered under the Program upon completion of the Holding
Period. Such Bombay Stock will be registered in the name of the Participant,
Beneficiary or Alternate Payee (or if a minor, in the name of another person as
custodian under the Uniform Gifts to Minors Act, or if incompetent, in the name
of the guardian or such other person(s) as the Program Administrative Committee
or Bombay may determine) alone or in his name and that of one such other adult
person as he may designate as joint tenants with right of survivorship, and not
as tenants in common. Such instructions shall remain in effect until receipt
by the Program Administration office of written instructions to change the
registration previously authorized. In the absence of such written
instructions, Bombay Stock to be delivered to a Participant will be registered
in his name or the Alternate Payee's name alone or in the event of his death
prior to such delivery will be registered in the name of the person or persons
entitled thereto.
F. MISCELLANEOUS.
1. No individual administering, or aiding in the administration
of the Program shall have any liability, except as provided
in subparagraph (2) below. As a condition precedent to
participation in the Program or the receipt of benefits
thereunder, such liability if any, is expressly waived and
released by each Participant and by any and all persons
claiming under or through any Participant, such waiver and
release to be conclusively evidenced by the act of
participation or the acceptance of benefits thereunder.
2. No individual administering, or aiding in the administration
of, the Program shall be liable except for his own acts or
omissions and then only for willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved
in the conduct of this office. As used herein, "individual
administering, or aiding in the administration of the
Program" shall include any share owner, director, officer,
Employee or agent of the Company.
3. The Company shall have the right to require compliance with
any legal requirements which it deems necessary as a
condition for delivery of, or payment for, any Bombay Stock
or cash to the credit of any Participant under the Program.
4. By a Participant's act of participating in the Program or by
the acceptance of any of the benefits thereunder, such
Participant and any and all persons claiming under or through
any such Participant, shall thereby be conclusively deemed to
have indicated his acceptance and ratification of, and
consent to, the application of the provisions of the Program.
5. For the purposes of the Program, unless the contrary is
clearly indicated by the context, the use of the masculine
gender shall also include within its meaning the feminine,
and the use of the singular shall also include within its
meaning the plural, and vice versa.
XIII
NOTICES AND COMMUNICATIONS
A. TO PARTICIPANTS. All notices, reports and other communications to
a Participant under or in connection with the Program shall be deemed to have
been duly given, made or delivered when received by the Participant, or (if
mailed) when mailed with postage prepaid and addressed to the Participant at
his address last appearing on the records of the Company.
B. BY PARTICIPANTS. All notices, instructions or other communications
by a Participant to the Company under or in connection with the Program shall
be duly given, made or delivered when received by the Company (550 Bailey
Avenue, Suite 700, Fort Worth, Texas 76107) or when received in the form
specified in writing by the Company and at the location, or by the person,
designated for receipt of such notice, instruction or other communication by
the Company.
XIV
AMENDMENT, SUSPENSION OR TERMINATION
A. AUTHORITY TO AMEND, SUSPEND OR TERMINATE. The Committee may
suspend or terminate the Program, or any portion thereof, at any time and may
amend the Program from time to time in such respects as the Committee may deem
advisable; provided, however, the Program shall not be amended more than once
every 6 months, other than to comport with changes in the Internal Revenue Code
of 1986, as amended, or the rules promulgated thereunder; and provided further,
the Program shall not be amended without shareholder approval to the extent
required by law or the rules of any exchange upon which the Bombay Stock is
listed, (a) to materially increase the number of shares of Bombay Stock which
may be issued under the Program, (b) to materially modify the requirements as
to eligibility for participation in the Program, or (c) to materially increase
the benefits accruing to officers of the Company under the Program. No such
amendment, suspension or termination shall make any change that would
disqualify the Program, or any other plan of the Company intended to be so
qualified, from the exemption provided by Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended.
B. DELEGATION OF AUTHORITY. The Committee may delegate to the
Administrative Committee the authority to amend any provision of this Program,
provided such amendment is (a) of an administrative nature or (b) does not
result in any material increase in costs to the Company.
C. AMENDMENTS. No amendment, suspension or termination shall
adversely affect any rights of a Participant to Bombay Stock, Fractional Share
payment or cash to his credit under the Program as of the date of amendment,
suspension or termination. Upon such termination, all Bombay Stock, Fractional
Share payment or cash to the credit of each Participant under the Program shall
be promptly paid over to him.
