EXHIBIT 3
SECOND AMENDMENT TO RIGHTS AGREEMENT
SECOND AMENDMENT dated as of October 23, 2003 (this "AMENDMENT") to
that certain Rights Agreement (the "AGREEMENT") dated as of September 3, 1998
between Gadzooks, Inc., a Texas corporation (the "COMPANY"), and Mellon Investor
Services LLC, as successor to ChaseMellon Shareholder Services, L.L.C., as
rights agent (the "RIGHTS AGENT"), as amended by a First Amendment thereto dated
as of October 7, 2003 (the "FIRST AMENDMENT"). Capitalized terms used herein and
not otherwise defined shall have the respective meanings ascribed to such terms
in the Agreement.
WHEREAS, the Company issued and sold $14 million of 5% Convertible
Subordinated Notes due October 9, 2008 (the "NOTES") in a private placement with
certain investors (the "PRIVATE PLACEMENT"); and
WHEREAS, prior to the Private Placement, Liberty Xxxxxx Asset
Management, L.P. ("LIBERTY XXXXXX"), together with its affiliates, beneficially
owned approximately 14.76% of the outstanding shares of common stock, par value
$0.01 per share of the Company; and
WHEREAS, prior to the Private Placement, the Company and the Rights
Agent entered into the First Amendment, which amended the Agreement to allow
Liberty Xxxxxx to participate in the Private Placement without causing it to be
an "Acquiring Person" under the Agreement; and
WHEREAS, the Company desires to further amend the Agreement to ensure
that Liberty Xxxxxx does not become an "Acquiring Person" under the Agreement by
virtue of interest that may accrue on the Notes issued to it in connection with
the Private Placement; and
WHEREAS, the Company deems this Amendment to the Agreement to be
necessary and desirable and in the best interests of the holders of the Rights
and has duly approved this Amendment; and
WHEREAS, no event has occurred that would cause any Person to be deemed
an Acquiring Person; and
WHEREAS, Section 27 of the Agreement permits the Company at any time
before any Person becomes an Acquiring Person to amend the Agreement in the
manner provided herein.
NOW, THEREFORE, the Agreement, as amended by the First Amendment, is
hereby amended as follows:
SECTION 1. AMENDMENT OF SECTION 1. The two sentences that were added by
the First Amendment to the definition of "Acquiring Person" in Section 1(a) of
the Agreement are hereby amended and restated in their entirety as follows:
"Notwithstanding the foregoing, (a) neither the Liberty Xxxxxx
Group nor any member thereof shall be an Acquiring Person
unless and until the Liberty Xxxxxx Group or any one or more
members thereof shall become the Beneficial Owner of 25% or
more of the then outstanding Common Shares and (b) neither the
Liberty
Xxxxxx Group nor any member thereof shall be deemed to be the
Beneficial Owner of any Common Shares issued or issuable to
the Liberty Xxxxxx Group or any member thereof upon conversion
of any interest that has or may accrue on the 5% Convertible
Subordinated Notes due October 9, 2008 that were issued by the
Company to Liberty Acorn Fund on October 9, 2003. For purposes
hereof, "Liberty Xxxxxx Group" means Liberty Xxxxxx Asset
Management, L.P., WAM Acquisition GP, Inc. and Liberty Acorn
Trust and their respective Affiliates and Associates."
SECTION 2. FULL FORCE AND EFFECT. Except as expressly amended hereby,
the Agreement as amended by the First Amendment and this Amendment shall
continue in full force and effect unamended and in accordance with the
provisions thereof on the date hereof. This Amendment and the Agreement, as
hereby amended, shall constitute one and the same instrument.
SECTION 3. GOVERNING LAW. This Amendment, the Agreement, as amended,
and each Rights Certificate issued hereunder or thereunder shall be deemed to be
a contract made under the laws of the State of Texas and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State;
provided, however, that all provisions regarding the rights, duties and
obligations of the Rights Agent shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts made and to be
performed entirely within such State.
SECTION 4. COUNTERPARTS. This Amendment 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.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
GADZOOKS, INC.
Attest: /s/ Xxx Xxxxxxxxx By: /s/ Xxxxx X. Xxxxxx
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Name: Xxx Xxxxxxxxx Name: Xxxxx X. Xxxxxx
Title: Controller Title: Vice President & Chief Financial
Officer
MELLON INVESTOR SERVICES LLC
Attest: /s/ Xxxxx Xxxx By: /s/ Xxxxxxx Xxxxxxx
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Name: Xxxxx Xxxx Name: Xxxxxxx Xxxxxxx
Title: Vice President Title: Assistant Vice President
