AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 2002
REGISTRATION NO. 333-96587
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DICK'S SPORTING GOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 5940 16-1241537
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
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COPIES OF ALL COMMUNICATIONS TO:
WILLIAM R. NEWLIN, ESQ. VALERIE FORD JACOB, ESQ.
LEWIS U. DAVIS, JR., ESQ. FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
JEREMIAH G. GARVEY, ESQ. ONE NEW YORK PLAZA
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION NEW YORK, NY 10004-1980
ONE OXFORD CENTRE (212) 859-8000
301 GRANT STREET, 20TH FLOOR
PITTSBURGH, PA 15219
(412) 562-8800
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as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act") please check the following box. [ ]
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1)(2) REGISTRATION FEE (3)
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Common Stock, $.01 par value................ $200,000,000.00 $18,400.00
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(1) Includes shares of common stock which may be purchased by the underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(3) Previously paid.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 26, 2002
P R O S P E C T U S
SHARES
We expect the public offering price to be between $ and $ per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will be listed on the New York Stock Exchange under the symbol "DKS."
PER SHARE TOTAL
--------- -----
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Dick's Sporting Goods, Inc.... $ $
Proceeds, before expenses, to the selling stockholders...... $ $
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The underwriters may also purchase up to an additional shares from the selling stockholders at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The shares will be ready for delivery on or about , 2002.
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MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
Sole Book-Running Co-Lead Manager
Manager
BANC OF AMERICA SECURITIES LLC
WILLIAM BLAIR & COMPANY
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The date of this prospectus is , 2002.
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[Photographs depicting prototypical store facade, photographs of inside of prototypical store and graphic depiction of company sales results and income from continuing operations for the last 5 fiscal years]
TABLE OF CONTENTS
PAGE
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Summary..................................................... 1
Risk Factors................................................ 8
Forward-Looking Statements.................................. 17
Market Data................................................. 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 19
Capitalization.............................................. 20
Dilution.................................................... 22
Selected Consolidated Historical Financial and Operating
Data...................................................... 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 26
Business.................................................... 35
Management.................................................. 45
Related Party Transactions.................................. 53
Principal and Selling Stockholders.......................... 56
Description of Capital Stock................................ 58
Shares Eligible for Future Sale............................. 64
United States Tax Consequences To Non-United States
Holders................................................... 66
Underwriting................................................ 69
Validity of Common Stock.................................... 72
Experts..................................................... 72
Additional Information...................................... 72
Index to Consolidated Financial Statements.................. F-1
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You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer and sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
Dick's Sporting Goods, DicksSportingGoods.com, Northeast Outfitters, PowerBolt, Fitness Gear and Stone Hill are our trademarks. Each trademark, trade name or service mark of any other company appearing in this prospectus belongs to its holder.
SUMMARY
This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, including "Risk Factors" and our audited financial statements and the notes to those financial statements and the other financial information appearing elsewhere in this prospectus, before you decide to invest in our common stock. Generally, references to "Dick's," "Dick's Sporting Goods," "we," "us" and "our" mean Dick's Sporting Goods, Inc. and our consolidated subsidiary. In addition, in this prospectus our fiscal years ended on February 28, 1998, January 30, 1999, January 29, 2000, February 3, 2001, and February 2, 2002 are referred to as fiscal 1997, fiscal 1998, fiscal 1999, fiscal 2000 and fiscal 2001, respectively. The convention that is used in determining our fiscal year end was the Saturday nearest to the last day of January beginning in 1999 and the Saturday nearest to the last day of February in prior years.
DICK'S SPORTING GOODS
We are the most profitable full-line sporting goods retailer as compared to the six largest publicly-traded full-line sporting goods retailers in the United States as measured by total net income in fiscal 2001, and our $1.1 billion in net sales in fiscal 2001 ranks us as the second largest. Our core focus is to be an authentic sporting goods retailer by offering a broad selection of high-quality, competitively-priced brand name sporting goods equipment, apparel and footwear that enhances our customers' performance and enjoyment of their sports activities. Each of our stores typically contains five specialty stores. We believe our "store-within-a-store" concept creates a unique shopping environment by combining the convenience, broad assortment and competitive prices of large format stores with the brand names, deep product selection and customer service of a specialty store. We believe this combination differentiates us from our competitors, positions us as a destination store for a wide range of sporting goods and appeals to a broad customer segment from the beginner to the sports enthusiast.
As of August 3, 2002, we operated 134 stores in 24 states. Our two primary store prototypes of approximately 48,000 and 30,000 square feet provide us with substantial flexibility to adapt to specific market characteristics and optimize our investments in new stores. We carry a wide variety of well-known brands, including Nike, Columbia, Adidas and Callaway, as well as exclusive branded-products sold under names such as Ativa and Walter Hagen, which are available only in our stores. The breadth of our product selections in each category of sporting goods offers our customers a wide range of price points and enables us to address the needs of sporting goods consumers, from the beginner to the sport enthusiast. For the twelve months ended August 3, 2002, we generated net sales, operating income and net income of $1.2 billion, $55.9 million and $31.0 million, respectively.
COMPETITIVE STRENGTHS
We believe that the following key competitive strengths differentiate us and are critical to our continuing success:
Demonstrated Ability to Consistently Deliver Profitable Growth
For the four year period ending February 2, 2002, our net sales, operating income and net income have grown at a compounded annual growth rate of 20%, 39% and 55%, respectively. During the same time period, our gross profit margins have increased from 22.1% to 24.5%, while our operating margins have increased from 2.7% to 4.2%. We will continue to focus on the financial metrics which we believe are key to our profitable growth, such as return on invested capital for all of our capital projects, inventory turnover and growth in store operating profit. For the four year period ending February 2, 2002, our return on invested capital for the company has increased from 8.1% to 10.8%. These historical results may not be indicative of future results and we can provide no assurances that we will be able to achieve comparable future results.
Compelling New Store Economics
We believe our new stores generate attractive returns on invested capital as compared to the publicly-traded full-line sporting goods retailers. Our cash-on-cash return for new stores has steadily improved since the
beginning of fiscal 1996, and in fiscal 2001, our 104 comparable stores (stores open for 14 full months) generated an average cash-on-cash return of 45%. When we refer to cash-on-cash return, we mean cash generated from a store's operations divided by the cash investment in net assets of that store. We can provide no assurances that we can generate these returns on new stores we open in the future.
Leading Market Share in Existing Markets
We believe we are the leading full-line retailer of sporting goods in substantially all of our markets as calculated by the number of stores operated by a retailer in each market multiplied by that retailer's nationwide average net sales per store. We intend to add new stores to existing markets to further solidify our market share and expand into new markets which are close to our existing markets. This strategy enables us to leverage our brand recognition, existing advertising, management and distribution costs in order to increase our return on invested capital. We believe our strong brand recognition combined with the density of store locations we have achieved in our markets provides a significant competitive advantage.
Unique Shopping Experience
Our stores provide a distinctive and exciting shopping experience by offering our customers the convenience of numerous specialty stores under one roof while delivering the product assortment of a large format store. We believe the following characteristics differentiate us from our competitors:
- Interactive "Store-Within-A-Store." Our stores typically contain five stand alone specialty stores, including: The Pro Shop (golf), The Footwear Center (high-performance athletic footwear), The Cycle Shop (cycling), The Sportsman's Lodge (hunting, fishing and camping) and Total Sports (seasonal sports equipment and athletic apparel). Each of these specialty departments offer the broad selection of high-quality, well-known brand names and innovative merchandise presentation primarily found in a specialty store. In addition, our stores provide interactive opportunities, by allowing customers to test golf clubs in an indoor driving range, shoot bows in our archery range, or run and rollerblade on our footwear track.
- Authentic Sporting Goods Retailer. Our history and core foundation is as a purveyor of authentic athletic equipment, apparel and footwear, which means we offer athletic merchandise that is high quality and intended to enhance our customers' performance and enjoyment of athletic pursuits, rather than focusing our merchandise selection on the latest fashion trend or style. We believe this focus makes our results less volatile than many of our competitors, while distinguishing us and our offerings from mass merchandisers. This merchandising approach ultimately positions us with advantages in a market which we believe will continue to benefit from new product offerings with enhanced technological features.
- Expertise and Service. We enhance our customers' shopping experience by providing knowledgeable and trained customer service professionals and value added services. For example, we were the first full-line sporting goods retailer to have active members of the PGA working in our stores, and currently employ over 100 PGA professionals in our golf departments. We also currently have over 200 bike mechanics to sell and service bicycles. All of our stores also provide support services such as golf club grip replacement, bicycle repair and maintenance, and home delivery and assembly of fitness equipment.
Experienced Management Team
Our executive management team has worked together for a number of years and has diverse and extensive backgrounds across retail sectors. Our executive management team averages 13 years of experience in the sporting goods industry, all with us, and 22 years in general retailing. We believe the team's experience has enabled us to anticipate and respond effectively to industry trends and competitive dynamics, better understand our customer base and build strong vendor relationships.
GROWTH STRATEGY
We plan to continue to strengthen our position as a leading full-line sporting goods retailer by:
Expanding Our Store Base Using Our Proven Store Model
We believe that our compelling new store economics and our successful track record of opening new stores provides us with a strong foundation for continued growth through new store openings. We plan to open 15 stores in fiscal 2002, of which nine are open to date, and between 15 and 20 stores in fiscal 2003. Our store openings will be in existing markets as well as contiguous markets. Since the beginning of fiscal 2000, we have opened 51 stores.
Continuing to Increase Margins and Return on Invested Capital
We will continue to strive to increase operating margins and return on capital by:
- Generating continuous increases in comparable store sales by expanding our sales in selected product lines, such as women's apparel;
- Continuing to expand gross margins as we benefit from improved purchasing leverage from our vendors, increased scale and leverage of distribution and occupancy costs, as well as disciplined merchandising planning and allocation which contribute to reduced markdowns;
- Leveraging the infrastructure investments we have made and intend to make, principally in the areas of distribution, information systems, and people, to enable us to better manage our growth; and
- Improving inventory turnover, which in fiscal 2001 was the highest among all comparable publicly-traded full-line sporting goods retailers, by expanding our backstock program at our distribution center to more efficiently replenish high sales volume stores and faster selling products within our stores.
Continuing to Expand Our Exclusive Brand-name Offerings
We offer our customers high-quality products at competitive prices marketed under exclusive brands. We have invested in a development and procurement staff that continually sources performance-based products generally targeted to the sporting enthusiast for sale under brands such as Ativa, Walter Hagen, Stone Hill, Northeast Outfitters, PowerBolt, and DBX. Many of our products incorporate technical features such as GORE-TEX, a waterproof breathable fabric, and CoolMax, a fabric that wicks moisture away from the skin to the fabric where the moisture evaporates faster, that are typically available only through well-known brand names. Our exclusive products offer outstanding value to our customers at each price point and provide us with significantly higher gross margins than comparable products we sell. Exclusive branded products have grown to $28.2 million of net sales in fiscal 2001 from $9.8 million in fiscal 1999. We expect to continue to grow our exclusive brand-name offerings.
Dick's was founded in 1948 when Richard ("Dick") Stack, the father of Edward W. Stack, our Chairman and Chief Executive Officer, opened his original bait and tackle store in Binghamton, New York. Edward W. Stack joined his father's business full-time in 1977, and, upon his father's retirement in 1984, became President and Chief Executive Officer of the then two store chain. Since 1994 we have opened 125 stores, and we plan to continue to expand our store base to further solidify our position as a leader of sporting goods retailing.
We were incorporated in 1948 in New York under the name Dick's Clothing and Sporting Goods, Inc. In November 1997, we reincorporated as a Delaware corporation, and in April 1999 we changed our name to Dick's Sporting Goods, Inc. Our executive offices are located at 200 Industry Drive, RIDC Park West, Pittsburgh, PA 15275, and our phone number is (412) 809-0100. Our website is located at www.dickssportinggoods.com. The information on our website does not constitute a part of this prospectus.
THE OFFERING
Common stock offered:
By us....................... shares
By the selling
stockholders.................. shares
Total.................... shares
Common stock to be outstanding
after the offering............ shares
Class B common stock to be
outstanding after the
offering...................... shares
Use of proceeds............... We estimate that our net proceeds from this
offering will be approximately $ million.
We plan to use the net proceeds from this
offering to reduce the amount of indebtedness
outstanding under our revolving bank facility
including accrued interest. We intend, subject
to compliance with the terms of our credit
facility, to reborrow under the credit facility
in the ordinary course of business for:
- opening new retail stores; and
- general corporate purposes, including working
capital.
We will not receive any proceeds from the sale
of the shares by the selling stockholders.
Dual classes of stock and
voting
rights........................ Upon the completion of the offering we will
have two classes of common stock, our existing
common stock and a new class of Class B common
stock. The holders of common stock generally
have rights identical to holders of Class B
common stock, except that holders of common
stock are entitled to one vote per share and
holders of Class B common stock are entitled to
ten votes per share. Holders of all classes of
common stock will vote together as a single
class on all matters presented to the
stockholders for their vote or approval except
as otherwise required by Delaware law. All of
the Class B common stock will be held by Edward
W. Stack and his relatives.
Risk factors.................. See "Risk Factors" and other information
included in this prospectus for a discussion of
factors you should carefully consider before
deciding to invest in shares of our common
stock.
Proposed New York Stock
Exchange trading symbol....... "DKS"
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Unless we indicate otherwise, all information in this prospectus:
- is based on an assumed initial public offering price of $ per share (the midpoint of the range on the front cover of this prospectus);
- assumes no exercise of the underwriters' over-allotment option; and
- gives effect to (i) a charter amendment which will occur just prior to the completion of this offering and will provide for (1) the authorization of the issuance of up to ,000,000 shares of common stock, ,000,000 shares of Class B common stock, and 5,000,000 shares of preferred stock, and
(2) simultaneously, a -for-1 stock split of all existing shares of common stock, and (ii) a share exchange by Edward W. Stack and his relatives of common stock for shares of Class B common stock.
The number of shares of common stock that will be outstanding after this offering excludes:
- 2,493,045 shares of common stock issuable upon the exercise of stock options outstanding as of August 3, 2002, with a weighted average exercise price of $9.57 per share, of which 1,760,306 were vested as of August 3, 2002, options for 1,235,000 shares of common stock to be granted at least at the public offering price in connection with this offering and 3,065,000 shares of either common stock or Class B common stock available for future grants under our 2002 Stock Plan;
- 500,000 shares of common stock reserved for issuance under our 2002 Employee Stock Purchase Plan; and
- 8,229 shares of common stock exercisable under warrants which expire upon the offering at an exercise price of $0.01 per share.
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data for fiscal years 1997, 1999, 2000 and 2001 presented below under the captions "Statement of Operations Data" and "Other Data" have been derived from our consolidated financial statements for those periods. The following summary consolidated financial data for fiscal years 1997, 1999, 2000 and 2001, the twelve month period ended January 30, 1999 and the 26 weeks ended August 4, 2001 and August 3, 2002 presented below under the caption "Store Data" have been derived from internal records of our operations. The following summary consolidated financial data for the 12 months ended January 30, 1999 and for the 26 weeks ended August 4, 2001 and as of and for the 26 weeks ended August 3, 2002 presented below under the captions "Statement of Operations Data," "Other Data" and "Balance Sheet Data" have been derived from our consolidated financial statements, which, in our opinion, include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the information set forth therein.
Our fiscal year consists of 52 or 53 weeks, ends on the Saturday nearest to the last day of January beginning in 1999 and on the Saturday nearest to the last day of February in prior years and is named for the calendar year ending closest to that date. All fiscal years presented include 52 weeks of operations, except 2000, which includes 53 weeks. You should read the information set forth below in conjunction with other sections of this prospectus, including "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes.
12 MONTHS 26 WEEKS ENDED
ENDED ----------------------
FISCAL JANUARY 30, FISCAL FISCAL FISCAL AUGUST 4, AUGUST 3,
1997 1999 (1) 1999 2000 2001 2001 2002
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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SALES PER SQUARE FOOT DATA)
STATEMENT OF OPERATIONS DATA: (2)
Net sales............................ $ 534,593 $ 628,860 $ 728,342 $ 893,396 $1,074,568 $487,532 $ 586,758
Gross profit......................... 112,957 138,735 163,896 208,844 263,569 115,508 150,392
Selling, general and administrative
expense............................ 101,508 116,476 132,403 169,392 213,065 95,025 118,024
Operating income..................... 8,095 17,073 28,005 33,541 45,360 18,617 29,156
Interest expense..................... 5,946 4,831 3,520 6,963 6,241 3,758 1,740
Income from continuing operations.... 1,289 7,341 14,691 15,947 23,471 8,916 16,449
Discontinued operations (3).......... -- 1,016 3,514 7,304 -- -- --
Net income........................... 1,289 6,325 11,177 8,643 23,471 8,916 16,449
PRO FORMA DATA:
Pro forma net income applicable to
common stockholders (4)............
Pro forma diluted net income per
common share (4)...................
Pro forma shares outstanding (4).....
STORE DATA:
Comparable store net sales increase
(decrease) (5)..................... 2.7% 7.4% (0.6%) 3.0% 3.6% 4.7% 5.4%
Number of stores at end of period.... 61 70 83 105 125 114 134
Total square feet at end of period... 3,434,422 3,858,422 4,355,072 5,298,188 6,148,894 5,695,474 6,485,401
Net sales per square foot (6)(7)..... $ 162 $ 174 $ 175 $ 180 $ 186 $ 88 $ 91
Average net sales per store (6)...... $ 9,247 $ 9,779 $ 9,559 $ 9,598 $ 9,442 $ 4,471 $ 4,496
OTHER DATA:
Gross profit margin.................. 21.1% 22.1% 22.5% 23.4% 24.5% 23.7% 25.6%
Operating margin..................... 1.5% 2.7% 3.8% 3.7% 4.2% 3.8% 5.0%
Inventory turnover (8)............... 2.96x 3.33x 3.63x 3.91x 3.73x 1.88x 1.88x
Depreciation and amortization........ $ 7,038 $ 8,121 $ 8,662 $ 9,425 $ 12,082 $ 5,162 $ 6,579
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AS OF AUGUST 3, 2002
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ACTUAL AS ADJUSTED (4)
-------- ----------------
BALANCE SHEET DATA:
Inventories................................................. $249,762
Working capital (9)......................................... 92,745
Total assets................................................ 377,614
Total debt including capitalized lease obligations.......... 93,976
Accumulated deficit -- including accretion of redeemable
preferred stock (10)...................................... (11,590)
Total stockholders' equity.................................. 78,984
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(1) During the period ended January 30, 1999, we changed our fiscal reporting year from the Saturday nearest to the end of February to the Saturday nearest to the end of January. Our 1999 fiscal year began on January 31, 1999 and ended on January 29, 2000. The 12 months ended January 30, 1999 represents the recasted 52 weeks then ended and is included for purposes of disclosing a period for comparison against future historical periods.
(2) The "Statement of Operations Data" for fiscal years 1999, 2000 and 2001 has been derived from our audited consolidated financial statements. Such information for fiscal 1997 and for the 12 months ended January 30, 1999 has been derived from our consolidated financial statements.
(3) Discontinued operations resulted from our former internet commerce business.
(4) Assumes the sale by us of shares of our common stock at an assumed public offering price of $ per share and the application of the estimated aggregate net proceeds to us of $ after deducting estimated offering expenses and underwriting discounts and commissions. We intend to use these net proceeds to reduce the principal amount of borrowings under our existing revolving credit facility. These amounts may, subject to compliance with the terms of our credit facility, be subsequently reborrowed by us. See "Use of Proceeds."
(5) Comparable store sales begin in a store's 14th full month of operations after its grand opening. Comparable store sales for the full year and for the 26 week periods are for stores that opened at least 13 months prior to the beginning of the period noted. Stores that were relocated during the applicable period have been excluded from comparable store sales. Each relocated store is returned to the comparable store base after its 14th full month of operations.