XV
APPLICABLE LAW
Any question concerning, or in respect of, the validity, construction,
interpretation, administration and effect of the Program, and of its rules and
regulations, and the rights of any or all persons having or claiming to have an
interest therein or thereunder, shall be governed exclusively and solely in
accordance with the laws of the State of Texas, with jurisdiction for any
action being expressly agreed as being Tarrant County, Texas, where all
contributions and payments under the Program are deemed to take place. The
issuance of shares of Bombay Stock shall be subject to all applicable rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
XVI
DEFINITIONS
For the purposes of the Program, unless some other meaning is clearly
indicated by the context, the following definitions shall be applicable:
"Alternate Payee" shall have the same meaning as defined in Internal
Revenue Code Section 414(p) and in the Employee Retirement Income Security Act
at 29 U.S.C.S. Section 105, as it may be amended from time to time.
"Beneficiary" is defined in Section VIII.
"Bombay Stock" is defined as The Bombay Company, Inc. Common Stock,
$1 par value.
"Committee" is defined as the Compensation and Human Resources Committee
of the Board of Directors of the Company.
"Company" is defined in Section III as Bombay and each of its affiliates
and associates adopting the Program.
"Company Contribution" is defined in Section IV.
"Court Order" is defined in paragraph VII.
"401(k) Plan" means The Bombay Company, Inc. Employee 401(k) Savings and
Stock Ownership Plan or its Canadian equivalent plan.
"Earnings" means the amount which an Employee is receiving as salary or
wages from the Company, including bonuses, payments for overtime, vacation pay,
commissions, and any cost of living adjustment, but excluding living allowance,
any special payments made for services performed outside his regular duties and
any other special payments, except to the extent that the inclusion of any such
items are specifically approved by the Chief Executive Officer of the Company
or by such Employee or Employees of the Company as he may authorize in writing.
Earnings shall not include Company Contributions to the Bombay Stock Purchase
Program.
"Employee" means a regular Employee of the Company receiving wages or
salary, but shall not include any person compensated pursuant to a contract
other than an employment contract with the Company under the terms of which
compensation is paid on a regular fixed salary or wage basis. As used above,
"Employee" shall also include, without limitation, any salesman who is a bona
fide Employee of the Company and recognized as such for Social Security
purposes.
"Employee Payroll Deduction" is defined in Section III.
"Fractional Share" means an interest equivalent to and expressed as a
fraction of a share of Bombay Stock determined by dividing that amount credited
to the Participant to be applied to the purchase of Bombay Stock (but which is
insufficient to acquire a full share of Bombay Stock) by the applicable Stock
Price.
"Holding Period" is defined in Section VI.
"Officers" means the President, any Executive Vice President, Vice
President, Treasurer, Secretary, Assistant Treasurer or Assistant Secretary and
such other Employees as the Board of Directors may designate as "Officers" for
this purpose.
"Other Contribution" is defined in Section IV(C).
"Participant" is an eligible Employee who elects or is selected to
participate in the Program.
"Program" is defined in Section I.
"Stock Price" is defined in Section IV(A).
XVII
EFFECTIVE DATE
A. The Program shall become effective as of the date set forth in
Section I.B. but only upon approvals, rulings and orders (satisfactory to the
Company and, to the extent deemed by the Company to be necessary or desirable)
by the appropriate State and Federal or other government authorities with
respect to the Program and any action contemplated under the Program.
B. Notwithstanding the provisions of Section III, and Paragraph A of
this Section, Employees who are represented by a union (pursuant to a
certification by the National Labor Relations Board or otherwise in accordance
with the provisions of Section 9 of the National Labor Relations Act) shall
become eligible to participate in the Program (a) only after the Company and
such union shall have entered into a written agreement to the effect that the
Program shall be offered to the Employees so represented, and (b) only in
accordance with any conditions or requirements contained in such agreement.
IN WITNESS WHEREOF, the Company has caused this Program to be executed by
its duly appointed officers and its corporate seal to be hereunto affixed as of
the date first written above.