(6) Calculated using net sales of all stores open at both the beginning and the end of the period.
(7) Calculated using gross square footage of all stores open at both the beginning and the end of the period. Gross square footage includes the storage, receiving and office space that generally occupies approximately 15% of total store space.
(8) Calculated as cost of goods sold divided by the average of the last five quarters' ending inventories for the twelve month periods, and as the cost of goods sold divided by the average of the last three quarters ending inventory for the 26 week periods.
(9) Defined as current assets less current liabilities.
(10) Includes $63,897 of accretion of the redeemable preferred stock to its redemption value through a charge to accumulated deficit.
RISK FACTORS
This offering and an investment in our common stock involve a high degree of risk. Before you invest in our common stock, you should be aware of various risks, including those described below. You should carefully consider these risk factors, together with all of the other information included in this prospectus, before you decide whether to purchase our common stock. The risks and uncertainties described below are not the only ones we face.
If any of the following risks occur, our business, financial condition and results of operations could be materially harmed. In such an event, the trading price of our common stock could decline, and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
INTENSE COMPETITION IN THE SPORTING GOODS INDUSTRY COULD LIMIT OUR GROWTH AND REDUCE OUR PROFITABILITY.
The market for sporting goods retailers is highly fragmented and intensely competitive. Our current and prospective competitors include many large companies that have substantially greater market presence, name recognition, and financial, marketing and other resources than us. We compete directly or indirectly with the following categories of companies:
- large format sporting goods stores, such as The Sports Authority, Galyan's Trading Company and Gart Sports Company;
- traditional sporting goods stores and chains, such as Big 5 Sporting Goods and Hibbett Sporting Goods;
- specialty sporting goods shops and pro shops, such as The Athlete's Foot, Champs, Finish Line, Foot Locker, REI, Bass Pro Shops, Gander Mountain, Golfsmith, Edwin Watts Golf and Golf Galaxy;
- mass merchandisers, warehouse clubs, discount stores and department stores, such as Wal-Mart, Target, Kmart, Kohls and Sears; and
- catalog and Internet-based retailers, such as L.L. Bean, Eddie Bauer, Land's End, Cabela's, ShopSports.com and web sites operated by GSI Commerce, Inc.
Pressure from our competitors could require us to reduce our prices or increase our spending for advertising and promotion. Increased competition in markets in which we have stores or the adoption by competitors of innovative store formats, aggressive pricing strategies and retail sale methods, such as the Internet, could cause us to lose market share and could have a material adverse effect on our business, financial condition and results of operations.
LACK OF AVAILABLE RETAIL STORE SITES ON TERMS ACCEPTABLE TO US, RISING REAL ESTATE PRICES AND OTHER COSTS AND RISKS RELATING TO NEW STORE OPENINGS COULD SEVERELY LIMIT OUR GROWTH OPPORTUNITIES.
Our strategy includes opening stores in new and existing markets. We must successfully choose store sites, execute favorable real estate transactions on terms that are acceptable to us, hire competent personnel and effectively open and operate these new stores. Our plans to increase the number of our retail stores will depend in part on the availability of existing retail stores or store sites. We cannot assure you that stores or sites will be available to us for purchase or lease, or that they will be available on terms acceptable to us. If additional retail store sites are unavailable on acceptable terms, we may not be able to carry out a significant part of our growth strategy. Rising real estate costs and acquisition, construction and development costs could also inhibit our ability to grow. If we fail to locate desirable sites, obtain lease rights to these sites on terms acceptable to us, hire adequate personnel and open and effectively operate these new stores, our financial performance could be adversely affected.
In addition, our expansion in new and existing markets may present competitive, distribution and merchandising challenges that differ from our current challenges, including competition among our stores,
diminished novelty of our store design and concept, added strain on our distribution center, additional information to be processed by our management information systems and diversion of management attention from operations, such as the control of inventory levels in our existing stores, to the opening of new stores and markets. New stores in new markets, where we are less familiar with the target customer and less well-known, may face different or additional risks and increased costs compared to stores operated in existing markets, or new stores in existing markets. Expansion into new markets could also bring us into direct competition with retailers with whom we have no past experience as direct competitors. To the extent that we become increasingly reliant on entry into new markets in order to grow, we may face additional risks and our net income could suffer. To the extent that we are not able to meet these new challenges, our sales could decrease and our operating costs could increase.
There also can be no assurance that our new stores will generate sales levels necessary to achieve store-level profitability or profitability comparable to that of existing stores. New stores also may face greater competition and have lower anticipated sales volumes relative to previously opened stores during their comparable years of operation. We may not be able to advertise cost-effectively in new or smaller markets in which we have less store density, which could slow sales growth at such stores. We also cannot guarantee that we will be able to obtain and distribute adequate product supplies to our stores or maintain adequate warehousing and distribution capability at acceptable costs.
OUR ABILITY TO EXPAND OUR BUSINESS WILL BE DEPENDENT UPON THE AVAILABILITY OF ADEQUATE CAPITAL.
The rate of our expansion will also depend on the availability of adequate capital, which in turn will depend in large part on cash flow generated by our business and the availability of equity and debt capital. We cannot assure you that we will be able to obtain equity or debt capital on acceptable terms or at all. Our current revolving credit facility contains provisions which restrict our ability to incur additional indebtedness, to raise capital through the issuance of equity or make substantial asset sales which might otherwise be used to finance our expansion. Our obligations under the revolving credit facility are secured by interests in substantially all of our personal property excluding store and distribution center equipment and fixtures, which may further limit our access to certain capital markets or lending sources. Moreover, the actual availability under our credit facility is limited to the lesser of 70% of our eligible inventory or 85% of our inventory's liquidation value, in each case net of specified reserves and less any letters of credit outstanding, and opportunities for increased cash flows from reduced inventories would be partially offset by reduced availability through our revolving credit facility. As a result, we cannot assure you that we will be able to finance our current plans for the opening of new retail stores.
IF WE ARE UNABLE TO PREDICT OR REACT TO CHANGES IN CONSUMER DEMAND, WE MAY LOSE CUSTOMERS AND OUR SALES MAY DECLINE.
Our success depends in part on our ability to anticipate and respond in a timely manner to changing consumer demand and preferences regarding sporting goods. Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to change. We often make commitments to purchase products from our vendors several months in advance of the proposed delivery. If we misjudge the market for our merchandise our sales may decline significantly. We may overstock unpopular products and be forced to take significant inventory markdowns or miss opportunities for other products, both of which could have a negative impact on our profitability. Conversely, shortages of items that prove popular could reduce our net sales. In addition, a major shift in consumer demand away from sporting goods or sport apparel could also have a material adverse effect on our business, results of operations and financial condition.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS AND OUR INSURANCE MAY NOT BE SUFFICIENT TO COVER DAMAGES RELATED TO THOSE CLAIMS.
We may be subject to lawsuits resulting from injuries associated with the use of sporting goods equipment that we sell. In addition, although we do not sell hand guns, assault weapons or automatic firearms, we do sell hunting rifles which are products that are associated with an increased risk of injury and related lawsuits. We may incur losses due to lawsuits relating to our performance of background checks on hunting rifle
purchasers as mandated by state and federal law or the improper use of hunting rifles sold by us, including lawsuits by municipalities or other organizations attempting to recover costs from hunting rifle manufacturers and retailers relating to the misuse of hunting rifles. In addition, in the future there may be increased federal, state or local regulation, including taxation, of the sale of hunting rifles in our current markets as well as future markets in which we may operate. Commencement of these lawsuits against us or the establishment of new regulations could reduce our sales and decrease our profitability. There is a risk that claims or liabilities will exceed our insurance coverage. In addition, we may be unable to retain adequate liability insurance in the future. Although we have entered into product liability indemnity agreements with many of our vendors, we cannot assure you that we will be able to collect payments sufficient to offset product liability losses. In addition, we are subject to regulation by the Consumer Product Safety Commission and similar state regulatory agencies. If we fail to comply with government and industry safety standards, we may be subject to claims, lawsuits, fines and adverse publicity that could have a material adverse effect on our business, results of operations and financial condition.
IF OUR SUPPLIERS, DISTRIBUTORS OR MANUFACTURERS DO NOT PROVIDE US WITH SUFFICIENT QUANTITIES OF PRODUCTS, OUR SALES AND PROFITABILITY WILL SUFFER.
We purchase merchandise from over 1,000 vendors. In fiscal 2001, purchases from Nike represented approximately 10% of our total purchases. Although in fiscal 2001, purchases from no other vendor represented more than 10% of our total purchases, our dependence on our principal suppliers involves risk. If there is a disruption in supply from a principal supplier or distributor, we may be unable to obtain the merchandise that we desire to sell and that consumers desire to purchase. Moreover, many of our suppliers provide us with incentives, such as return privileges, volume purchasing allowances and cooperative advertising. A decline or discontinuation of these incentives could reduce our profits.
We believe that a significant portion of the products that we purchase, including those purchased from domestic suppliers, are manufactured abroad in countries such as China, Taiwan and South Korea. In addition, we believe most, if not all, of our private label merchandise is manufactured abroad. Foreign imports subject us to the risks of changes in import duties, quotas, loss of "most favored nation" or MFN status with the United States for a particular foreign country, work stoppages, delays in shipment, freight cost increases and economic uncertainties (including the United States imposing antidumping or countervailing duty orders, safeguards, remedies or compensation and retaliation due to illegal foreign trade practices). If any of these or other factors were to cause a disruption of trade from the countries in which the suppliers of our vendors are located, our inventory levels may be reduced or the cost of our products may increase. In addition, to the extent that any foreign manufacturers from whom we purchase products directly or indirectly utilize labor and other practices that vary from those commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in come cases, face potential liability. To date, we have not experienced any difficulties of this nature.
Historically, instability in the political and economic environments of the countries in which we or our vendors obtain our products has not had a material adverse effect on our operations. However, we cannot predict the effect that future changes in economic or political conditions in such foreign countries may have on our operations. In the event of disruptions or delays in supply due to economic or political conditions in foreign countries, such disruptions or delays could adversely affect our results of operations unless and until alternative supply arrangements could be made. In addition, merchandise purchased from alternative sources may be of lesser quality or more expensive than the merchandise we currently purchase abroad.
Countries from which our vendors obtain these new products may, from time to time, impose new or adjust prevailing quotas or other restrictions on exported products, and the United States may impose new duties, quotas and other restrictions on imported products. The United States Congress periodically considers other restrictions on the importation of products obtained by us and our vendors. The cost of such products may increase for us if applicable duties are raised, or import quotas with respect to such products are imposed or made more restrictive.
THE IMPLEMENTATION OF OUR NEW INFORMATION SYSTEM SOFTWARE COULD DISRUPT OUR OPERATIONS AND NEGATIVELY IMPACT OUR FINANCIAL RESULTS AND MATERIALLY ADVERSELY AFFECT OUR BUSINESS OPERATIONS.
During January 2003, we intend to implement a new information system including a suite of applications that include JDA Merchandising and Arthur Planning and Allocation. This new system, if not functioning properly, could disrupt our ability to track, record and analyze the merchandise that we sell and cause disruptions of operations, including, among others, an inability to process shipments of goods, process financial information or credit card transactions, deliver products or engage in similar normal business activities, particularly if there are any unforeseen interruptions after implementation. Although we believe that we have taken and will continue to take prudent measures in planning, testing and transitioning to the new system we plan to use, any material disruption, malfunctions or other similar problems in or with the new system could negatively impact our financial results and materially adversely affect our business operations.
WE RELY ON A SINGLE LARGE DISTRIBUTION CENTER ALONG WITH A SMALLER RETURN FACILITY, AND IF THERE IS A NATURAL DISASTER OR OTHER SERIOUS DISRUPTION AT THESE FACILITIES, WE MAY LOSE MERCHANDISE AND BE UNABLE TO EFFECTIVELY DELIVER IT TO OUR STORES.
We rely on a 388,000 square foot distribution center in Smithton, Pennsylvania. We also operate a 75,000 square foot return center in Conklin, New York. Any natural disaster or other serious disruption to these facilities due to fire, tornado or any other cause would damage a significant portion of our inventory, could impair our ability to adequately stock our stores and process returns of products to vendors and could negatively affect our sales and profitability.
OUR BUSINESS IS SEASONAL AND OUR ANNUAL RESULTS ARE HIGHLY DEPENDENT ON THE SUCCESS OF OUR FOURTH QUARTER SALES.
Our business is highly seasonal in nature. Our highest sales and operating income historically occur during the fourth fiscal quarter, which is due, in part, to the holiday selling season and, in part, to our strong sales of cold weather sporting goods and apparel. The fourth quarter generated approximately 31.7% of our net sales and approximately 55.0% of our net income for fiscal 2001. Any decrease in our fourth quarter sales, whether because of a slow holiday selling season, unseasonable weather conditions, or otherwise, could have a material adverse effect on our business, financial condition and operating results for the entire fiscal year.
OUR BUSINESS IS DEPENDENT ON THE GENERAL ECONOMIC CONDITIONS IN OUR MARKETS.
In general, our sales depend on discretionary spending by our customers. A deterioration of current economic conditions or an economic downturn in any of our major markets or in general could result in declines in sales and impair our growth. General economic conditions and other factors that affect discretionary spending in the regions in which we operate are beyond our control and are affected by:
- interest rates and inflation;
- the impact of an economic recession;
- the impact of natural disasters;
- consumer credit availability;
- consumer debt levels;
- consumer confidence in the economy;
- tax rates and tax policy;
- unemployment trends; and
- other matters that influence consumer confidence and spending.
Increasing volatility in financial markets may cause some of the above factors to change with an even greater degree of frequency and magnitude.
BECAUSE OUR STORES ARE CONCENTRATED IN THE EASTERN UNITED STATES, WE ARE SUBJECT TO REGIONAL RISKS.
Many of our stores are located in the eastern United States. Because of this, we are subject to regional risks, such as the regional economy, weather conditions, increasing costs of electricity, oil and natural gas, natural disasters, as well as government regulations specific to the states in which we operate. If the region were to suffer an economic downturn or other adverse regional event, our net sales and profitability could suffer.
Our results of operations may be harmed by unseasonably warm winter weather conditions. Many of our stores are located in geographic areas that experience seasonably cold weather. We sell a significant amount of winter merchandise. Abnormally warm weather conditions could reduce our sales of these items and hurt our profitability.
THE TERMS OF OUR REVOLVING CREDIT FACILITY IMPOSE OPERATING AND FINANCIAL RESTRICTIONS ON US, WHICH MAY IMPAIR OUR ABILITY TO RESPOND TO CHANGING BUSINESS AND ECONOMIC CONDITIONS. THIS IMPAIRMENT COULD HAVE A SIGNIFICANT ADVERSE IMPACT ON OUR BUSINESS.
Our current revolving credit facility contains provisions which restrict our ability to, among other things, incur additional indebtedness, issue additional shares of capital stock, make particular types of investments, incur liens, pay dividends, redeem capital stock, consummate mergers and consolidations, enter into transactions with affiliates or make substantial asset sales. In addition, our obligations under the revolving credit facility are secured by interests in substantially all of our personal property excluding store and distribution center equipment and fixtures. In the event of our insolvency, liquidation, dissolution or reorganization, the lenders under our revolving credit facility would be entitled to payment in full from our assets before distributions, if any, were made to our stockholders.
As of , 2002, after giving pro forma effect to this offering and the use of proceeds that we will receive from this offering, we would have had approximately $ million of outstanding long-term and revolving debt. This debt could have significant adverse effects on our business, including:
- making it more difficult for us to obtain additional financing on favorable terms;
- requiring us to dedicate a substantial portion of our available cash for interest payments and the repayment of principal;
- limiting our ability to capitalize on significant business opportunities;
- making us more vulnerable to economic downturns; and
- limiting our ability to exploit business opportunities and to withstand competitive pressures.
If we are unable to generate sufficient cash flows from operations in the future, we may have to refinance all or a portion of our debt and/or obtain additional financing. We cannot assure you that refinancing or additional financing on favorable terms could be obtained or that we will be able to operate at a profit.
WE MAY PURSUE STRATEGIC ACQUISITIONS, WHICH COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS.
We may from time to time acquire complementary companies or businesses. Acquisitions may result in difficulties in assimilating acquired companies, and may result in the diversion of our capital and our management's attention from other business issues and opportunities. We may not be able to successfully integrate operations that we acquire, including their personnel, financial systems, distribution, operations and general store operating procedures. If we fail to successfully integrate acquisitions, our business could suffer. In addition, the integration of any acquired business, and their financial results, into ours may adversely affect our operating results. We currently do not have any agreements with respect to any such acquisitions.
THE LOSS OF OUR KEY EXECUTIVES, ESPECIALLY EDWARD W. STACK, OUR CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS DUE TO THE LOSS OF THEIR EXPERIENCE AND INDUSTRY RELATIONSHIPS.
Our success depends on the continued services of our senior management, particularly Edward W. Stack, our Chairman of the Board and Chief Executive Officer. If we were to lose any key senior executive, our business could be materially adversely affected. With the exception of the employment agreement contemplated for Mr. Stack to be entered into just prior to the consummation of this offering, we do not have employment agreements with members of senior management.
OUR BUSINESS DEPENDS ON OUR ABILITY TO MEET OUR LABOR NEEDS.
Our success depends on hiring and retaining quality managers and sales associates in our stores. We plan to expand our employee base to manage our anticipated growth. Competition for personnel, particularly for employees with retail expertise, is intense. Additionally, our ability to maintain consistency in the quality of customer service in our stores is critical to our success. Also, many of our store-level employees are in entry-level or part-time positions that historically have high rates of turnover. We are also dependent on the employees who staff our distribution and return centers, many of whom are skilled. We may be unable to meet our labor needs and control our costs due to external factors such as unemployment levels, minimum wage legislation and wage inflation. Although none of our employees are currently covered under collective bargaining agreements, we cannot guarantee that our employees will not elect to be represented by labor unions in the future. If we are unable to hire and retain sales associates capable of providing a high level of customer service, our business could be materially adversely affected.
TERRORIST ATTACKS OR ACTS OF WAR MAY SERIOUSLY HARM OUR BUSINESS.
Terrorist attacks or acts of war may cause damage or disruption to our company, our employees, our facilities and our customers, which could significantly impact our net sales, costs and expenses, and financial condition. The terrorist attacks that took place in the United States on September 11, 2001 were unprecedented events that have created many economic and political uncertainties. The long-term effects on our company of the September 11, 2001 attacks are unknown. The potential for future terrorist attacks, the national and international responses to terrorist attacks, and other acts of war or hostility may cause greater uncertainty and cause our business to suffer in ways that we currently cannot predict. Our geographic focus in the eastern United States may make us more vulnerable to such uncertainties than other comparable retailers who may not have a similar geographic focus.
RISKS ASSOCIATED WITH THIS OFFERING
WE ARE CONTROLLED BY OUR CHIEF EXECUTIVE OFFICER AND HIS RELATIVES, WHOSE INTERESTS MAY DIFFER FROM OTHER STOCKHOLDERS.
Upon the adoption of our charter amendment, we will have two classes of common stock. The common stock will have one vote per share and the Class B common stock will have 10 votes per share. Mr. Edward W. Stack, our Chairman and Chief Executive Officer, and his relatives will control % of the combined voting power of our common stock after this offering and will control the outcome of any corporate transaction or other matter submitted to the stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets. Mr. Stack and his relatives may also acquire additional shares of Class B common stock upon the exercise of future stock options exercisable for Class B common stock. They will also have the power to prevent or cause a change in control. The interests of Mr. Stack and his relatives may differ from the interests of the other stockholders and they may take actions with which you disagree.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SUBSTANTIALLY, WHICH MAY ADVERSELY AFFECT OUR BUSINESS AND THE MARKET PRICE OF OUR COMMON STOCK.
Our net sales and results of operations have fluctuated in the past and may vary from quarter to quarter in the future. These fluctuations may adversely affect our business, financial condition and the market price of
our common stock. A number of factors, many of which are outside our control, may cause variations in our quarterly net sales and operating results, including:
- changes in demand for the products that we offer in our stores;
- pre-opening costs associated with new stores;
- lockouts or strikes involving professional sports teams;
- retirement of sports superstars used in marketing various products;
- costs related to the closures of existing stores;
- litigation;
- pricing and other actions taken by our competitors;
- adverse weather conditions near our markets; and
- general economic conditions.
For example, any potential strike or lock-out involving Major League Baseball would have an adverse effect on our sales of baseball equipment and apparel.
OUR COMPARABLE STORE SALES WILL FLUCTUATE AND MAY NOT BE A MEANINGFUL INDICATOR OF FUTURE PERFORMANCE.
Changes in our comparable store sales results could affect the price of our common stock. A number of factors have historically affected, and will continue to affect, our comparable store sales results, including:
- competition;
- our new store openings;
- general regional and national economic conditions;
- actions taken by our competitors;
- consumer trends and preferences;
- changes in the other tenants in the shopping centers in which we are located;
- new product introductions and changes in our product mix;
- timing and effectiveness of promotional events;
- lack of new product introductions to spur growth in the sale of various kinds of sports equipment; and
- weather.
We cannot assure you that comparable store sales will continue to increase at the rates achieved in our last fiscal year. Moreover, our comparable store sales may decline. As a result, the unpredictability of our comparable store sales may vary from quarter to quarter, and an unanticipated decline in revenues or comparable store sales may cause the price of our common stock to fluctuate significantly.
INVESTORS WILL BE SUBJECT TO MARKET RISKS TYPICALLY ASSOCIATED WITH INITIAL PUBLIC OFFERINGS.
There has not been a public market for our common stock. We cannot predict the extent to which a trading market will develop or how liquid that market might become. If you purchase shares of common stock in this offering, you will pay a price that was not established in the public trading markets. The initial public offering price will be determined by negotiations among the underwriters, the selling stockholders and us. You may not be able to resell your shares at or above the initial public offering price and may suffer a loss on your investment.
The market price of our common stock is likely to be highly volatile as the stock market in general has been highly volatile. Factors that could cause fluctuation in the stock price may include, among other things:
- actual or anticipated variations in quarterly operating results;
- changes in financial estimates by securities analysts;
- our inability to meet or exceed securities analysts' estimates or expectations;
- conditions or trends in our industry;
- changes in the market valuations of other retail companies;
- announcements by us or our competitors of significant acquisitions, strategic partnerships, divestitures, joint ventures or other strategic initiatives;
- capital commitments;
- additions or departures of key personnel; and
- sales of common stock.
Many of these factors are beyond our control. These factors may cause the market price of our common stock to decline, regardless of our operating performance.
FUTURE SALES OF OUR COMMON STOCK, INCLUDING THE SHARES PURCHASED IN THIS OFFERING, MAY DEPRESS OUR STOCK PRICE.
Sales of substantial amounts of our common stock in the public market following this offering by our existing stockholders or upon the exercise of outstanding options to purchase shares of our common stock may adversely affect the market price of our common stock. Such sales could create public perception of difficulties or problems with our business. As a result, these sales might make it more difficult for us to sell securities in the future at a time and price that we deem necessary or appropriate.
Upon completion of this offering, we will have outstanding shares of common stock and shares of Class B common stock, assuming no exercise of outstanding options after , 2002, of which:
- all of the shares we and the selling stockholders are selling in this offering may be resold in the public market immediately after this offering, other than shares purchased by our affiliates or stockholders subject to the lock-up agreements; and
- all other shares are subject to the lock-up agreements and will become available for resale in the public market beginning 181 days after the date of this prospectus.
With limited exceptions, these lock-up agreements prohibit a stockholder from selling, contracting to sell or otherwise disposing of any common stock or any securities that are convertible into or exercisable for common stock (such as the Class B common stock) for 180 days from the date of this prospectus, although Merrill Lynch may, in its sole discretion and at any time without notice, release all or any portion of the securities subject to these lock-up agreements. As a result of these lock-up agreements, notwithstanding possible earlier eligibility for sale under the provisions of Rules 144 or 701, none of these shares may be sold until 181 days after the date of this prospectus.
Additional shares of common stock underlying options will become available for sale in the public market. We expect to file a registration statement on Form S-8 which will register up to 7,309,595 shares upon the exercise of options and upon the issuance under our employee stock purchase plan.
In addition, substantially all of our current stockholders have "demand" and/or "piggyback" registration rights in connection with future offerings of our common stock. "Demand" rights enable the holders to demand that their shares be registered and may require us to file a registration statement under the Securities Act at our expense. "Piggyback" rights provide for notice to the relevant holders of our stock if we propose to register any of our securities under the Securities Act, and grant such holders the right to include their shares in the registration statement. All holders of registrable securities are not able to exercise their registration rights until 180 days following the date of this prospectus without the consent of Merrill Lynch.
As restrictions on resale end, our stock price could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These sales also might make it more difficult for us to sell securities in the future at a time and at a price that we deem appropriate.
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION AS A RESULT OF THIS OFFERING.
The initial public offering price is substantially higher than the book value per share of our common stock. As a result, purchasers in this offering will experience immediate and substantial dilution of $ per share in the tangible book value of the common stock from the initial public offering price. In addition, to the extent that currently outstanding options to purchase common stock are exercised, there will be further dilution.
OUR ANTI-TAKEOVER PROVISIONS COULD PREVENT OR DELAY A CHANGE IN CONTROL OF OUR COMPANY, EVEN IF SUCH CHANGE OF CONTROL WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws as well as provisions of Delaware law could discourage, delay or prevent a merger, acquisition or other change in control of our company, even if such change in control would be beneficial to our stockholders. These provisions include:
- authorizing the issuance of Class B common stock;
- classifying the board of directors such that only one-third of directors are elected each year;
- authorizing the issuance of "blank check" preferred stock that could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;
- prohibiting the use of cumulative voting for the election of directors;
- limiting the ability of stockholders to call special meetings of stockholders;
- if our Class B common stock is no longer outstanding, prohibiting stockholder action by partial written consent and requiring all stockholder actions to be taken at a meeting of our stockholders or by unanimous written consent; and
- establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate," "intend," "predict" and "continue" or similar words. Forward-looking statements may also use different phrases. Forward-looking statements address, among other things,
- our expectations;
- our growth strategies, including our plans to open new stores;
- our efforts to increase profit margins and return on invested capital;
- plans to grow our private label business;
- projections of our future profitability, results of operations, capital expenditures or our financial condition; or
- other "forward-looking" information.
We believe it is important to communicate our expectations to our investors. However, events may occur that we are not able to predict accurately or which we do not fully control that could cause actual results to differ materially from those expressed or implied by our forward-looking statements, including:
- our inability to manage our growth, open new stores on a timely basis and expand successfully in new and existing markets;
- changes in general economic and business conditions and in the specialty retail or sporting goods industry in particular;
- actions by our competitors;
- the level of demand for the products we sell;
- changes in our business strategies; and
- other factors discussed under "Risk Factors."
We do not assume any obligation to update any forward-looking statements except to the extent required by the federal securities laws.
MARKET DATA
We use market and industry data throughout this prospectus, which we have obtained from market research, publicly available information and industry publications. These sources generally state that the information that they provide has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. The market and industry data is often based on industry surveys and the preparers' experience in the industry. Although we believe that the surveys and market research that others have performed are reliable, we have not independently verified this information. In general references to our industry position are based on our rank among the publicly traded full-line retailers and are based on information publicly disclosed by such companies. When we refer to ourselves as the most profitable full-line sporting goods retailer in the United States as compared to the six largest publicly-traded full-line sporting goods retailers as measured by net income, we mean that we have more net income in dollars than The Sports Authority, Galyan's Trading Company, Gart Sports Company, Big 5 Sporting Goods, Sport Chalet and Hibbett Sporting Goods in the referenced period.
USE OF PROCEEDS
The net proceeds to us from the sale of shares of common stock being offered by us at an assumed initial public offering price of $ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses, are estimated to be approximately $ million. We will not receive any proceeds from shares of common stock sold by the selling stockholders, nor can we participate in the sale of additional shares relating to the underwriters' over-allotment option, if exercised.
The principal purpose of this offering is to create a public market for our common stock in order to facilitate our future access to public capital. We plan to use the net proceeds from this offering for reducing the amount of indebtedness outstanding under our revolving bank facility including accrued interest. Any proceeds from the offering paid to us in excess of the amounts outstanding under our credit facility would be used for general corporate purposes. We intend, subject to compliance with the terms of our credit facility, to reborrow under the credit facility in the ordinary course of business and to use those reborrowings for opening new retail stores and general corporate purposes, including working capital. Our bank debt consists of a $180 million revolving credit facility in principal amount. At August 3, 2002, the outstanding balance under our credit facility was $90.3 million. Borrowings under the credit facility bear interest at variable rates, and the weighted average interest rate at August 3, 2002 was 3.19%. The credit facility expires on May 30, 2006. In September 2001, we used borrowings under our revolving credit facility to repay promissory notes in the aggregate principal amount of $13.8 million in connection with our repurchase of shares of common stock from certain of our former preferred stockholders. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations--Liquidity and Capital Resources."
Pending the described uses of the net proceeds, we intend to invest the net proceeds in short-term investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. Our current credit facility prohibits payment of any dividends. We currently intend to retain any future earnings to finance operations and expand our business. The payment of any future cash dividends will be at the sole discretion of our board of directors and will depend on, among other things, our future earnings, our capital requirements, our contractual obligations, including those under our credit facility, and our general financial condition.
CAPITALIZATION
The following table describes our capitalization as of August 3, 2002. Our capitalization is presented:
- on an actual basis; and
- on an as adjusted basis to give effect to:
- a charter amendment which will occur just prior to the completion of this offering, which will consist of: (i) the authorization of the issuance of up to ,000,000 shares of common stock, ,000,000 shares of Class B common stock, and ,000,000 shares of preferred stock; and (ii) simultaneously, a -for-1 stock split of all existing shares of common stock;
- the exchange by Edward W. Stack and his relatives of shares of common stock for shares of Class B common stock;
- the issuance and sale of shares of common stock offered by us in this offering; and
- the application of the estimated net proceeds from the sale of our common stock based on an assumed initial public offering price of $ per share and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
You should read this table in conjunction with the consolidated financial statements and the notes to those statements and the other financial information included elsewhere in this prospectus.
AS OF AUGUST 3, 2002
--------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE DATA)
Cash........................................................ $ 13,874
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Short term debt and current portion of capitalized lease
obligations............................................... $ 211
Long-term debt, including capitalized lease obligations, net
of current portion (1).................................... 93,765
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Total debt............................................. 93,976
Stockholders' equity:
Preferred stock, par value, $.01 per share, 3,120,159
shares authorized and no shares issued and outstanding,
actual; and 5,000,000 shares authorized, and no shares
issued and outstanding, as adjusted.................... --
Class B common stock, par value, $.01 per share, no shares
authorized, issued and outstanding, actual; and
,000,000 shares authorized, and shares issued
and outstanding, as adjusted (2)....................... --
Common stock, par value, $.01 per share, 14,502,004 shares
authorized and issued and outstanding, actual;
and ,000,000 shares authorized, and shares
issued and outstanding, as adjusted (2)................ 73
Additional paid-in capital................................ 96,375
Accumulated deficit -- including accretion of redeemable
preferred stock (3).................................... (11,590)
Note receivable for common stock (4)...................... (6,196)
Accumulated other comprehensive income.................... 322
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Total stockholders' equity............................. 78,984
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Total capitalization................................... $172,960
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(1) At August 3, 2002, the outstanding aggregate principal borrowings under our credit facility were approximately $90,299.
(2) The table above excludes (i) an aggregate of 2,493,045 shares of common
stock issuable upon exercise of stock options outstanding at August 3, 2002,
(ii) an aggregate of 1,235,000 shares of common stock issuable upon exercise
of stock options to be granted in connection with this offering, (iii)
3,065,000 shares of either
common stock or Class B common stock reserved for issuance in connection with future stock options and other awards under our stock option plan and under our stock purchase plan, (iv) 500,000 shares of common stock reserved for issuance under our 2002 Employee Stock Purchase Plan and (v) 8,229 shares of common stock reserved for issuance in connection with the exercise of outstanding warrants.
(3) Includes $63,897 of accretion of the redeemable preferred stock to its redemption value through a charge to accumulated deficit.
(4) On May 16, 2001, Edward W. Stack, our Chairman and Chief Executive Officer, issued a promissory note to us in the aggregate principal amount of $6,196 in connection with his exercise of employee stock options to purchase 1,239,123 shares of our common stock, which after giving effect to the charter amendment will be converted into Class B common stock. The promissory note matures on or before May 16, 2011, unless accelerated by an event of default or Mr. Stack ceases to be an employee of Dick's Sporting Goods, and bears a simple rate of interest of 5.5% per annum. See "Related Party Transactions."
DILUTION
Our pro forma net tangible book value as of August 3, 2002 was $ million or $ per share. Our pro forma net tangible book value per share is determined by subtracting the total amount of our liabilities from the total amount of our tangible assets and dividing the remainder by the number of shares of our common stock outstanding and after giving effect to the charter amendment and exchange which will occur just prior to the completion of this offering. The charter amendment consists of (i) the authorization of the issuance of up to ,000,000 shares of common stock, ,000,000 shares of Class B common stock, and 5,000,000 shares of preferred stock, and (ii) simultaneously, a -for-1 stock split of all existing shares of common stock. The exchange consists of Edward W. Stack and his relatives exchanging shares of common stock for shares of Class B common stock. The pro forma net tangible book value per share after this offering will be $ less than the price per share to the public in this offering, based on an assumed initial public offering price of $ per share. Therefore, purchasers of shares of common stock in this offering will realize immediate dilution of $ per share. The following table illustrates this dilution.
Assumed initial public offering price per share.......... $
Pro forma net tangible book value per share at
, 2002...................................... $
Increase in net tangible book value per share
attributable to new investors.......................
--------
Pro forma net tangible book value per share after the
offering............................................
--------
Dilution per share purchased in this offering............ $
========
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The following table presents, on a pro forma basis, as described above, as of , 2002 and assuming an initial public offering price of $ per share, for our existing stockholders and our new investors:
- the number of shares of our common stock purchased from us;
- the total cash consideration paid;
- the average price per share paid by new investors before deducting estimated underwriting discounts and commissions and our estimated offering expenses; and
- the average price per share paid by our existing holders of common stock including the holders of common stock after giving effect to the charter amendment which will occur just prior to the completion of this offering.
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER PERCENT NUMBER PERCENT PER SHARE
------- ------- -------- -------- ---------
Existing stockholders.......................... $
New investors..................................
------- --- ------- ---
Total.......................................... 100% 100%
======= === ======= ===
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The tables on this page exclude all outstanding options and employee purchase plans. See "Management--Stock Option Plans" and "Management--Employee Stock Purchase Plan" and notes to our consolidated financial statements. The table also excludes outstanding warrants. The exercise of outstanding options and warrants, as adjusted for the -for-1 split, having an exercise price less than the initial public offering price, would increase the dilutive effect to new investors that is shown in the tables. Also, the second table does not give effect to sales of shares of common stock by the selling stockholders. Sales by the selling stockholders in this offering will reduce the number of shares held by existing stockholders to shares of common stock, or % of the shares outstanding, and will increase the number of shares held by our new investors to shares of common stock, or % of the shares of common stock outstanding.
SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OPERATING DATA
The following selected consolidated financial data for fiscal years 1997, 1998 (11 month period), 1999, 2000 and 2001 presented below under the captions "Statement of Operations Data" and "Other Data" have been derived from our consolidated financial statements for those periods. The following selected consolidated financial data for fiscal years 1997, 1998 (11 month period), 1999, 2000 and 2001, the 12 month period ended January 30, 1999, and the 26 weeks ended August 4, 2001 and August 3, 2002 presented below under the caption "Store Data" have been derived from internal records of our operations. The following selected consolidated financial data for the 12 months ended January 30, 1999 and for the 26 weeks ended August 4, 2001 and as of and for the 26 weeks ended August 3, 2002 presented below under the captions "Statement of Operations Data," "Other Data" and "Balance Sheet Data" have been derived from our consolidated financial statements, which, in our opinion, include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the information set forth therein.
Our fiscal year consists of 52 or 53 weeks, ends on the Saturday nearest to the last day in January beginning in 1999 and the Saturday nearest to the last day of February in prior years and is named for the calendar year ending closest to that date. All fiscal years presented include 52 weeks of operations, except fiscal 2000 which includes 53 weeks and the 11 months ended January 30, 1999, which includes 48 weeks. The 12 months ended January 30, 1999 represents the recasted 52 weeks then ended and is included for purposes of disclosing a period for comparison against future historical periods. You should read the information set forth below in conjunction with other sections of this prospectus, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes.
12 MONTHS 26 WEEKS ENDED
FISCAL ENDED -----------------------
FISCAL 1998 (1) JANUARY 30, FISCAL FISCAL FISCAL AUGUST 4, AUGUST 3,
1997 (11 MONTHS) 1999 (1) 1999 2000 2001 2001 2002
---------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SALES PER SQUARE FOOT DATA)
STATEMENT OF OPERATIONS
DATA: (2)
Net sales............... $ 534,593 $ 602,101 $ 628,860 $ 728,342 $ 893,396 $1,074,568 $ 487,532 $ 586,758
Cost of goods sold
(3)................... 421,636 465,832 490,125 564,446 684,552 810,999 372,024 436,366
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit............ 112,957 136,269 138,735 163,896 208,844 263,569 115,508 150,392
Selling, general and
administrative
expense............... 101,508 110,335 116,476 132,403 169,392 213,065 95,025 118,024
Pre-opening expense..... 3,354 2,382 2,447 3,488 5,911 5,144 1,866 3,212
Non-recurring charge
(4)................... -- 2,739 2,739 -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income........ 8,095 20,813 17,073 28,005 33,541 45,360 18,617 29,156
Interest expense........ 5,946 4,440 4,831 3,520 6,963 6,241 3,758 1,740
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations before
income taxes.......... 2,149 16,373 12,242 24,485 26,578 39,119 14,859 27,416
Income tax expense...... 860 6,556 4,901 9,794 10,631 15,648 5,943 10,967
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing
operations............ 1,289 9,817 7,341 14,691 15,947 23,471 8,916 16,449
Discontinued operations
(5)................... -- 1,016 1,016 3,514 7,304 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. 1,289 8,801 6,325 11,177 8,643 23,471 8,916 16,449
Accretion of redeemable
preferred stock (6)... (12,030) (12,157) (13,160) (14,404) (5,654) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stockholders.......... $ (10,741) $ (3,356) $ (6,835) $ (3,227) $ 2,989 $ 23,471 $ 8,916 $ 16,449
========== ========== ========== ========== ========== ========== ========== ==========
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12 MONTHS 26 WEEKS ENDED
FISCAL ENDED -----------------------
FISCAL 1998 (1) JANUARY 30, FISCAL FISCAL FISCAL AUGUST 4, AUGUST 3,
1997 (11 MONTHS) 1999 (1) 1999 2000 2001 2001 2002
---------- ----------- ----------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SALES PER SQUARE FOOT DATA)
Basic net income (loss)
per common share:
Income from continuing
operations............ $ 2.12 $ 16.07 $ 12.01 $ 24.00 $ 3.88 $ 3.39 $ 1.36 $ 2.26
Loss from accretion of
redeemable preferred
stock................. (19.79) (19.90) (21.53) (23.53) (1.38) -- -- --
Discontinued
operations.......... -- (1.66) (1.66) (5.74) (1.77) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stockholders.......... (17.67) (5.49) (11.18) (5.27) 0.73 3.39 1.36 2.26
Diluted net income
(loss) per common
share:
Diluted income from
continuing
operations............ 2.12 16.07 12.01 24.00 1.99 3.03 1.35 1.96
Diluted loss from
accretion of preferred
stock................. (19.79) (19.90) (21.53) (23.53) -- -- -- --
Discontinued
operations............ -- (1.66) (1.66) (5.74) (0.91) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stockholders.......... (17.67) (5.49) (11.18) (5.27) 1.08 3.03 1.35 1.96
Weighted average number
of common shares
outstanding (in
thousands):
Basic................. 608 611 611 612 4,112 6,930 6,576 7,284
Diluted............... 608 611 611 612 8,010 7,745 6,587 8,383
STORE DATA:
Comparable store net
sales increase
(decrease) (7)........ 2.7% 7.4% (0.6%) 3.0% 3.6% 4.7% 5.4%
Number of stores at end
of period............. 61 70 83 105 125 114 134
Total square feet at end
of period............. 3,434,422 3,858,422 4,355,072 5,298,188 6,148,894 5,695,474 6,485,401
Net sales per square
foot (8)(9)........... $ 162 $ 174 $ 175 $ 180 $ 186 $ 88 $ 91
Average net sales per
store (8)............. $ 9,247 $ 9,779 $ 9,559 $ 9,598 $ 9,442 $ 4,471 $ 4,496
OTHER DATA:
Gross profit margin..... 21.1% 22.1% 22.5% 23.4% 24.5% 23.7% 25.6%
Operating margin........ 1.5% 2.7% 3.8% 3.7% 4.2% 3.8% 5.0%
Inventory turnover
(10).................. 2.96x 3.33x 3.63x 3.91x 3.73x 1.88x 1.88x
Depreciation and
amortization.......... $ 7,038 $ 8,121 $ 8,662 $ 9,425 $ 12,082 $ 5,162 $ 6,579
BALANCE SHEET DATA (2):
Inventories............. $ 150,038 $ 128,869 $ 139,577 $ 163,149 $ 202,413 $ 212,728 $ 249,762
Working capital (11).... 23,911 56,428 56,834 51,239 68,957 97,472 92,745
Total assets............ 223,454 200,994 219,752 264,513 322,810 340,323 377,614
Total debt including
capitalized lease
obligations........... 70,128 28,131 14,931 73,647 80,861 118,331 93,976
Total mandatorily
redeemable preferred
stock excluded from
stockholders' equity
(12)(13).............. 125,609 137,766 152,170 -- -- -- --
Accumulated deficit --
including accretion of
redeemable preferred
stock (14)............ (47,913) (51,272) (54,499) (51,510) (28,039) (42,594) (11,590)
Total stockholders'
(deficit) equity
(13).................. $ (56,247) $ (59,587) $ (62,814) $ 38,742 $ 63,105 $ 48,209 $ 78,984
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(1) During the period ended January 30, 1999, we changed our fiscal reporting year from the Saturday nearest to the end of February to the Saturday nearest to the end of January. The eleven-month period ended January 30, 1999 consists of the 48 weeks then ended. Our 1999 fiscal year began on January 31, 1999 and ended on January 29, 2000.