/s/ MICHAEL J. VEITENHEIMER
Michael J. Veitenheimer
Vice President
(SEAL)
4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>ex10cexecutiveltdisability.txt
<DESCRIPTION>EX 10C - EXECUTIVE LT DISABILITY PLAN
<TEXT>
EXHIBIT 10(C)
EXECUTIVE LONG TERM DISABILITY PLAN
EMPLOYEE GROUP BENEFITS
UNDERWRITTEN BY
SUN LIFE ASSURANCE COMPANY OF CANADA
Group Policy Number: 64492
Policy Effective Date: August 1, 2000
Policy Amendment Date: March 1, 2001
This Group Policy applies to all full-time employees of The Bombay Company,
Inc., (the "Company"). The attached Notice provides a higher level of benefits
under the plan to full-time Executive Employees. A copy of the group benefit
plan may be obtained for the Company by contacting the Human Resources
Department at (817) 347-8200.
<PAGE>
SUN LIFE ASSURANCE COMPANY OF CANADA
NOTICE
To All Full-Time Executive Employees of
THE BOMBAY COMPANY, INC.
Group Policy Number 64492
Effective March 1, 2001, certain provisions of the Group Policy have been
amended. The updated language is shown below.
AMOUNT OF INSURANCE
The lesser of:
60% of your Total Monthly Earnings; or
70% (All Source Benefit Percentage) of your Total Monthly
Earnings, less Other Income Benefits.
- the MAXIMUM MONTHLY BENEFIT is $15,000.
Note: Your amount of insurance is also subject to reductions for your
employment earnings.
If you have any questions, contact your Plan Administrator or contact the Sun
Life Center at 1-800-247-6875.
PLEASE FILE THIS NOTICE IN YOUR
GROUP INSURANCE BOOKLET-CERTIFICATE
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>ex10d1996ltincentivestock.txt
<DESCRIPTION>EX 10D - 1996 LT INCENTIVE STOCK PLAN
<TEXT>
EXHIBIT 10(D)
THE BOMBAY COMPANY, INC.
1996 LONG-TERM INCENTIVE PLAN
<PAGE>
THE BOMBAY COMPANY, INC.
1996 LONG-TERM INCENTIVE STOCK PLAN
TABLE OF CONTENTS
SECTION 1 Purposes of the Plan.......................................1
SECTION 2 Definitions................................................1
SECTION 3 Effective Date of Plan and Duration of Plan................2
SECTION 4 Plan Administration........................................2
a) Committee..............................................2
b) Committee Authority....................................2
c) Cancellation and Reissuance............................2
d) Delegation.............................................3
e) Limitation of Liability................................3
SECTION 5 Participation..............................................3
SECTION 6 Available Shares of Common Stock...........................3
a) Available Shares.......................................3
b) Limitations............................................4
c) Non-Share Usage........................................4
d) Adjustments............................................4
SECTION 7 Awards.....................................................4
a) General................................................4
b) Foreign Jurisdiction...................................4
c) Stock Options..........................................4
d) Stock Appreciation Rights..............................5
e) Stock Awards...........................................5
SECTION 8 Dividends and Dividend Equivalents.........................5
SECTION 9 Payments and Payment Deferrals.............................5
SECTION 10 Transferability............................................6
SECTION 11 Change-of-Control..........................................6
SECTION 12 Award Agreements...........................................8
SECTION 13 Termination and Amendment of the Plan......................8
SECTION 14 Tax Withholding............................................8
SECTION 15 Other Benefit and Compensation Programs....................8
SECTION 16 Unfunded Plan..............................................9
SECTION 17 Use of Proceeds............................................9
SECTION 18 Regulatory Approvals.......................................9
SECTION 19 Future Rights..............................................9
SECTION 20 Governing Law..............................................9
SECTION 21 Successors and Assigns.....................................9
<PAGE>
THE BOMBAY COMPANY, INC.
1996 LONG-TERM INCENTIVE STOCK PLAN
1. PURPOSES OF THE PLAN
The purpose of the 1996 Long-Term Incentive Stock Plan of The Bombay
Company, Inc. is to provide incentives and rewards for employees so as to
promote the interests of the Company and its shareholders by (i) strengthening
the Company's ability to attract and retain highly competent officers and other
key employees; (ii) permit the awarding of opportunities for plan participants
to be rewarded using stock based incentives; (iii) to provide a means to
encourage stock ownership and proprietary interest in the Company by the
recipients of awards made under the Plan; and (iv) to provide equity ownership
opportunities and performance based incentives to better align the interests of
officers and key employees with those of shareholders.