(2) The "Statement of Operations Data" and "Balance Sheet Data" for fiscal years 1998, 1999, 2000 and 2001 has been derived from our audited consolidated financial statements. Such information for fiscal year 1997 and for the twelve months ended January 30, 1999 has been derived from our consolidated financial statements.
(3) Cost of goods sold includes occupancy, freight and distribution costs, and shrink expense.
(4) Non-recurring charge includes asset impairment and distribution center and corporate office relocation expense.
(5) Discontinued operations resulted from our former internet commerce business.
(6) Represents accretion of the redeemable preferred stock to its redemption value through a charge to accumulated deficit.
(7) Comparable store sales begin in a store's 14th full month of operations after its grand opening. Comparable store sales for the full year and for the 26 week periods are for stores that opened at least 13 months prior to the beginning of the period noted. Stores that were relocated during the applicable period have been excluded from comparable store sales. Each relocated store is returned to the comparable store base after its 14th full month of operations.
(8) Calculated using net sales of all stores open at both the beginning and the end of the period.
(9) Calculated using gross square footage of all stores open at both the beginning and the end of the period. Gross square footage includes the storage, receiving and office space that generally occupies approximately 15% of total store space.
(10) Calculated as cost of goods sold divided by the average of the last five quarters' ending inventories for the twelve month periods, and as the cost of goods sold divided by the average of the last three quarters ending inventory for the 26 week periods.
(11) Defined as current assets less current liabilities.
(12) In connection with our recapitalization in fiscal 2000, the preferred stockholders elected to convert all outstanding shares of preferred stock to shares of common stock resulting in the conversion of 9,396,612 shares of preferred stock to 10,931,239 shares of common stock. We repurchased approximately 60% of the shares of common stock from the former preferred stockholders for cash and promissory notes. The notes were repaid in September 2001.
(13) The mandatorily redeemable preferred stock was not classified within stockholders' equity (deficit) because of the redemption feature.
(14) Includes $63,897 of accretion of the redeemable preferred stock to its redemption value through a charge to accumulated deficit.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with "Selected Consolidated Historical Financial and Operating Data" and our consolidated financial statements and related notes appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including, but not limited to, those set forth under "Risk Factors" in this prospectus.
OVERVIEW
We are the most profitable full-line sporting goods retailer as compared to the six largest publicly-traded full-line sporting goods retailers in the United States as measured by total net income in fiscal 2001, and our $1.1 billion in net sales in fiscal 2001 ranks us as the second largest as measured by net sales. As of August 3, 2002, we operated 134 stores in 24 states. Our two primary store prototypes of approximately 48,000 and 30,000 square feet provide us with substantial flexibility to adapt to specific market characteristics and optimize our investments in new stores.
RESULTS OF OPERATIONS
The following table presents for the periods indicated selected items in the consolidated statements of income as a percentage of our net sales:
26 WEEKS ENDED
FISCAL YEAR ----------------------
----------------------- AUGUST 4, AUGUST 3,
1999 2000 2001 2001 2002
----- ----- ----- --------- ---------
(PERCENTAGE OF NET SALES)
Net sales.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold..................... 77.5 76.6 75.5 76.3 74.4
----- ----- ----- ----- -----
Gross profit........................... 22.5 23.4 24.5 23.7 25.6
Selling, general and administrative
expenses............................. 18.2 19.0 19.8 19.5 20.1
Pre-opening expenses................... 0.5 0.7 0.5 0.4 0.5
----- ----- ----- ----- -----
Operating income....................... 3.8 3.7 4.2 3.8 5.0
Interest expense....................... 0.5 0.8 0.6 0.8 0.3
----- ----- ----- ----- -----
Income from continuing operations
before income taxes.................. 3.3 2.9 3.6 3.0 4.7
Income taxes........................... 1.3 1.2 1.5 1.2 1.9
----- ----- ----- ----- -----
Income from continuing operations...... 2.0 1.7 2.1 1.8 2.8
Discontinued operations................ 0.5 0.8 -- -- --
----- ----- ----- ----- -----
Net income............................. 1.5% 0.9% 2.1% 1.8% 2.8%
===== ===== ===== ===== =====
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Cost of goods sold includes the cost of merchandise, inventory shrinkage, freight, distribution and store occupancy costs. Store occupancy costs include rent, common area maintenance charges, real estate and other asset based taxes, store maintenance, utilities, depreciation, fixture lease expenses and certain insurance expenses.
Selling, general and administrative expenses include store and field support payroll and fringe benefits, advertising, bank card charges, information systems, marketing, legal, accounting, other store expenses and all expenses associated with operating our corporate headquarters.
Pre-opening expenses consist primarily of marketing, payroll and recruiting costs incurred prior to a new store opening.
Interest expense results primarily from interest on our revolving line of credit.
Loss from discontinued operations and disposal of business is attributable to our internet commerce business which was closed effective as of the end of fiscal 2000.
Our fiscal year ends on the Saturday closest to January 31 and generally results in a 52-week fiscal year. However, every five or six years, our fiscal year is 53 weeks. Fiscal 2000 is 53 weeks. For purposes of annual comparisons, unless otherwise noted, we have not adjusted for this difference.
26 WEEKS ENDED AUGUST 3, 2002 COMPARED TO THE 26 WEEKS ENDED AUGUST 4, 2001
Net Sales
Net sales increased by $99.2 million, or 20.4%, to $586.8 million for the 26 weeks ended August 3, 2002, from $487.6 million for the 26 weeks ended August 4, 2001. This increase resulted from a comparable store sales increase of $24.1 million, or 5.4%, and $75.1 million in new store sales, which reflected the opening of nine new stores and relocation of three stores in the 26 weeks ended August 3, 2002 and the opening of 20 new stores in 2001. The increase in comparable store sales is mostly attributable to sales increases in the majority of our merchandise categories with women's apparel, camping, team sports and exercise recording the largest increases. These increases were partly offset by lower sales of fishing tackle.
Gross Profit
Gross profit increased by $34.9 million, or 30.2%, to $150.4 million for the 26 weeks ended August 3, 2002 from $115.5 million for the 26 weeks ended August 4, 2001. As a percentage of net sales, gross profit increased to 25.6% for the 26 weeks ended August 3, 2002 from 23.7% for the 26 weeks ended August 4, 2001. The increase in gross profit percentage was primarily due to improved selling margins in the majority of our product categories, as well as leverage on store occupancy costs that resulted from our increased comparable store sales and improved productivity at our distribution center.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $23.0 million to $118.0 million for the 26 weeks ended August 3, 2002 from $95.0 million for the 26 weeks ended August 4, 2001. As a percentage of net sales, selling, general and administrative expenses increased by 0.6% to 20.1% for the 26 weeks ended August 3, 2002 from 19.5% for the 26 weeks ended August 4, 2001. The dollar increase in these expenses is attributable to an increase in store personnel expenses of $11.9 million, other store expenses (including credit card fees) of $3.1 million and an increase in net advertising expense of $2.5 million, each of which is primarily associated with operating nine new stores opened in the 26 weeks ended August 3, 2002 and the opening of 20 new stores in 2001. In addition, corporate expenses increased $5.5 million as we invested in people associated with new human resources and merchandising system initiatives as well as the expansion of our product sourcing group and support of our new store growth.
Pre-Opening Expenses
Pre-opening expenses increased by $1.3 million to $3.2 million for the 26 weeks ended August 3, 2002 from $1.9 million for the 26 weeks ended August 4, 2001. Pre-opening expenses increased primarily as a result of the addition of nine new stores and three relocations for the 26 weeks ended August 3, 2002 compared to nine new stores for the 26 weeks ended August 4, 2001.
Operating Income
Operating income increased by $10.5 million, or 56.6%, to $29.1 million for the 26 weeks ended August 3, 2002 from $18.6 million for the 26 weeks ended August 4, 2001. The increase in operating income is primarily attributable to higher comparable store sales and gross margin percentage combined with operating income from stores opened during 2001.
Interest Expense
Interest expense decreased by $2.0 million to $1.7 million for the 26 weeks ended August 3, 2002 from $3.7 million for the 26 weeks ended August 4, 2001. This decrease was due to lower interest rates and, to a lesser extent, lower average borrowings.
Income Taxes
Our effective tax rate was 40% in both the 26 weeks ended August 3, 2002 and the 26 weeks ended August 4, 2001.
Net Income
As a result of the foregoing, net income increased by $7.5 million, or 84.5%, to $16.4 million for the 26 weeks ended August 3, 2002 from $8.9 million for the 26 weeks ended August 4, 2001.
FISCAL YEAR 2001 (52 WEEKS) COMPARED TO FISCAL YEAR 2000 (53 WEEKS)
Net Sales
Net sales increased by $181.2 million, or 20.3%, to $1,074.6 million from $893.4 million in 2000. This increase resulted from a comparable store sales increase of $28.4 million, or 3.6% (excluding the 53rd week from fiscal 2000), and $152.8 million from new store sales which were attributable to the opening of 20 new stores in 2001 and 22 new stores in 2000. The increase in comparable store sales is mostly attributable to sales increases in a majority of our merchandise categories with women's and kids apparel, as well as golf, team sports, exercise and hunting equipment recording the largest increases. These increases were partially offset by declines in men's outerwear and boots that resulted from the unusually mild weather in the fourth quarter and reduced scooter sales.
Gross Profit
Gross profit increased by $54.8 million, or 26.2%, to $263.6 million in 2001 from $208.8 million in 2000. As a percentage of net sales, gross profit increased to 24.5% in 2001 from 23.4% in 2000. The increase in gross profit percentage was primarily due to improved selling margins in a majority of our product categories, as well as lower freight costs and improved productivity at our distribution center.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $43.7 million to $213.1 million from $169.4 million in 2000. As a percentage of net sales, selling, general and administrative expenses increased by 0.8% to 19.8% in 2001 from 19.0% in 2000. The dollar increase in these expenses is attributable to an increase in store personnel expenses of $16.6 million, other store expenses (including credit card fees) of $7.1 million and an increase in net advertising expense of $7.5 million, each of which is primarily associated with operating 20 new stores opened in 2001 and 22 new stores opened in 2000, and an increase in corporate expenses of $12.5 million as we invested in people associated with new human resources and merchandising system initiatives as well as the formation of our product sourcing group and additional personnel required to support our new stores.
Pre-Opening Expenses
Pre-opening expenses decreased by $0.8 million to $5.1 million in 2001 from $5.9 million in 2000. Pre-opening expenses decreased in 2001 primarily as a result of two fewer new store openings than in 2000.
Operating Income
Operating income increased by $11.9 million, or 35.2%, in 2001 to $45.4 million from $33.5 million in 2000. The increase in operating income is primarily attributable to higher comparable store sales and gross margin percentage combined with operating income from stores opened during 2000.
Interest Expense
Interest expense decreased by $0.8 million to $6.2 million in 2001 from $7.0 million in 2000. This decrease was due to lower average borrowings and lower borrowing rates.
Income Taxes
Our effective tax rate was 40% in both 2001 and 2000.
Loss From Discontinued Operations and Disposal of Business
Loss from discontinued operations and disposal of business decreased by $7.3 million to $0 in 2001 from $7.3 million in 2000. The loss in 2000 was attributable to our internet commerce business.
Net Income
As a result of the foregoing, net income increased by $14.9 million, or 172%, in 2001 to $23.5 million in 2001 from $8.6 million in 2000.
FISCAL YEAR 2000 (53 WEEKS) COMPARED TO FISCAL YEAR 1999 (52 WEEKS)
Net Sales
Net sales increased by $165.1 million, or 22.7%, to $893.4 million from $728.3 million in 1999. This increase resulted from a comparable store sales increase of $19.4 million, or 3.0% (exclusive of the 53rd week in fiscal 2000), and $145.7 million from new store sales which were attributable to the opening of 22 new stores in 2000 and 13 new stores in 1999. The increase in comparable store sales resulted from increases in a majority of our merchandise categories. Exercise equipment and scooters along with outerwear, boots, socks and hunting clothing were all favorably influenced by an unusually cold fall season, and recorded the largest increases.
Gross Profit
Gross profit increased by $44.9 million, or 27.4%, to $208.8 million in 2000 from $163.9 million in 1999. As a percentage of net sales, gross profit increased to 23.4% in 2000 from 22.5% in 1999. The increase in gross profit percentage was primarily due to improved selling margins in a majority of our merchandise categories.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $37.0 million to $169.4 million from $132.4 million in 1999. As a percentage of net sales, selling, general and administrative expenses increased by 0.8% to 19.0% in 2000 from 18.2% in 1999. The dollar increase in these expenses is attributable to an increase in store personnel expenses of $16.8 million, other store expenses (including credit card fees) of $6.2 million and an increase in net advertising expense of $5.2 million, each of which is primarily associated with operating 22 new stores opened in 2000 and 13 stores opened in 1999, and an increase in corporate expenses of $8.8 million due in part to the implementation of our warehouse management system and additional personnel required to support our new stores.
Pre-Opening Expenses
Pre-opening expenses increased by $2.4 million to $5.9 million in 2000 from $3.5 million in 1999. Pre-opening expenses in 2000 is greater than 1999 due to an increase in the number of new stores opened from 13 in 1999, as compared with 22 in 2000.
Operating Income
Operating income increased by $5.5 million or 19.8% in 2000 to $33.5 million from $28.0 million in 1999. The increase in operating income is primarily attributable to higher comparable store sales and gross margin percentage combined with operating income from stores opened during 1999.
Interest Expense
Interest expense increased by $3.5 million from $3.5 million in 1999 to $7.0 million in 2000. The increase is attributable to interest expense incurred in connection with borrowings that resulted from our common stock buy-back in 2000, combined with higher average interest rates on the revolving line of credit.
Income Taxes
Our effective tax rate was 40% in both 2000 and 1999.
Loss From Discontinued Operations and Disposal of Business
Loss from discontinued operations and disposal of business increased by $3.8 million to $7.3 million in 2000 from $3.5 million in 1999. The loss in 2000 and 1999 was attributable to our internet commerce business.
Net Income
As a result of the foregoing, net income decreased $2.6 million or 22.7% to $8.6 million in 2000 from $11.2 million in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary capital requirements are for inventory, capital improvements, and pre-opening expenses to support our expansion plans, as well as for various investments in store remodeling, store fixtures and ongoing infrastructure improvements. Our main sources of liquidity have been cash flows from operations, borrowings under our credit facility and proceeds from sale-leaseback transactions.
The following chart illustrates principal elements of our cash flow for the past three fiscal years and interim periods.
CASH FLOW ANALYSIS
-------------------------------------------------------------
26 WEEKS 26 WEEKS
FISCAL FISCAL FISCAL ENDED ENDED
1999 2000 2001 AUGUST 4, 2001 AUGUST 3, 2002
------- ------- ------- -------------- --------------
(DOLLARS IN THOUSANDS)
Net cash provided by (used in)
operating activities................ $15,769 $17,613 $12,007 $(25,123) $ (3,151)
Net cash (used in) provided by
investing activities:
Capital expenditures................ (14,749) (35,719) (32,219) (15,234) (14,169)
Proceeds from sale-leasebacks and
fixture leasing.................. 8,991 13,213 10,254 2,467 3,094
Net cash (used in) provided by
investing activities................ (5,758) (22,506) (21,965) (12,767) (11,075)
Net cash (used in) provided by
financing activities................ (9,055) 7,527 10,655 45,647 19,124
Long-term debt and capital leases (at
end of period)...................... 14,931 73,647 80,861 118,331 93,976
Working capital (at end of period).... $56,834 $51,239 $68,957 $ 97,472 $ 92,745
|
During fiscal 1999, 2000 and 2001, net cash provided by operating activities was $15.8 million, $17.6 million and $12.0 million, respectively. During the 26 weeks ended August 3, 2002, net cash of $3.2 million was used in operating activities. All of our revenues are realized at the point-of-sale in our stores. Thus, our net sales are essentially on a cash basis. Changes in inventory turnover affect net cash provided by operating activities. Inventory turnover was 3.63, 3.91, 3.73, and 1.88 in fiscal 1999, 2000, 2001 and the 26 weeks ended August 3, 2002, respectively. Generally, a higher inventory turnover corresponds with greater net cash from operating activities. The cash flow from operating our stores is a significant source of liquidity. The cash flow from operating our stores is used primarily to purchase inventory, make interest payments on our indebtedness and pay income taxes.
During fiscal 1999, 2000 and 2001 and the 26 weeks ended August 3, 2002, net cash used in investing activities was $5.8 million, $22.5 million, $22.0 million and $11.1 million, respectively. We use cash in investing activities to build new stores and remodel or relocate existing stores. Furthermore, net cash used in investing activities includes purchases of information technology assets and expenditures for distribution facilities and corporate headquarters. During fiscal 1999, 2000 and 2001 and the 26 weeks ended August 3, 2002, we opened 13, 22, 20 and nine new stores, respectively, and remodeled or relocated six, five, one and three stores, respectively. Sale-leaseback transactions covering store fixtures, buildings and information technology assets also have the effect of returning to us cash previously invested in these assets.
Our liquidity and capital needs have been met by cash from operations and borrowings under our revolving line of credit. This credit facility currently provides for revolving loans in an aggregate outstanding principal amount of up to $180 million, including up to $25 million in the form of letters of credit. The actual availability under our credit facility is limited to the lesser of 70% of our eligible inventory or 85% of our inventory's liquidation value, in each case net of specified reserves and less any letters of credit outstanding. Outstanding borrowings on the credit facility, as of January 29, 2000, February 3, 2001, February 2, 2002 and August 3, 2002 were $10.5 million, $55.1 million, $77.1 million and $90.3 million, respectively. Total remaining borrowing capacity, after subtracting letters of credit as of January 29, 2000, February 3, 2001, February 2, 2002 and August 3, 2002 was $73.2 million, $50.2 million, $52.9 million and $66.8 million, respectively. Interest on outstanding indebtedness under the credit facility currently accrues at the lender's prime commercial lending rate or, if we elect, at the one month LIBOR plus 1.25% based on our current interest coverage ratio. Our obligations under the credit facility are secured by interests in substantially all of our personal property excluding store and distribution center equipment and fixtures. The credit facility matures on May 30, 2006. We have used our credit facility to meet our seasonal working capital requirements and support our growth.
The credit facility contains restrictions regarding our and our subsidiary's ability, among other things, to merge, consolidate or acquire non-subsidiary entities, to incur indebtedness or liens, to pay dividends or make distributions on our stock, to make investments or loans, or to engage in transactions with affiliates. We are also required to comply with a fixed charge coverage ratio. As of August 3, 2002, we were in compliance with the terms of the credit facility.
In 2000, our preferred stockholders elected to convert all outstanding preferred shares to common stock resulting in the conversion of 9,396,612 shares of preferred stock into 10,931,239 shares of common stock. The company also repurchased and retired approximately 60% of the common stock from the former preferred stockholders for cash of $44.8 million (which was financed with borrowings under the credit facility) and promissory notes totaling $13.8 million in principal amount. We repaid in full the promissory notes in 2001 and financed the repayment with borrowings under the credit facility.
In addition, as of August 3, 2002 there were outstanding warrants to purchase 8,229 shares of common stock, all of which if exercised prior to the offering will be converted to shares of common stock upon the completion of this offering. The exercise price per share of the warrants is $.01 per share. The warrants expire by their terms if not exercised before the business day prior to the effective date of this offering.
We estimate that in fiscal 2002, capital expenditures net of any sale-leaseback of fixtures and computer equipment will be approximately $20.0 million. We intend to use these funds primarily to develop new stores,
relocate and improve existing stores, provide leasehold improvements and build our information systems infrastructure.
We believe that cash flows from operations and funds available under our credit facility will be sufficient to satisfy our capital requirements for at least the next 12 months.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following table summarizes our material contractual obligations, including both on-and-off balance sheet arrangements in effect at February 2, 2002, and as adjusted to give effect to the sale by us of shares of common stock in this offering at an assumed initial public offering price of $ per share and the application of the net proceeds of the sale (after deducting estimated offering expenses and underwriting discounts and commissions):
CONTRACTUAL OBLIGATIONS FISCAL 2002 FISCAL 2003 FISCAL 2004 THEREAFTER TOTAL AS ADJUSTED
----------------------- ----------- ----------- ----------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS)
Long-term debt............ $ 160 $ 77,230 $ 174 $ 985 $ 78,549
Capital lease
obligations............. 51 56 60 2,145 2,312
Operating lease
obligations............. 85,660 90,257 88,090 871,948 1,135,955
------- -------- ------- -------- ----------
Total obligations....... $85,871 $167,543 $88,324 $875,078 $1,216,816
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The following table summarizes our other commercial commitments, including both on-and off-balance sheet arrangements, in effect at February 2, 2002.
OTHER COMMERCIAL COMMITMENTS FISCAL 2002 TOTAL
---------------------------- ----------- ------
Documentary letters of credit............................... $2,511 $2,511
Standby letters of credit................................... 5,347 5,347
------ ------
Total commercial commitments.............................. $7,858 $7,858
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The only off-balance sheet contractual obligations and commercial commitments as of February 2, 2002 relate to operating lease obligations and letters of credit. We have excluded these items from our balance sheet in accordance with generally accepted accounting principles.
QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY
The following table sets forth certain unaudited financial and operating data in each fiscal quarter during fiscal 2000, fiscal 2001 and the first quarter of fiscal 2002. The unaudited quarterly information includes all normal recurring adjustments that we consider necessary for a fair presentation of the information shown. This information should be read in conjunction with the audited consolidated financial statements and the notes thereto appearing elsewhere in this prospectus.
2000 2001 2002
----------------------------------------- ----------------------------------------- -------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST SECOND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
Net sales............ $172,535 $205,329 $204,017 $311,515 $228,822 $258,710 $246,513 $340,523 $276,635 $310,123
Gross profit......... 36,099 45,886 46,346 80,513 52,931 62,577 61,179 86,882 70,040 80,352
Operating income
(loss)............. (1,900) 8,367 1,916 25,158 4,968 13,649 4,329 22,414 8,736 20,420
Net income (loss).... (1,543) 2,825 (575) 7,936 1,866 7,050 1,638 12,917 4,729 11,720
Net income as a % of
full year.......... (17.9%) 32.7% (6.7%) 91.8% 8.0% 30.0% 7.0% 55.0% -- --
Comparable store net
sales (decrease)
increase (1)....... (0.4)% 1.7% 3.7% 7.6% 3.1% 6.3% 4.2% 0.7% 5.6% 5.3%
AS A PERCENTAGE OF NET SALES:
Net sales............ 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Gross profit......... 20.9 22.3 22.7 25.8 23.1 24.2 24.8 25.5 25.3 25.9%
Operating income
(loss)............. (1.1) 4.1 0.9 8.1 2.2 5.3 1.8 6.6 3.1 6.6%
Net income (loss).... (0.9) 1.4 (0.3) 2.5 0.8 2.7 0.7 3.8 1.7 3.8%
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(1) Comparable store sales begin in a store's 14th full month of operations after its grand opening. Comparable store sales for the full year and for the 13 week periods are for stores that opened at least 25 months prior to the end of the period noted. Stores that were relocated during the applicable period have been excluded from comparable store sales. Each relocated store is returned to comparable store base after its 14th full month of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk
After this offering, our net exposure to interest rate risk will consist primarily of borrowings under our revolving credit facility. Our revolving credit facility bears interest at rates that are benchmarked either to U.S. short-term floating rate interest rates or one-month LIBOR rates, at our election. The aggregate balance outstanding under our revolving credit facility as of February 2, 2002 and February 3, 2001 totaled $77.1 million and $55.1 million, respectively. The impact on our annual net income of a hypothetical one percentage point interest rate change on the average outstanding balances under our revolving credit facility would be approximately $0.6 million based upon fiscal 2001 average borrowings.
Impact of Inflation
We do not believe that our operating results have been materially affected by inflation during the preceding three fiscal years. There can be no assurance, however, that our operating results will not be adversely affected by inflation in the future.
Tax Matters
Presently, we do not believe that we have any tax matters that could materially affect our consolidated financial statements.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001, be accounted for using the purchase method of accounting. SFAS No. 142 changes the accounting for goodwill and certain other intangible assets from an amortization method to an impairment only approach. We do not believe that the adoption of SFAS No. 142 effective February 3, 2002, will have a material impact on our financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which provides guidance that will eliminate inconsistencies in accounting for the impairment or disposal of long-lived assets under existing accounting pronouncements. We do not believe that the adoption of SFAS No. 144, effective February 3, 2002, will have a material impact on our financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We do not believe that the adoption of SFAS No. 146 will have a material impact on our financial position or results of operations.
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
Our significant accounting policies are described in Note 1 of the Consolidated Financial Statements, which were prepared in accordance with accounting principles generally accepted in the United States of America. In preparing our financial statements, we made estimates and judgments which affect the results of our operations and the value of assets and liabilities we report. Our actual results may differ from these estimates.
We believe that the following summarizes critical accounting policies which require significant judgments and estimates in our preparation of our consolidated financial statements.
Inventory Valuation
We value our inventory using the lower of weighted average cost or market method. Market price is generally based on the current selling price of the merchandise. We regularly review inventories to determine if the carrying value of the inventory exceeds market value and we record a reserve to reduce the carrying value to its market price, as necessary. Historically, we have rarely experienced significant occurrences of obsolescence or slow moving inventory. However, future changes such as customer merchandise preference, unseasonable weather patterns, or business trends could cause our inventory to be exposed to obsolescence or slow moving merchandise.
Shrink is accrued as a percentage of merchandise sales based on historical shrink trends. We perform physical inventories at our stores and distribution center throughout the year. The reserve for shrink represents an estimate for shrink for each of our locations since the last physical inventory date through the reporting date. Estimates by location and in the aggregate are impacted by internal and external factors and may vary significantly from actual results.
Impairment of Assets
We review long-lived assets whenever events and circumstances indicate that the carrying value of these assets may not be recoverable based on estimated future cash flows. Assets are reviewed at the lowest level for which cash flows can be identified, which is the store level. In determining future cash flows, significant estimates are made by us with respect to future operating results of each store over its remaining lease term. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
BUSINESS
We are the most profitable full-line sporting goods retailer as compared to the six largest publicly-traded full-line sporting goods retailers in the United States as measured by total net income in fiscal 2001, and our $1.1 billion in net sales in fiscal 2001 ranks us as the second largest. Our core focus is to be an authentic sporting goods retailer by offering a broad selection of high-quality, competitively-priced brand name sporting goods equipment, apparel and footwear that enhances our customers' performance and enjoyment of their sports activities. Each of our stores typically contains five specialty stores. We believe our "store-within-a-store" concept creates a unique shopping environment by combining convenience, broad assortment and competitive prices of large format stores with the brand names, deep product selection within a category and the customer service of a specialty store. We believe this combination differentiates us from our competitors, positions us as a destination store for a wide range of sporting goods and appeals to a broad customer segment from the beginner to the sports enthusiast.
As of August 3, 2002, we operated 134 stores in 24 states. Our two primary store prototypes of approximately 48,000 and 30,000 square feet provide us with substantial flexibility to adapt to specific market characteristics and optimize our investments in new stores. We carry a wide variety of well-known brands, including Nike, Columbia, Adidas and Callaway, as well as exclusive branded-products sold under names such as Ativa and Walter Hagen, which are available only in our stores. The breadth of our product selections in each category of sporting goods offers our customers a wide range of price points and enables us to address the needs of sporting goods consumers, from the beginner to the sport enthusiast. For the twelve months ended August 3, 2002, we generated net sales, operating income and net income of $1.2 billion, $55.9 million and $31.0 million, respectively.
Dick's was founded in 1948 when Richard ("Dick") Stack, the father of Edward W. Stack, our Chairman and Chief Executive Officer, opened his original bait and tackle store in Binghamton, New York. Edward W. Stack joined his father's business full-time in 1977 and, upon his father's retirement in 1984, became President and Chief Executive Officer of the then two store chain. Under his leadership, our business has continued to evolve. By 1986, our business included a broad range of sporting goods and active apparel, including participation sports equipment, athletic apparel, athletic footwear and hunting, fishing and camping equipment. In 1994, we redefined our market strategy and began to expand our business and accelerate our new store openings. Since then we have opened 125 stores, and we plan to continue to expand our store base to further solidify our position as a leader of sporting goods retailing.
COMPETITIVE STRENGTHS
We believe that the following key competitive strengths differentiate us and are critical to our continuing success:
Demonstrated Ability to Consistently Deliver Profitable Growth
For the four year period ending February 2, 2002, our net sales, operating income and net income have grown at a compounded annual growth rate of 20%, 39% and 55%, respectively. During the same time period, our gross profit margins have increased from 22.1% to 24.5%, while our operating margins have increased from 2.7% to 4.2%. We will continue to focus on the financial metrics which we believe are key to our profitable growth, such as return on invested capital for all of our capital projects, inventory turnover and growth in store operating profit. For the four year period ending February 2, 2002, our return on invested capital for the company has increased from 8.1% to 10.8%. These historical results may not be indicative of future results and we can provide no assurances that we will be able to achieve comparable future results.
Compelling New Store Economics
We believe our new stores generate above average returns on invested capital as compared to other publicly-traded full-line sporting goods retailers. Our cash-on-cash return for new stores has steadily improved since the beginning of fiscal 1996, and in fiscal 2001, our 104 comparable stores (stores open for 14 full months) generated an average cash-on-cash return of 45%. When we refer to cash-on-cash returns, we mean cash
generated from a store's operations divided by the cash investment in net assets of that store. We can provide no assurances that we can generate these returns on new stores we open in the future.
Leading Market Share in Existing Markets
We believe we are the leading full-line retailer of sporting goods in substantially all of our markets as calculated by the number of stores operated by a retailer in each market multiplied by that retailer's nationwide average net sales per store. We intend to add new stores to existing markets to further solidify our market share and expand into new markets which are close to our existing markets. This strategy enables us to leverage our brand recognition, existing advertising, management and distribution costs in order to increase our return on invested capital. We believe our strong brand recognition combined with the density of store locations we have achieved in our markets provides a significant competitive advantage.
Unique Shopping Experience
Our stores provide a distinctive and exciting shopping experience by offering our customers the convenience of numerous specialty stores under one roof while delivering the product assortment of a large format store. We believe the following characteristics differentiate us from our competitors:
- Interactive "Store-Within-A-Store." Our stores typically contain five
stand alone specialty stores. We seek to create a distinct look and
feel for each specialty department to heighten the customer's interest
in the products offered. A typical store has the following in-store
specialty shops: (i) the Pro Shop, a golf shop with a putting green and
hitting area and video monitors featuring golf tournaments and
instruction on the Golf Channel or other sources; (ii) the Footwear
Center, featuring hardwood floors, a track for testing athletic shoes
or in-line skates and a bank of video monitors playing sporting events;
(iii) the Cycle Shop, designed to sell and service bikes, complete with
mechanics' work area and equipment on the sales floor; (iv) the
Sportsman's Lodge for the hunting and fishing customer, designed to
have the look of an authentic bait and tackle shop; and (v) Total
Sports, a seasonal sports area displaying sports equipment and athletic
apparel associated with specific seasonal sports, such as hockey and
baseball. In addition, our stores provide interactive opportunities, by
allowing customers to test golf clubs in an indoor driving range, shoot
bows in our archery range, or run and rollerblade on our footwear
track.
- Authentic Sporting Goods Retailer. Our history and core foundation is as a purveyor of authentic athletic equipment, apparel and footwear, which means we offer athletic merchandise that is high quality and intended to enhance our customers' performance and enjoyment of athletic pursuits, rather than focusing our merchandise selection on the latest fashion trend or style. We believe this focus makes our results less volatile than many of our competitors, while distinguishing us and our offerings from mass merchandisers. This merchandising approach creates customer loyalty from our customers who seek genuine deep product offerings, and ultimately positions us with advantages in a market which we believe will continue to benefit from new product offerings with enhanced technological features.
- Expertise and Service. We enhance our customers' shopping experience by providing knowledgeable and trained customer service professionals and value added services. For example, we were the first full-line sporting goods retailer to have active members of the PGA working in our stores, and currently employ over 100 PGA professionals in our golf departments. We also currently have over 200 bike mechanics to sell and service bicycles. All of our stores also provide support services such as golf club grip replacement, bicycle repair and maintenance, home delivery and assembly of fitness equipment.
Experienced Management Team
Our senior management team has worked together for a number of years and has diverse and extensive backgrounds across retail sectors. Our senior management team averages 13 years of experience in the sporting goods industry, all with us, and 22 years in general retailing. We believe the team's experience has enabled us to
anticipate and respond effectively to industry trends and competitive dynamics, better understand our customer base and build strong vendor relationships.
GROWTH STRATEGY
We plan to continue to strengthen our position as a leading full-line sporting goods retailer by:
Expanding Our Store Base Using Our Proven Store Model
We believe that our compelling new store economics and our successful track record of opening new stores provides us with a strong foundation for continued growth through new store openings. We planned to open 15 stores in fiscal 2002, of which nine are open to date and between 15 and 20 stores in fiscal 2003. Our store openings will be in existing markets as well as contiguous markets. Since the beginning of fiscal 2000, we have opened 51 stores.
Continuing to Increase Margins and Return on Invested Capital
We will continue to strive to increase operating margins and return on capital by:
- Generating continuous increases in comparable store sales by expanding our sales in selected product lines, such as women's apparel;
- Continuing to expand gross margins as we benefit from improved purchasing leverage from our vendors, increased scale and leverage of distribution and occupancy costs, as well as disciplined merchandising planning and allocation which contribute to reduced markdowns;
- Leveraging the infrastructure investments we have made and intend to make, principally in the areas of distribution, information systems, and people, in order to enable us to better manage our growth; and
- Improving inventory turnover, which in fiscal 2001 was the highest among all comparable publicly-traded full-line sporting goods retailers, by expanding our backstock program at our distribution center to more efficiently replenish high sales volume stores and faster selling products within our stores.
Continuing to Expand Our Exclusive Brand-name Offerings
We offer our customers high-quality products at competitive prices marketed under exclusive brands. We have invested in a development and procurement staff that continually sources performance-based products generally targeted to the sporting enthusiast for sale under brands such as Ativa, Walter Hagen, Stone Hill, Northeast Outfitters, PowerBolt, and DBX. Many of our products incorporate technical features such as GORE-TEX, a waterproof breathable fabric, and CoolMax, a fabric that wicks moisture away from the skin to the fabric where the moisture evaporates faster, that are typically available only through well-known brand names. Our exclusive products offer outstanding value to our customers at each price point and provide us with significantly higher gross margins than comparable products we sell. Exclusive branded products have grown to $28.2 million of net sales in fiscal 2001 from $9.8 million in fiscal 1999. We expect to continue to grow our exclusive brand-name offerings.
In addition, we may from time to time acquire complementary companies or businesses. Currently, we are not actively considering any acquisitions and we do not currently have any agreements with respect to any acquisitions.
RETAIL STORE OPERATIONS
Our Store Design
We design our stores to create an exciting shopping environment with distinct departments that can stand on their own as authentic sporting goods specialty shops. Our two primary prototype stores are approximately 48,000 square feet and 30,000 square feet, respectively. Signs and banners are located throughout the store
allowing customers to quickly locate the various departments. A wide aisle through the middle of the store displays seasonal or special-buy merchandise. Video monitors throughout the store provide a sense of entertainment with videos of championship games, instructional sessions or live sports events. Our smaller prototype store is designed to offer approximately 80% of the items offered in our larger prototype store while maintaining essentially the same selection for smaller population centers. We have recently developed a third prototype store of approximately 75,000 square feet as a growth vehicle for those trade areas that have sufficient in-profile customers to support it. Of the 38 stores we have opened or relocated or plan to open or relocate in 2001 and 2002, 26 are or are expected to follow the 48,000 square foot prototype, 11 are or are expected to be approximately 30,000 square foot stores and one is a 75,000 square foot store. In most of our stores, approximately 85% of store space is used for selling and approximately 15% is used for office space and non-retail functions.
We seek to stimulate cross-selling and impulse buying through the layout of our departments and the use of lower shelving which enables customers to see the array of merchandise offered throughout our stores. We avoid the warehouse store look featured by some of our large format competitors.
Our stores are typically open seven days a week, generally from 10:00
a.m. to 9:30 p.m. Monday through Friday, 9:00 a.m. to 9:30 p.m. on Saturday and
11:00 a.m. to 6:00 p.m. on Sunday.
Broad Merchandise Selection
We offer a full range of sporting goods and active apparel at each price point in order to appeal to the beginner, intermediate and enthusiast sports consumer. The merchandise we carry includes one or more of the leading manufacturers in each category. Our objective is not only to carry leading brands, but a full range of products within each brand, including the premium items for the sports enthusiast. As beginners and intermediates move to higher levels in their sports, we expect to be prepared to meet their needs.