2. DEFINITIONS
"Award" includes, without limitation, stock options (including incentive
stock options under Section 422 of the Code), stock appreciation rights, stock
awards made in restricted and performance shares or denominated in units
equivalent in value to shares or other awards that are valued in whole or in
part by reference to, or are otherwise based on, the Common Stock, all on a
stand alone, combination or tandem basis, as described in or granted under this
Plan.
"Award Agreement" means a written agreement entered into between the
Company and a Participant setting forth the terms and conditions of an Award
made to such Participant under this Plan, in the form prescribed by the
Committee.
"Board" means the Board of Directors of the Company.
"Change of Control" shall have the meaning specified in Section 11.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the body appointed by the Board, which shall be
comprised in such a manner as to comply with the requirements, if any, of Rule
16b-3 (or any successor rule) under the Exchange Act and of Section 162 of the
Code.
"Common Stock" means the common stock of the Company, $1.00 par value per
share.
"Company" means The Bombay Company, Inc., a Delaware corporation and
shall include any entity that is directly or indirectly controlled by the
Company or any entity, including an acquired entity, in which the Company has a
significant equity interest, as determined by the Committee.
"Employee" means an employee of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the closing price of the Common Stock as
reported on the New York Stock Exchange Composite Transactions Tape on the
relevant valuation date or, if there were no Common Stock transactions on the
valuation date, on the next preceding date on which there were Common Stock
transactions.
"Participant" means an Employee who has been granted an Award under this
Plan.
"Performance Goals" means, with respect to any Performance Period, goals
based on any of the following criteria established by the Committee and set
forth in the applicable Award Agreement(s): earnings or earnings growth;
return on equity, assets or investment; revenues; expense control; total
shareholder return; cash flow; or assets. Such Performance Goals may be
particular to an Employee or the division, department, branch, line of
business, subsidiary or other unit in which the Employee works, or may be based
on the performance of the Company generally.
"Performance Period" means the period of time designated by the Committee
applicable to a stock Award during which the Performance Goals shall be
measured.
"Plan" means this 1996 Long-Term Incentive Stock Plan.
"Reporting Person" means an officer or director of the Corporation
subject to the reporting requirements of Section 16 of the Exchange Act.
3. EFFECTIVE DATE OF PLAN AND DURATION OF PLAN
The effective date of this Plan is March 6, 1996 subject to its approval
by the shareholders of the Company at the next annual meeting or any
adjournment thereof. Any grant of any Award under the Plan prior to such
approval shall be deemed to be null and void if such approval is not obtained
within one year of its approval by the Board. No Award shall be granted
pursuant to the Plan on or after the tenth anniversary date of the effective
date, but any Award granted prior to such tenth anniversary may extend beyond
that date to the date(s) specified in the Award Agreement.
4. PLAN ADMINISTRATION
a) Committee. The Committee shall be responsible for administering
the Plan. Each member of the Committee shall serve for such term as the Board
may determine, subject to removal by the Board at any time.
b) Committee Authority. The Committee shall have full and exclusive
power to interpret the Plan and to adopt such rules, regulations and guidelines
for carrying out the Plan as it may deem necessary or proper, all of which
power shall be executed in the best interests of the Company and in keeping
with the provisions and objectives of the Plan. This power includes, but is
not limited to, selecting Participants, establishing all Award terms and
conditions, adopting procedures and regulations governing Awards, and making
all other determinations necessary or advisable for the administration of this
Plan, including the authority in the event of a spin-off or other corporate
transaction to permit substitution of an Award granted under the Plan with an
award from another company or an award denominated in other than shares of
Common Stock. All decisions made by the Committee shall be final and binding
on all persons affected by such decisions.
c) Cancellation and Reissuance. The Committee shall not have the
right to cancel outstanding stock options or stock appreciation rights for the
purpose of replacing or regranting such options or rights with a purchase price
that is less than the purchase price of the original option or right.
d) Delegation. Except as required by Rule 16b-3 (or any successor
rule) under the Exchange Act with respect to grants of options, stock
apprecia