We believe that the range of the merchandise we offer, particularly for the enthusiast sports consumer, distinguishes us from other large format sporting goods stores. We also believe that the range of merchandise we offer allows us to compete effectively against all of our competitors, from traditional independent sporting goods stores and specialty shops to other large format sporting goods stores and mass market discount retailers.
The following table sets forth the approximate percentage of sales attributable to hardlines, footwear and apparel for the periods presented:
FISCAL YEAR
--------------------
MERCHANDISE CATEGORY 1999 2000 2001
-------------------- ---- ---- ----
Hardlines (1)............................................... 59% 60% 61%
Footwear.................................................... 19 18 19
Apparel..................................................... 22 22 20
--- --- ---
Total....................................................... 100% 100% 100%
=== === ===
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(1) Includes items such as hunting and fishing gear, sporting goods equipment and golf equipment.
Customer Service
Store Associates. We strive to complement our merchandise selection and innovative store design with superior customer service. We actively recruit sports enthusiasts to serve as sales associates because we believe that they are more knowledgeable about the products they sell. For example, we currently employ PGA golf professionals to work in our golf departments and bike mechanics to sell and service bicycles. We believe that our associates' enthusiasm and ability to demonstrate and explain the advantages of the products increases sales. We believe our prompt, knowledgeable and enthusiastic service fosters the confidence and loyalty of our customers and differentiates us from other large format sporting goods stores.
We emphasize product knowledge at both the hiring and training stages. We hire most sales associates for a specific department or category. As part of our interview process, we test each prospective sales associate for knowledge specific to the department or category in which he or she is to work. We train new sales associates through a self-study and testing program we have developed for each of our categories. We utilize a program designed to measure our sales associates' productivity. We also use mystery shoppers to shop at each store at least monthly and encourage customer comments by making available comment cards for customers to complete and return. These programs allow us to identify stores in which improvements need to be made at the sales associate or managerial levels.
We typically staff our stores with a store manager, four sales managers, a front end manager and approximately 52 full-time and part-time sales associates, depending on store volume and time of year. The operations of each store are supervised by one of 18 district managers, each of whom report to one of two regional vice presidents. Each vice president is assisted by a regional director of stores, who is located in the field, and all of these individuals report to the vice president of operations.
Support Services. We believe that we further differentiate our stores from other large format sporting goods stores by offering support services for the products we sell. We replace golf club grips in all of our stores. Our PGA professionals offer golf lessons, generally at local ranges. Although we do not receive a share of income from these lessons, allowing our PGA professionals to offer lessons not only helps us in recruiting them to work for us but provides a benefit to our customers.
Our prototype stores feature a bicycle maintenance and repair station on the sales floor, allowing our bicycle mechanics to service bicycles in addition to assisting customers. We believe that these maintenance and repair stations are one of our most effective selling tools by giving credence to our specialty store concept and giving assurance that we can repair and tune the bicycles they purchase.
We also string tennis rackets, sharpen ice skates, replace in-line skate wheels, provide home delivery and assembly of fitness equipment, provide scope mounting and bore sighting services, cut arrows and sell hunting and fishing licenses.
Our Competitive Pricing
We position ourselves to be competitive in price, but we do not attempt to be a discount leader. We maintain a policy of matching our competitors' advertised prices. If a customer finds a competitor with a lower price on an item, we will match the lower price. Additionally, under our "Right Price Promise," if within 30 days of purchasing an item from us, a customer finds a lower advertised price by either us or a competitor, we will refund the difference. We seek to offer value to our customers and develop and maintain a reputation as a provider of value at each price point.
Site Selection and Store Locations
We select geographic markets and store sites on the basis of demographic information, quality and nature of neighboring tenants, store visibility and accessibility. Key demographics include population density, household income, age and average number of occupants per household. We seek to locate our stores primarily in retail centers which are also occupied by major discount retailers such as Wal-Mart or Target or specialty retailers from other categories such as Barnes & Noble, Best Buy or Staples.
We seek to balance our store expansion between new and existing markets. In our existing markets, we add stores as necessary to cover appropriate market areas. By clustering stores, we seek to take advantage of economies of scale in advertising, promotion, distribution and supervisory costs. We seek to locate stores within separate market areas within each metropolitan area, in order to establish long-term market penetration. In new markets, we generally seek to expand in geographically contiguous areas to build on our experience in the same or nearby regions. We believe that local knowledge is an important part of success. In considering new markets, we locate our stores in areas we believe are underserved. In addition to larger metropolitan markets, we also target smaller population centers in which we locate single stores, generally in regional shopping centers with a wide regional draw.
The following table provides a history of our store openings since the beginning of fiscal 1997.
26 WEEKS
ENDED
FISCAL 1997 FISCAL 1998 FISCAL 1999 FISCAL 2000 FISCAL 2001 AUGUST 3, 2002
----------- ----------- ----------- ----------- ----------- --------------
Stores open at beginning
of period............... 51 61 70 83 105 125
New stores opened......... 10 9 13 22 20 9
------ ------ ------ ------ ------ ------
Stores open at end of
period.................. 61 70 83 105 125 134
Average gross square
footage per store(1).... 57,126 56,302 54,044 52,803 50,647 49,114
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(1) Calculated using gross square footage of all stores opened at both the beginning and the end of the period. Gross square footage includes the storage, receiving and office space that generally occupies approximately 15% of total store space.
OUR INTERNET STRATEGY
In January 2001, we approved a plan to discontinue the operations of our wholly-owned subsidiary, DSG Holdings, LLC, which ran our internet commerce business under the domain name of dsports.com.
In April 2001, we entered into an internet commerce agreement with GSI Commerce, Inc. (f/k/a Global Sports Interactive, Inc.). Under the terms of this ten-year agreement, GSI is responsible for all financial and operational aspects of the internet site which operates under the domain name of "DicksSportingGoods.com." We have licensed to GSI the use of our name and trademarks in connection with the operation of the web site and are only responsible for supporting the site through advertising by such means as signs within our stores and reference to the site in our print and electronic advertising. We and GSI may terminate the agreement if the other party breaches its obligations under the agreement and does not cure the breach within the time frame specified or if the other party files for bankruptcy or becomes insolvent.
The agreement provided for the payment to us of a monthly royalty on sales through the web site. During the period of April 2001 through July 2001, GSI made $58,117 in royalty payments to us. We had the option to convert the royalty arrangement into the right to purchase common shares in GSI in the event the price was at or above a specific level for a defined time.
In July 2001, we elected to convert the royalty arrangement into restricted, unregistered shares of GSI common stock, for which restrictions lapse over a four-year period.
We also received warrants to purchase common shares which are exercisable subject to achieving defined performance milestones. In May 2002, we exercised one of these warrants to purchase shares of unregistered common stock.
The value of the shares of restricted, unregistered GSI common stock that we received in lieu of royalty payments and upon exercise of warrants that we were issued was $4,893,000 as of August 3, 2002. The difference between the fair value of these shares and the amount we paid was recorded as deferred revenue and is being amortized over the ten year term of the agreement.
MARKETING AND ADVERTISING
Our marketing program is designed to promote our extensive selection of brand name products at competitive prices. The program is centered on extensive newspaper advertising supplemented by direct mail and seasonal use of local television and radio. The advertising strategy is focused on weekly newspaper advertising utilizing both multi-page, color inserts and standard run of press advertising, with emphasis on key shopping periods, such as the Christmas season, Father's Day, and back-to-school, and on specific sales and promotional events, including our annual Golf-a-thon sale.
Our strategy of clustering stores in major markets enables us to employ an aggressive advertising strategy on a cost-effective basis through the use of newspaper and local television and radio advertising. Our goal is to be one of the dominant sporting goods advertisers in each of our markets. We advertise in major metropolitan newspapers as well as in regional newspapers circulated in areas surrounding our store locations. Our newspaper advertising typically consists of weekly promotional advertisements with four-color inserts. Our television advertising is generally concentrated during a promotional event or key shopping period. Radio advertising is used primarily to publicize specific promotions in conjunction with newspaper advertising or to announce a public relations promotion or grand opening. Vendor payments under cooperative advertising arrangements with us, as well as vendor participation in sponsoring sporting events and programs, have significantly contributed to our advertising leverage.
Our advertising is designed to create an "event" in the stores and to drive customer traffic with advertisements promoting a wide variety of merchandise values appropriate for the current holiday or event.
We also sponsor tournaments and amateur competitive events in an effort to align ourselves with both the serious sports enthusiast and the community in general.
Our "Scorecard" loyalty program, rolled out chain wide in February 2002 after having been tested for more than one year, provides rebates to customers based on purchases. After a customer registers, rebate points build as a percentage of purchases. These rebates are systemically tracked and once a customer reaches a minimum threshold purchase level of $300, a merchandise credit is mailed to the customer's home. The database of "Scorecard" members exceeds 1.3 million as of August 3, 2002. This database is then used in conjunction with our direct marketing program. The direct marketing program consists of several direct mail pieces sent during holidays throughout the year. Additionally, several customer focused mailings are sent to members based on their past purchasing history.
INFORMATION SYSTEMS
We have installed information systems including STS Merchandising, E-3 Replenishment and MMS Planning and Allocation retail software operating on a client server platform, except for E-3 which runs on an AS400. We utilize ICL-Fujitsu point-of-sale systems that incorporate scanning, price look-up, and store level access to our merchandise information system. Our fully integrated management information systems track purchasing, sales and inventory transfers down to the stock keeping unit or "SKU" level and have allowed us to improve overall inventory management by identifying individual SKU activity and projecting trends and replenishment needs on a timely basis. We believe that these systems enable us to increase margins by reducing inventory investment, strengthening in-stock positions, reducing our historical shrinkage levels, and creating store level perpetual inventories and automatic inventory replenishment on basic items of merchandise.
We have a fully integrated merchandise planning and allocation system that optimizes the distribution of most products to the stores through the integration of historical sales data and forecasted data at an individual store and item level. This minimizes markdowns taken on merchandise and improves sales on these products. Our store operations personnel in every location have online access to product signage, advertising information and e-mail through our wide area network.
A new system initiative is underway with a targeted implementation date during January 2003. The suite of applications being implemented includes JDA Merchandising and Arthur Planning and Allocation all running on a client server platform. A new data warehouse interfacing with these applications should allow for improved merchandise analysis to a lower level of detail. Planning and merchandise pricing is designed to be more geographically sensitive providing the opportunity to increase inventory turns and gross margin dollars. See "Risk Factors -- The implementation of our new information system software could disrupt our operations and negatively impact our financial results and materially adversely affect our business operations."
PURCHASING AND DISTRIBUTION
In addition to merchandise procurement, our buying staff is also responsible for determining initial pricing and product marketing plans and working with our allocation and replenishment groups to establish stock
levels and product mix. Our buying staff also regularly communicates with our store operations personnel to monitor shifts in consumer tastes and market trends.
Our planning, replenishment, allocation, and merchandise control groups are responsible for merchandise distribution, inventory control, and the E-3 automatic replenishment purchasing and allocation systems. These groups act as the central processing intermediary between our buying staff and our stores. This group also coordinates the inventory levels necessary for each advertising promotion with our buying staff and our advertising department, tracking the effectiveness of each advertisement to allow our buying staff and our advertising department to determine the relative success of each promotional program. In addition, this group's other duties include implementation of price changes, creation of all vendor purchase orders, and determination of the adequate amount of inventory for each store.
We purchase merchandise from over 1,000 vendors, and we have no long-term purchase commitments. During fiscal 2001, Nike, our largest vendor, represented approximately 10% of our purchases. No other vendor represented 10% or more of our fiscal 2001 purchases. We do not have long term contracts with any of our vendors and all of our purchases from vendors are done on a short-term purchase order basis.
We utilize a single distribution center to which vendors directly ship merchandise where it is processed as necessary, applying price tickets and hangers, before being shipped to the stores. We believe that our distribution system has the following advantages as compared to a direct delivery, or drop shipping, system utilized by some retailers: reduced individual store inventory investment; more timely replenishment of store inventory needs, better use of store floor space, reduced transportation costs, and easier returns to vendors. We have a 388,000 square foot distribution center located in Smithton, Pennsylvania. We also have a 75,000 square foot return center in Conklin, New York. All damaged or defective merchandise being returned to vendors is consolidated for cost efficient return at this center. Inventory arriving at a distribution center is allocated directly to our stores or to our distribution center for temporary storage or to both.
We have contracted with a dedicated fleet for the delivery of merchandise from our distribution center to our stores. We contract with common carriers to deliver merchandise to our stores outside a 300-mile radius from Smithton.
INDUSTRY AND COMPETITION
According to the National Sporting Goods Association, total U.S. retail sales of sporting goods, including sporting equipment, athletic footwear and apparel, exceeded $45.8 billion in 2001. Sports equipment constituted 46.9% of industry sales, while athletic footwear constituted 29.0% of industry sales and apparel constituted 24.1%. According to Sporting Goods Business magazine, as of June 2002, the top 10 full-line sporting goods retailers account for only 15.4% of total industry sales in 2001. We believe that this fragmentation presents an attractive opportunity for us to continue to expand our market share as customers increasingly prefer one-stop shopping convenience, large selection, high levels of service and competitive prices.
The retail sporting goods industry comprises five principal categories of retailers:
- sporting goods stores (large format stores);
- traditional sporting goods retailers;
- specialty retailers;
- mass merchants; and
- catalogue and Internet retailers.
Sporting Goods Stores. The large format stores generally range from 20,000 to 100,000 square feet and offer a broad selection of sporting goods merchandise. We believe that our superior performance with the large format store in recent years is due in part to our unique approach in blending the best attributes of a large format store with the best attributes of a specialty shop. We believe that this merchandising approach, rather than the "discount" approach taken by some other competitors in this category, has resulted in our higher than
average sales per store and the highest net income in fiscal 2001 of any publicly-traded full-line sporting goods retailer.
Traditional Sporting Goods Stores. These stores generally range in size from 5,000 square feet to 20,000 square feet and are frequently located in regional malls and multi-store shopping centers. They typically carry a varied assortment of merchandise and attempt to position themselves as convenient neighborhood stores. Compared to our stores, they offer a more limited product assortment. We believe these stores do not cater to the sports enthusiast.
Specialty Stores. These stores generally range in size from approximately 2,000 to 20,000 square feet. These retailers typically focus on a specific category, such as athletic footwear, or an activity, such as golf or skiing. While they may offer a deep selection of products within their specialty, they lack the wide range of products that we offer. We believe prices at these stores typically tend to be higher than prices at the sporting goods stores and traditional sporting goods stores.
Mass Merchants. These stores generally range in size from approximately 50,000 to over 200,000 square feet and are primarily located in shopping centers, free-standing sites or regional malls. Sporting goods merchandise and apparel represent a small portion of the total merchandise in these stores and the selection is often more limited than in other sporting goods retailers. We believe that this limited selection particularly with well-known brand names, combined with the reduced service levels typical of a mass merchandiser, limit their ability to meet the needs of sporting goods customers.
Catalogue and lnternet-Based Retailers. We believe that the relationships that we have developed with our suppliers and customers through our retail stores provide us with a significant advantage over catalogue-based and Internet-only retailers. These retailers sell a full line of sporting goods through the use of catalogues and/or the Internet.
GOVERNMENTAL REGULATION
We must comply with federal, state and local regulations, including the federal Brady Handgun Violence Prevention Act, which require us, as a federal firearms licensee, to perform a pre-sale background check of purchasers of hunting rifles. We perform this background check using either the FBI-managed National Instant Criminal Background Check System, or NICS, or a state government-managed system that relies on NICS and any additional information collected by the state. These background check systems confirm that a sale can be made, deny the sale, or require that the sale be delayed for further review and provide us with a transaction number for the proposed sale. We are required to record the transaction number on Form 4473 of the Bureau of Alcohol, Tobacco and Firearms and retain a copy for our records for 20 years for auditing purposes for each approved, denied or delayed sale. After all of these procedures are complete, we finalize the sale by transferring the product.
In addition, many of our imported products are subject to existing or potential duties, tariffs or quotas that may limit the quantity of products that we may import into the U.S. and other countries or impact the cost of such products. To date, we have not been restricted by quotas in the operation of our business and customs duties have not comprised a material portion of the total cost of our products.
PROPRIETARY RIGHTS
Each of "Dick's," "Northeast Outfitters," "PowerBolt," "Fitness Gear" and "Stone Hill" has been registered as a service mark or trademark with the United States Patent and Trademark Office. In addition, we have numerous pending applications for trademarks. We have entered into licensing agreements for names which we do not own which provide for exclusive rights to use names such as "Walter Hagen" and "Field & Stream" for specified product categories. The earliest any of our key licenses for these branded products expires, including extensions, is 2006. These licenses contain customary termination provisions at the option of the licensor including, in some cases, termination upon our failure to sell a minimum volume of branded products covered by the license.
EMPLOYEES
As of August 3, 2002, we employed approximately 9,000 employees, approximately 3,900 of whom were employed full-time. We also employ additional personnel during peak selling periods. We consider our relationships with our employees to be good. None of our employees is covered by collective bargaining agreements.
PROPERTIES
Our corporate headquarters are located at 200 Industry Drive, RIDC Park West, Pittsburgh, PA 15275, where we lease approximately 66,000 square feet of office space. Our lease of this building is for a term of 20 years through June 2019 with two options for extension of five years each. At the end of the initial or any renewal term, we have the option to purchase the property. We also sublease approximately 26,000 square feet of additional office space in Pittsburgh. This sublease expires in October 2003, with an option to extend to February 2004. We are currently exploring alternatives which would allow us to consolidate these office facilities into one facility.
We also currently lease a 388,000 square foot distribution center in Smithton, Pennsylvania. The term of this lease expires in November 2019. We also lease a 75,000 square foot return center in Conklin, New York, which is utilized for freight consolidation and the handling of damaged and defective merchandise. The term of this lease expires in October 2009.
We believe that our current facilities are adequate for our current operations and contemplated growth.
We lease all of our stores. Initial lease terms are generally for 15 years, and most leases contain multiple five-year renewal options and rent escalation provisions. We believe that our leases, when entered into, were at market rate rents. We generally select a new store site six to 12 months before its opening. Our stores are primarily in shopping centers in regional shopping areas, as well as in free-standing locations. We currently have 15 signed leases for planned stores in fiscal 2002, nine of which we have already opened, and ten signed leases for the 15 to 20 stores planned for fiscal 2003.
The store list below represents the stores we operated as of August 3, 2002:
STATE # OF STORES ----- ----------- Alabama.................... 2 Connecticut................ 2 Delaware................... 2 Georgia.................... 1 Iowa....................... 1 Illinois................... 2 Indiana.................... 4 Kansas..................... 3 Kentucky................... 4 Massachusetts.............. 2 Maryland................... 6 Michigan................... 7 Missouri................... 4 |
STATE # OF STORES
----- -----------
North Carolina............. 13
New Jersey................. 6
New York................... 20
Ohio....................... 20
Pennsylvania............... 22
South Carolina............. 2
Tennessee.................. 2
Virginia................... 4
Vermont.................... 1
Wisconsin.................. 3
West Virginia.............. 1
---
Total.................... 134
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LEGAL PROCEEDINGS
Various claims and lawsuits arising in the normal course of business are pending against us. The subject matter of these proceedings primarily include commercial disputes and employment issues. The results of these proceedings are not expected to have a material adverse effect on our consolidated financial position or results of operations.
MANAGEMENT
Executive Officers and Directors
NAME AGE POSITION ---- --- -------- Edward W. Stack................. 47 Chairman and Chief Executive Officer and Director William J. Colombo.............. 47 President and Chief Operating Officer and Director Michael F. Hines................ 46 Chief Administrative Officer and Chief Financial Officer Gary M. Sterling................ 49 Senior Vice President, Merchandising, Planning and Allocation David I. Fuente................. 56 Director Walter Rossi.................... 60 Director Lawrence J. Schorr.............. 48 Director Steven E. Lebow................. 48 Director |
Other Key Employees
NAME AGE POSITION
---- --- --------
Raymond M. Albers............... 60 Senior Vice President -- Chief Information Officer
Walter E. Archie................ 54 Vice President -- New Product Development
Jeffrey R. Hennion.............. 35 Vice President -- Finance and Treasurer
John M. Page.................... 43 Vice President, General Merchandise Manager -- Hardlines
Joseph J. Queri, Jr. ........... 44 Senior Vice President -- Real Estate
Joseph H. Schmidt............... 43 Vice President -- Store Operations and Construction
Gregory Tye..................... 42 Vice President -- Distribution
Lynn S. Uram.................... 40 Senior Vice President -- Human Resources
Michael S. Wilkes............... 48 Vice President, General Merchandise Manager -- Apparel and
Footwear
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Executive Officers and Directors
EDWARD W. STACK has served as our Chairman and Chief Executive Officer since 1984 when the founder and Edward Stack's father, Richard "Dick" Stack, retired from our then two store chain. Mr. Edward Stack has served us full time since 1977 in a variety of positions, including President, Store Manager and Merchandise Manager.
WILLIAM J. COLOMBO became our President and a board member in 2002 in addition to being Chief Operating Officer. From late in 1998 to 2001, Mr. Colombo served as President of dsports.com LLC, our internet commerce subsidiary. Mr. Colombo served as Chief Operating Officer and an Executive Vice President from 1995 to 1998. Mr. Colombo joined us in 1988. From 1977 to 1988, he held various field and corporate management positions with J.C. Penney Company, Inc. (a retailing company).
MICHAEL F. HINES became our Chief Administrative Officer, in addition to being the Chief Financial Officer, in 2001. Mr. Hines joined us in 1995 as the Chief Financial Officer. From 1990 to 1995, Mr. Hines was employed by Staples, Inc. (an office supply retailer), most recently as Vice President of Finance. Prior to that, Mr. Hines spent 12 years in public accounting, the last eight years with Deloitte and Touche LLP.
GARY M. STERLING became our Senior Vice President, Merchandising, Planning and Allocation in 2001. Mr. Sterling served as Senior Vice President -- Merchandising from 1999 to 2000 and as our Senior Vice President -- Merchandising and Product Development for the remainder of 2000 and in the beginning of 2001. Mr. Sterling joined us in 1996 as Vice President, General Merchandise Manager-Hardlines. From 1986 to 1996 Mr. Sterling was employed by Venture Stores, Inc. (a chain of discount department stores and formerly a subsidiary of the May Department Store Company) most recently as Senior Vice President, General Merchandise Manager.
DAVID I. FUENTE has served on the Board since 1993. Mr. Fuente is currently a member of the board of Office Depot, Inc. (an office supply retailer) and was Chairman of Office Depot from 1987 to 2001 and its Chief Executive Officer from 1987 to 2000. He currently serves as a director for Ryder System, Inc. (a truck leasing and logistics company).
WALTER ROSSI has served on the Board since 1993. Since 2000 Mr. Rossi has been the Chairman and Chief Executive Officer of Naartjie Custom Kids, Inc. (a children's apparel retailer). Mr. Rossi formerly served as Chief Executive Officer of Home Express (a retailer of home furnishings), Chairman of the Retail Group at Phillips-Van Heusen Corporation (a clothing manufacturing and retailing company) and Chairman and Chief Executive Officer of Mervyn's (a department store chain). Mr. Rossi also serves on the Board of Greenbacks, Inc (a deep discount retailer).
LAWRENCE J. SCHORR has served on the Board since 1985. Mr. Schorr currently serves as Chief Executive Officer of Empire Plastics, Inc. (a privately owned plastics manufacturing company) and as co-managing partner of the law firm of Levene, Gouldin and Thompson LLP. Mr. Schorr has held both of these positions for the last five years. He previously was President of RRT-Recycle America, a subsidiary of WMX Technologies, Inc. He formerly served in the same position for Resource Recycling Technologies, Inc. (a solid waste material management company). Prior to that he served as a partner in the law firm of Levene, Gouldin and Thompson LLP.
STEVEN E. LEBOW has served on the Board since 1999 and has had observer status on the Board since 1993. Mr. Lebow is currently the Managing Partner and co-founder of GRP Partners (a venture capital firm). Prior to joining GRP Partners, Mr. Lebow spent 21 years at Donaldson, Lufkin & Jenrette (an investment banking firm) in a variety of positions, most recently as Chairman of Global Retail Partners, and as a Managing Director and head of the Retail Group within the Investment Banking Division. Mr. Lebow also serves on the boards of several private companies.
Other Key Employees
RAYMOND M. ALBERS joined us in 1996 as our Chief Information Officer. From 1989 to 1996, Mr. Albers served as Vice President -- Chief Information Officer of Circuit City Stores, Inc. From 1980 to 1989 he was with Target Stores, a division of Dayton Hudson Corporation, most recently as Vice President -- Information Systems. Prior to joining Target Stores, Mr. Albers held various positions with Federated Department Stores, Inc. and May Department Stores Company. Mr. Albers plans to retire at the end of the current fiscal year.
WALTER E. ARCHIE joined us in 2000 as Vice President -- New Product Development. From 1997 to 2000, Mr. Archie was the Managing Director of L.L. Bean, Inc., Hong Kong. Mr. Archie served as Vice President, Product Development/Sourcing for Woolworth Overseas Corporation in Hong Kong. From 1990 to 1994 he served Claire's Boutique, Inc., most recently as Managing Director of Claire's Stores International, Inc. in Hong Kong.
JEFFREY R. HENNION became our Vice President -- Finance and Treasurer in 2002. He started with us in 2000 as Vice President-Treasurer. Prior to joining us, Mr. Hennion served Alcoa, Inc. (Aluminum Company of America) from 1989 to 2000 in various treasury and finance related functions, most recently as Assistant Treasurer and as Director -- Investor Relations.
JOHN M. PAGE became our Vice President, General Merchandise Manager -- Hardlines in 1999. Mr. Page joined us in 1996 as Divisional Merchandise Manager -- Hardlines. Prior to joining us, Mr. Page served Sports and Recreation (Jumbo Sports) for over 14 years, most recently as Vice President of Purchasing.
JOSEPH J. QUERI, JR. became our Senior Vice President -- Real Estate in 1999. Mr. Queri joined us in 1993 as Vice President of Real Estate. Prior to joining us, Mr. Queri served with the Widewaters Group, an affiliate of Pyramid Company from 1987 to 1992, where he was in charge of leasing operations.
JOSEPH H. SCHMIDT became our Vice President -- Store Operations and Construction in 2001. Mr. Schmidt previously served as our Regional Vice President Store Operations from 2000 to 2001. Mr. Schmidt
joined us in 1990 and has held various positions in store operations. From 1981 to 1990, he held various positions in store operation for Ames Department Stores, Inc.
GREGORY TYE joined us in 1999 as Vice President -- Distribution. From 1993 to 1999, Mr. Tye held various distribution related positions with divisions of May Department Stores Company, most recently serving as Vice President -- Distribution for the Famous Barr division.
LYNN S. URAM became our Senior Vice President -- Human Resources in 2002. Ms. Uram previously served as Vice President Human Resources since 1999 and from 1996 to 1999 served as Director -- Human Resources. Ms. Uram joined us in 1994 as Corporate Human Resource Manager. Ms. Uram was employed by The Joseph Horne Company (formerly a Pittsburgh based department store chain) as Director, Compensation/ Benefits from 1993 to 1994. Ms. Uram was employed by Valassis Communications, Inc. from 1986 to 1993.
MICHAEL S. WILKES joined us in 2000 as Vice President General Merchandise Manager -- Apparel and Footwear. Mr. Wilkes served Payless Shoesource, Inc. from 1986 to 2000, most recently as Senior Vice President Men's General Merchandise Manager.
CLASSES OF DIRECTORS
The Board is divided into three classes, each containing as nearly as possible an equal number of directors. The terms of Messrs. Fuente and Colombo expire in 2003, the terms of Messrs. Rossi and Lebow expire in 2004 and the terms of Messrs. Schorr and Stack expire in 2005. A classified board of directors may have the effect of deterring or delaying any attempt by any person or group to obtain control of us by a proxy content since such third party would be required to have its nominees elected at two separate annual meetings of the board of directors in order to elect a majority of the members of the Board.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors has established an audit committee, a compensation committee and a corporate governance committee.
Mr. Schorr, Rossi and Lebow are members of the audit committee. We intend, prior to the consummation of this offering, to adopt an audit committee charter, under which the audit committee will review with management our internal financial controls, accounting procedures and reports. The audit committee also would review the engagement of our independent auditors, make recommendations to the board of directors regarding the selection of independent auditors and review the scope, fees and results of any audit.
Messrs. Fuente and Schorr comprise the compensation committee. The compensation committee will administer all of our salary and incentive compensation policies. The compensation committee also will administer our stock option and stock purchase plans and establish the terms and conditions of all stock option grants.
CORPORATE GOVERNANCE COMMITTEE
Upon the completion of this offering, we intend to establish a corporate governance committee of the board of directors. We intend that this committee will provide oversight and guidance to the board of directors to ensure that the membership, structure, policies and processes of the board and its committees facilitate the effective exercise of the board's role in our governance. We intend that the committee would review and evaluate the policies and practices with respect to the size, composition and functioning of the board, evaluate the qualifications of and recommend to the full board candidates for election as directors, and review and recommend to the full board the compensation and benefits for non-employee Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee currently consists of Messrs. Fuente and Schorr. Neither Mr. Fuente nor Mr. Schorr has ever been an officer or employee of ours or any of our subsidiaries. None of our executive officers serve or have served as a member of the board of directors, compensation committee or other board committee
performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our compensation committee. Our compensation committee customarily has met and discussed matters relating to the compensation of our employees and key officers. Generally, the compensation committee has made recommendations to our full board of directors in order for the full board to take formal action on these matters. Messrs. Fuente and Schorr each participated in our fiscal 2001 repurchase of common stock from the former holders of our preferred stock that was converted into common stock in connection with that repurchase. Additionally, along with the other non-management directors, Messrs. Fuente and Schorr each will receive option grants exercisable for 50,000 shares of our common stock at the consummation of this offering at a price equal to the initial offering price to the public. For a more detailed description of these matters, see "Related Party Transactions."
DIRECTOR COMPENSATION
Beginning in fiscal 2001, non-employee directors are compensated by means of an annual retainer of $20,000 plus $7,500 per meeting both paid in cash. There are generally four Board meetings per year. Prior to fiscal 2001, non-employee directors received no cash compensation. Instead, there was an initial stock option grant of 10,000 shares and annual stock option grants of 5,000 shares. In the future, we intend to compensate our non-employee directors in an amount consistent with amounts paid by comparable public companies. Additionally, members of our Board of Directors are reimbursed for their expenses incurred in connection with attending any meeting.
We intend to issue, immediately prior to the offering, options to purchase 50,000 shares of common stock to each of our non-employee directors, David I. Fuente, Walter Rossi, Lawrence J. Schorr and Steven E. Lebow, and options to purchase 100,000 shares of common stock to each of William J. Colombo and Michael F. Hines. The options granted to the directors will vest ratably over a four year period beginning on the first anniversary of the date of grant. All options granted to Messrs. Colombo and Hines will vest on the fourth anniversary of the date of grant. All of the above options will be granted at the initial offering price to the public of the shares of common stock sold under this prospectus. Additional grants are being made to Edward W. Stack. The terms of these grants are described in this prospectus at "Management -- Severance and Employment Arrangements." The grants of these options are being made in consideration for services to be rendered to us.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation earned by our chief executive officer and our other executive officers for services rendered in all capacities to us in fiscal 2001.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-------------------
ANNUAL COMPENSATION SECURITIES
--------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) COMPENSATION (2) OPTIONS/SARS (#)(3) COMPENSATION (4)
--------------------------- ---- -------- ---------- ---------------- ------------------- ----------------
Edward W. Stack, Chairman
and Chief Executive
Officer................. 2001 $400,000 $1,200,000 $11,797 -- $12,917(5)
William J. Colombo,
President and Chief
Operating Officer....... 2001 $393,769 $ 595,327 $ 746 -- $ 8,496(5)
Michael F. Hines, Chief
Administrative Officer
and Chief Financial
Officer................. 2001 $393,769 $ 585,484 $ -- -- $ 3,906
Gary M. Sterling, Senior
Vice President,
Merchandising, Planning
and Allocation.......... 2001 $299,192 $ 149,596 $ -- -- $ 3,759
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(1) Bonus awards shown in this column were earned under our bonus program during and based on our performance in fiscal year 2001 but were not paid until fiscal year 2002.
(2) Amount shown is the tax payment related to stock option compensation. The amounts do not include the value of perquisites and other personal benefits because they do not exceed the lesser of $50,000 or 10% of any such officer's total annual salary and bonus.
(3) Does not include the extension of our existing option award to Mr. Colombo described in "Related Party Transactions."
(4) "All Other Compensation" consists of our matching contributions under our
401(k) Plan and life insurance premiums.
(5) Includes $9,000 and $4,590 of insurance premiums paid in fiscal 2001 by us on life insurance policies for the benefit of Messrs. Stack and Colombo, respectively. The beneficiaries under the policies, upon the executive's death, are the executive's respective spouses.
STOCK OPTION INFORMATION
We did not make any grants of stock options during fiscal 2001 to our executive officers named in the Summary Compensation Table. See footnote 3 above in the "Summary Compensation Table" and "Related Party Transactions."
The following table sets forth information with respect to the number and value of outstanding options held by executive officers named in the Summary Compensation Table at the end of fiscal 2001.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS
YEAR END (#) AT FISCAL YEAR END ($)(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME UPON EXERCISE (1) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------------- -------- ----------- ------------- ----------- -------------
Edward W. Stack........... 1,239,123(3) $24,782(4) 166,550 108,450
William J. Colombo........ -- -- 194,150 67,850
Michael F. Hines.......... -- -- 194,250 67,750
Gary M. Sterling.......... -- -- 111,250 66,750
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(1) Represents shares acquired upon the exercise of options.
(2) Based on an assumed initial public offering price of $ per share, minus the exercise price, multiplied by the number of shares underlying the options.
(3) Upon the completion of this offering, these shares of common stock will represent shares of Class B common stock.
(4) Amount reflects appreciated value of common stock underlying exercised options. The exercised option expired by its terms in 2002. Because there was no public trading market for our common stock the value of the underlying common stock was based on a third-party appraisal.
STOCK OPTION PLANS
1992 Stock Option Plan
We have a 1992 stock option plan, under which we have reserved for issuance 4,300,000 shares of common stock. Of this amount, we have outstanding 2,493,045 options as of August 3, 2002, with 1,239,123 options having been exercised. The plan provides for grants of nonqualified stock options to our key employees, officers and directors and grants of incentive stock options to employees. The compensation committee of the board of directors administers and interprets provisions of the plan relating to non-qualified stock options and the incentive committee does the same for provisions relating to incentive stock options.
The exercise price of common stock underlying an option may be greater, less than or equal to fair market value. However, the exercise price of an incentive stock option must be equal to or greater than the fair
market value of a share of common stock on the date such incentive stock option is granted, and the exercise price of an incentive stock option granted to an employee who owns more than 10% of the common stock may not be less than 110% of the fair market value of the underlying shares of common stock on the date of grant.
If we change the number of shares of common stock without receiving new consideration (such as by stock dividends or stock splits), the aggregate number of shares which may be issued under the plan and the total number of shares remaining subject to purchase under the outstanding options will be changed in proportion to such change in issued shares. The option exercise price per share will also be adjusted accordingly.
The maximum term of an option granted under the plan is 10 years from the date of grant except that the term of an incentive stock option granted to an employee who owns more than 10% of the common stock may not exceed five years from the date of grant. The compensation committee may accelerate the exercisability of any or all outstanding options in the event of an extraordinary corporate transaction including, but not limited to, a change in control of Dick's, the sale of substantially all the assets of Dick's or a merger of Dick's with or into another entity.
Under the plan, if an option holder is terminated without cause, the option holder may exercise his or her options within 30 days of termination to the extent the options were exercisable on the date of termination. If the option holder is terminated for cause, the option will be forfeited. Upon the death, retirement or permanent disability of an option holder, the options can be exercised within 90 days of such event to the extent the options were exercisable on the date the event occurred.
Under the stock option agreements entered into under the plan, if after this offering more than 80% of our common stock outstanding at any time is transferred in a single transaction or series of related transactions to a holder or group of related holders other than the holders of our common stock immediately after this offering, then all options granted become immediately exercisable whether or not they have vested. Under the stock option agreements entered into under the plan, option grants generally vest ratably over a period of four years.
Upon completion of this offering no additional grants will be made under this plan.
2002 Stock Plan
We have adopted a new stock plan known as the 2002 Stock Plan. The plan allows for the issuance of up to 4,300,000 shares of our capital stock (either common stock or Class B common stock at the discretion of the administrator of the plan) upon exercise of awards under the 2002 Stock Plan. As of the date of this prospectus, no awards have been granted under our 2002 Stock Plan. We intend to grant options in connection with this offering for 1,235,000 shares of our common stock exerciseable at or above the initial offering price to the public. The following is a description of the material features and provisions of the 2002 Stock Plan.
Awards. Under the 2002 Stock Plan, we may grant incentive stock options intended to qualify for special tax treatment, non-qualified stock options, incentive bonus awards, performance share awards, performance unit awards, restricted stock awards, restricted unit awards, stock unit awards and stock appreciation rights. Each incentive stock option will expire within 10 years of the original grant date, unless the grantee owns more than 10% of our stock, in which case the incentive stock option will expire within five years of the original grant date. Other awards may be granted for such time periods as determined by the administrator of the plan. Options may not have exercise prices less than the fair market value at the time of grant. If the grantee owns more than 10% of our stock, incentive stock options may not have an exercise price less than 110% of the fair market value at the time of grant. Upon exercise, an option grantee may pay for the shares with cash, other shares, a properly executed exercise notice accompanied by irrevocable instructions to a registered broker to promptly deliver the amount of proceeds necessary to pay the exercise price, or any combination of these methods.
If a grantee's employment is terminated, the grantee may, within 90 days after termination, exercise his or her option or stock appreciation right to the extent that the grantee was entitled to exercise it on the date of termination. If a grantee is disabled, the grantee may, within 12 months after becoming disabled, exercise his or her option or stock appreciation right to the extent that the grantee was entitled to exercise it on the date of becoming disabled. If a grantee dies, the grantee's estate may, within 12 months of the grantee's death, exercise the grantee's option or stock appreciation right to the extent that the grantee was entitled to exercise it on the
date of the grantee's death or to the extent that the award provides for vesting upon death. In each case, the option or stock appreciation right terminates with respect to the shares that had not vested prior to the grantee's termination or disability, or upon death. Other than by will or other transfer on death, options and stock appreciation rights are not transferable.
Performance share awards, performance unit awards, restricted stock awards, restricted unit awards and stock unit awards shall contain such vesting criteria, restrictions and other terms and conditions as are set forth in the written agreement evidencing such award. Notwithstanding the satisfaction of any performance goals set forth in such award, at the discretion of the administrator of the plan, the number of shares granted, issued or retained under such award may be reduced based on other considerations.
The administrator may also choose to award an incentive bonus award based on the achievement of one or more goals, all as set forth in a written document containing the terms and conditions of achieving such award. Notwithstanding the satisfaction of any performance goals set forth in such award, at the discretion of the administrator of the plan the award may be reduced based on other considerations.
Administration. The 2002 Stock Plan may be administered by the full board or any committee appointed by the board to administer the plan. The administrator, whether our board or a committee, will have the authority to determine the fair market value of the common stock for the purposes of making an award, select the eligible persons to whom awards may be granted, grant the awards, determine the number of shares to be covered by each award, offer to buy out for cash or shares a granted option or stock appreciation right and determine the form, terms and conditions of any agreement by which any award is made. The administrator may also determine whether any award will be paid in cash rather than stock, whether and to what extent payment of an award may be deferred, whether under certain circumstances to reduce the exercise price of an award and the restrictions applicable to any stock or unit grants or purchase rights. The 2002 Stock Plan will expire on , 2012.
Eligibility. Under the terms of the 2002 Stock Plan, all awards, except incentive stock options and incentive bonus awards may be granted to our employees, non-employee directors and consultants. Incentive stock options and incentive bonus awards may be granted only to our employees. The aggregate fair market value of stock with respect to which incentive stock options are exercisable for the first time by an individual in a year may not exceed $100,000. If this limit is exceeded, the excess will be considered a non-statutory option. Awards for Class B common stock and awards for securities convertible or exchangeable for Class B common stock may only be granted to Edward W. Stack and his relatives.
Adjustments. If a stock split, reverse stock split, stock dividend, combination, reclassification or other change in corporate structure affecting the number of issued shares of our common stock occurs, then the administrator of the plan can make equitable adjustments to the terms of the awards granted under the 2002 Stock Plan. In particular, the administrator can make an equitable adjustment in the number of shares authorized by the plan, the number of shares covered by outstanding awards under the plan and the exercise prices of outstanding awards. The adjustments must be performed in such a way that any incentive stock options granted under the plan will continue to qualify as incentive stock options. The board of directors can amend or terminate this plan any time, although certain amendments require stockholder approval and an amendment or termination cannot adversely affect any rights under an outstanding grant without the grantee's consent.
Change in Control. The plan administrator has the discretion to, on a change in control, vest and make exercisable any award granted under the plan. If we are acquired by merger or asset sale, the board can authorize that all outstanding awards be assumed or substituted by the successor or the successor's subsidiary or parent. Alternatively, each outstanding option which is not to be assumed or substituted by the successor corporation will immediately become exercisable prior to the merger. In addition, in the event of a proposed dissolution or liquidation, all awards will vest in full prior to such proposed dissolution or liquidation.
EMPLOYEE STOCK PURCHASE PLAN
Our board of directors has adopted a new employee stock purchase plan to present to our stockholders for approval prior to the completion of this offering. If adopted, our Employee Stock Purchase Plan will provide
our employees with an opportunity to purchase our common stock through accumulated payroll deductions and at a discount from fair market value. The total number of shares of common stock with respect to which purchases may be made under the plan will be 500,000, which amount shall be adjusted in the event of a change in the number of outstanding shares of common stock resulting from a stock split or other subdivision or consolidation of shares or other capital adjustment, the payment of stock dividends or distributions, or other change in the number of outstanding shares of common stock affected without receipt of consideration of Dick's in accordance with the terms of the plan. The Employee Stock Purchase Plan will be administered by our compensation committee.
Eligible employees may purchase shares having a fair market value of up to $25,000 for all purchases ending within the same calendar year under this plan. Our employees will be eligible to participate if they are employees of ours for more than 20 hours per week and customarily work for more than five months in any calendar year and do not own 5% or more of our voting stock. The initial offering period under the plan will commence on the date that the registration statement with respect to this offering is declared effective by the SEC, and will end on December 31, 2002. Subsequent offering periods will be every six months thereafter or as otherwise determined by the compensation committee. The purchase price per share for our common stock under the plan will be equal to the lower of 85% of the fair market value of our common stock on the first or last day of each purchase period. Employees may end their participation under the plan at any time prior to the exercise date of any one purchase period and, generally, such participation will be automatically terminated on termination of employment. In the event we are the surviving corporation in a merger, reorganization or other business combination, the right to purchase shares issued under the plan will be assumed such that they will cover the securities or other property that common stock holders are entitled to pursuant to the terms of the merger. A dissolution or liquidation or a merger or consolidation in which we are not the surviving entity will cause each purchase right then outstanding to terminate. Generally, our board of directors will have the power to amend, modify or terminate the plan at any time, provided previously granted purchase rights of plan participants are not impaired. The plan will terminate on June 30, 2007 unless earlier terminated by our board of directors.
SEVERANCE AND EMPLOYMENT ARRANGEMENTS
All of our executive officers have executed agreements with us providing them with severance payments upon termination of employment with us under certain circumstances. Upon the termination of employment of an officer under such circumstances we are obligated to pay to that officer an amount equal to the greater of (i) four weeks of pay at the officer's base salary or (ii) one week of pay for every year of employment with the us. The severance payment is payable biweekly over the 12-month period following the officer's termination. No severance payment is payable to the officer if the officer voluntarily terminates employment with us, retires or is terminated due to "cause" (as defined in the agreement), death, or permanent disability.
We expect to enter into a five year employment agreement with Mr. Stack immediately before the offering. The terms of this agreement will include the grant immediately prior to the offering to Mr. Stack of options to purchase 400,000 shares of our common stock at the public offering price, and the grant on the one year anniversary of the public offering of additional options for 400,000 shares of common stock at a price equal to the greater of 125% of the public offering price or the then market value of our common stock. The options will vest on the fourth anniversary from the date of grant. Mr. Stack will also agree not to compete with us.
RELATED PARTY TRANSACTIONS
Some of our stockholders, some of whom are affiliated with our directors or that own more than 5% of a class of our common stock (after giving effect to the charter amendment and share exchange), have registration rights to register shares of our common stock under the Securities Act. They may request that we register their shares of common stock with the SEC, and, if all conditions under our registration rights agreement are met, we must register their shares. We would be required to bear specified expenses related to those registrations. For a more detailed description, see "Description of Capital Stock--Registration Rights."
We entered into a stockholders agreement with all of our stockholders in July 2000. Under this agreement, our stockholders agreed to elect to our board of directors two nominees designated by the prior holders of 65% of our preferred stock and four nominees designated by the Stack family. The agreement also included transfer restrictions regarding our common stock, rights of first refusal regarding sales of our common stock, preemptive rights, reporting requirements, and a liquidation preference of $32.8 million for our prior preferred stockholders. The agreement by its terms terminates upon the completion of this offering.
All of our executive officers are participants in our Long-Term Incentive Plan. The purpose of the plan is to enhance the value of our company by reinforcing the incentives for key employees to achieve long-term performance goals, to link a significant portion of a participant's compensation to the achievement by us of certain performance goals and to attract, motivate and retain key employees. The plan, which commenced on February 3, 2002, sets forth certain metrics and formulas for the granting of awards. No benefits or awards have been made or are accrued under the plan and the plan will terminate upon the consummation of this offering without any awards being granted accrued or made under it.
Immediately prior to the completion of this offering, Edward W. Stack, our Chairman and Chief Executive Officer, Martin Stack, Stacey Stack, Donna Stack, Kim Myers, Nancy Heichemer, Richard T. Stack and Karin Stack, each of whom is a relative of Edward W. Stack, will collectively exchange 3,604,613 shares of common stock for 3,604,613 shares of Class B Common Stock pursuant to an exchange agreement entered into by and between us and those stockholders. The terms of the Class B common stock are as set forth in this prospectus under the caption "Description of Capital Stock". Kim Myers, the sister of our Chairman and CEO and after the exchange a holder of more than 5% of our Class B common stock, is married to our Director of Reverse Logistics, an employee in our Conklin, New York facility. In addition, in connection with this offering Edward W. Stack is being reimbursed by us for the $45,000 fee paid by him to the U.S. Federal Trade Commission made in connection with the Hart-Scott-Rodino filing being made by Mr. Stack and us as a result of the exchange.
We intend to issue, immediately prior to the offering, options to purchase 50,000 shares of common stock to each of our non-employee directors, David I. Fuente, Walter Rossi, Lawrence J. Schorr and Steven E. Lebow, and options to purchase 100,000 shares of common stock to each of William J. Colombo and Michael F. Hines. The options granted to the directors will vest ratably over a four year period beginning on the first anniversary of the date of grant. All options granted to Messrs. Colombo and Hines will vest on the fourth anniversary of the date of grant. All of the above options will be granted at the initial offering price to the public of the shares of common stock sold under this prospectus. Additional grants are being made to Edward W. Stack. The terms of these grants are described in this prospectus at "Management -- Severance and Employment Arrangements." The grants of these options are being made in consideration for services to be rendered to us.
On May 16, 2001, Edward W. Stack, our Chairman and Chief Executive Officer, issued a promissory note to us in the principal amount of $6,195,615, in connection with his exercise of employee stock options to purchase 1,239,123 shares of our common stock. The largest aggregate amount of indebtedness outstanding under the promissory note since its issuance, excluding accrued interest, and the amount outstanding as of June 19, 2002 was, excluding accrued interest, $6,195,615. The promissory note matures on or before May 16, 2011 unless accelerated by an event of default or Edward W. Stack ceases to be an employee of Dick's Sporting Goods, and bears a simple rate of interest of 5.5% per annum or $340,759 per annum. All accrued interest is payable annually on May 16th of each year on any portion of the note that remains outstanding. If not accelerated or prepaid, the principal under the note is due at maturity. The promissory note may be prepaid, in whole or in part, at any time without premium or penalty. At the time we made the loan to Mr. Stack, we believed based on
our knowledge of available loan terms, that the terms were consistent with the terms that we would have received from an unaffiliated third party in an arms-length transaction. While the note is outstanding, the 1,239,123 shares of common stock purchased by the note may not be sold or transferred or subject to any lien. Mr. Stack intends to use the proceeds from shares of common stock sold by him under this prospectus to repay all outstanding principal and interest under this promissory note on the closing of this offering.
In fiscal 2001, our former preferred stockholders, some of whom are affiliates of ours, elected to convert all outstanding preferred shares to common stock resulting in the conversion of 9,396,612 shares of preferred stock to 10,931,239 shares of our common stock. We repurchased approximately 60% of that common stock from the former preferred stockholders for cash of $44,809,000 and promissory notes totaling $13,751,000 that accrued interest at 7% annually. We repaid in full the promissory notes on September 9, 2001. The converted common stock held by the former preferred stockholders has a preference in the event of liquidation, merger, or sale of the Company equal to $32,800,000 in total. That preference will terminate upon the consummation of this offering, when the stockholders' agreement terminates.
Edward W. Stack, Steven E. Lebow, David I. Fuente and Lawrence J. Schorr, each a director, and each of Vulcan Ventures, Fourcar, B.V., Oak Investment Partners V, Limited Partnership and its affiliates, Crosslink Capital, Inc. and its affiliates, DLJ Capital Corporation and its affiliates and Bessemer Venture Partners III L.P. and its affiliates, being the holders of more than 5% of a class of our common stock (after giving effect to the charter amendment and share exchange), received shares of common stock as a result of the conversion of our preferred stock. Each such director and greater than 5% stockholder, after such conversion, had shares of their common stock repurchased by us, at the same price and on the same terms as the other stockholders who converted shares of preferred stock into common stock and sold shares of common stock to the Company at such time. In that transaction these stockholders received for the common stock repurchased the following: Mr. Stack $359,579.60; Mr. Lebow $307,577.52; Mr. Fuente $106,210.77; Mr. Schorr $36,457.98; Vulcan Ventures $14,425,207.42; Fourcar, B.V. $10,443,439.46; Oak Investment V, Limited Partnership and Oak V Affiliates Fund, Limited Partnership $4,912,348.66; DLJ Capital Corp., DLJ First ESC L.L.C., Sprout Growth L.P. and Sprout Growth, Ltd. $3,477,596.40; Crosslink Crossover Fund IIA, L.P., Crosslink Crossover Fund II, L.P., Crosslink Omega Ventures II Cayman, L.P. and Crosslink Omega Ventures II, L.P. $3,715,094.25; and Bessemer Venture Partners L.P. $5,749,740.85. These amounts were paid partially in cash and partially in the form of the above-referenced $13,751,000 7% promissory notes.
In fiscal 2001, we extended the maturity date of an incentive stock option for 78,397 shares of our common stock which was originally granted to our President, William J. Colombo, in 1992. This extension was made as part of an extension in maturity made to other options granted to other employees. This option, which would have expired in 2002, was extended for an additional 10 years from the original expiration date. As a result of the extension, the option became a non-qualified stock option. As a result of the extension, Mr. Colombo owed $746 in federal income tax, which was paid by us on his behalf.
We owe the estate of Richard ("Dick") Stack, our founder and father of Edward W. Stack, a balance of $548,000 as of February 2, 2002. The obligation represents the remaining balance on a $1,251,000 (the largest aggregate amount of indebtedness outstanding under the promissory note) in principal amount loan granted to us in 1986 and is payable at an annual interest rate of 12% in monthly installments of approximately $14,000 through May 1, 2006. The loan, which is subordinated to all of our senior indebtedness, may be prepaid, in whole or in part, at any time without premium or penalty. The loan may be accelerated upon an event of default, including default on any payment on the loan for a period of 15 days after notice, default in the observance of any other covenant, condition or agreement for a period of 30 days, the acceleration of our other indebtedness or our inability to pay our debts as they become due. At the time the loan was granted to us, we believed the terms were consistent with the terms that we would have received from an unaffiliated third party in an arms-length transaction.
We also lease two locations from Dick Stack's estate, one of which continues to operate as one of our stores and the second of which has been subleased to a third party. Our total monthly lease payments for the two locations is $20,000. We paid $120,000, $240,000, $240,000 and $240,000 under these leases in the 26 weeks ended August 3, 2002 and fiscal years 2001, 2000 and 1999, respectively. The amount we are paying per square
foot under these leases is comparable to the amounts we agreed to pay to unaffiliated third parties for other new leases that were entered into around the same time period.
We entered into an agreement with Edward W. Stack and Richard T. Stack, dated November 12, 1992, which gives Edward W. Stack the option to purchase up to 145,000 shares of common stock held by Richard T. Stack at 75% of the then market value of the stock. The option may be exercised at any time after the initial public offering of our common stock, until November 12, 2002. Richard T. Stack also executed an irrevocable proxy giving Edward W. Stack the right to vote all shares owned (including shares acquired in the future) by Richard T. Stack.
On November 1, 1999, we entered into a Contribution and Interest Purchase Agreement along with Oak Investment Partners VIII Limited Partnership, and other parties, related to investments made in DSG Holdings LLC, our e-commerce joint venture. Oak Investment Partners VIII Limited Partnership, an affiliate of Oak Investment Partners, a 5% holder of our common stock, contributed $5 million for 130,719 non-voting common interests in DSG Holdings. On November 3, 1999, Oak Investment Partners VIII Limited Partnership transferred its interest to Oak DSG Corp. Subsequently, on May 17, 2000, Oak DSG Corp. and Oak VIII Affiliates Fund Limited Partnership contributed an additional $2.5 million to DSG Holdings in exchange for an additional 2,237,571 non-voting common interests. On October 1, 2000, we purchased all of the outstanding equity interests not already owned by us in DSG Holdings for an aggregate purchase price of $5,000,000. As part of this transaction and included in the $5,000,000 we paid to the other holders of DSG Holdings, was a payment to Oak DSG Corp. and Oak VIII Affiliates Fund, Limited Partnership in the aggregate amount of $1,250,000. This amount was paid in exchange for Oak's equity interest in DSG Holdings. The amount paid to Oak was completed at the same time and on the same terms as the payments to the other holders of equity interests. Oak DSG Corp. and Oak VII Affiliates Fund are affiliates of Oak Investment Partners and its affiliates which will be, upon the completion of the offering, a greater than 5% holder of our common stock. In connection with our purchase of DSG Holdings, all of the former partners in the joint venture released all other partners from any claims, liabilities or other damages that one party may have against the other associated with the joint venture. In April 2001 we decided to discontinue the operations of DSG Holdings.
Some of our directors, executive officers, security holders that own of record or beneficially more than 5% of a class of our voting securities or members of their immediate family may purchase shares from us in the offering.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of our common stock and Class B common stock by:
- our chief executive officer, other executive officers and directors;
- each selling stockholder;
- all directors and executive officers as a group; and
- each person known to us to own beneficially more than 5% of any class of our outstanding shares.
A person has beneficial ownership of shares if he has the power to vote or dispose of the shares. This power can be exclusive or shared, direct or indirect. In addition, a person is considered by SEC rules to beneficially own shares underlying options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus. The shares listed in the table below include shares issuable upon the exercise of options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus.
As of , 2002, there were shares of our common stock outstanding, and after giving effect to our charter amendment and the share exchange by Edward W. Stack and his relatives, there will be shares of common stock and shares of Class B common stock outstanding. To calculate a stockholder's percentage of beneficial ownership, we must include in the numerator and denominator those shares underlying options that the stockholder is considered to beneficially own. Shares underlying options held by other stockholders, however, are disregarded in this calculation. Therefore, the denominator used in calculating beneficial ownership among our stockholders may differ.
SHARES BENEFICIALLY
OWNED AFTER
OFFERING
SHARES OF COMMON NUMBER OF ----------------------------------------------------------------
STOCK BENEFICIALLY SHARES OF
OWNED PRIOR TO COMMON
OFFERING (1) STOCK TO BE NUMBER PERCENT VOTING POWER
------------------- SOLD IN ----------------------- ----------------------- AFTER THE
NAME OF BENEFICIAL OWNER TOTAL PERCENT OFFERING COMMON STOCK CLASS B COMMON STOCK CLASS B OFFERING
------------------------ --------- ------- ----------- ------------ -------- ------------ -------- ------------
EXECUTIVE OFFICERS AND
DIRECTORS
Edward W. Stack............ 2,890,007(2) 37.44%
William J. Colombo......... 197,900(3) 2.64
Michael F. Hines........... 198,000(4) 2.65
Gary M. Sterling........... 112,500(5) 1.52
David Fuente............... 48,964(6) *
Walter Rossi............... 26,250(7) *
Lawrence J. Schorr......... 28,506(8) *
Steven Lebow............... 26,523(9) *
All Executive Officers and
Directors as a group (8
persons)................. 3,274,150(10) 40.57
FIVE PERCENT HOLDERS
Bessemer Venture Partners
III L.P.................. 355,586(11) 4.88
Fourcar, B.V............... 645,861(12) 8.87
Oak Investment Partners
affiliated entities...... 303,800(13) 4.17
Vulcan Ventures............ 892,109(14) 12.25
Nancy Heichemer............ 426,347(15) 5.85
Kim Myers.................. 370,089(16) 5.08
Richard T. Stack........... 254,500(17) 3.49
Crosslink Capital, Inc..... 214,666(18) 2.95
Sprout Group affiliated
entities................. 287,129(19) 3.94%
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SHARES BENEFICIALLY
OWNED AFTER
SHARES OF OFFERING
COMMON STOCK NUMBER OF ----------------------------------------------------------------
BENEFICIALLY SHARES OF
OWNED PRIOR TO COMMON
OFFERING (1) STOCK TO BE NUMBER PERCENT VOTING POWER
------------------- SOLD IN ----------------------- ----------------------- AFTER THE
NAME OF BENEFICIAL OWNER TOTAL PERCENT OFFERING COMMON STOCK CLASS B COMMON STOCK CLASS B OFFERING
------------------------ --------- ------- ----------- ------------ -------- ------------ -------- ------------
SELLING STOCKHOLDERS.......
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* Percentage of shares of common stock beneficially owned does not exceed one percent.
(1) Shares numbers do not reflect the effect of the for 1 stock split.
(2) Includes 176,050 shares of common stock issuable upon exercise of options that are presently issuable or will become exercisable within 60 days of the date of this prospectus. Includes 254,500 shares held by Richard T. Stack, over which Edward W. Stack maintains sole voting power. Edward W. Stack also has the right to purchase up to 145,000 of those shares. Mr. Stack's business address is our corporate headquarters at 200 Industry Drive, RIDC Park West, Pittsburgh, PA 15275.
(3) Includes 197,900 shares of common stock issuable upon exercise of options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus. Mr. Colombo's business address is our corporate headquarters at 200 Industry Drive, RIDC Park West, Pittsburgh, PA 15275.
(4) Includes 198,000 shares of common stock issuable upon exercise of options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus.
(5) Includes 112,500 shares of common stock issuable upon exercise of options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus.
(6) Includes 42,395 shares of common stock issuable upon exercise of options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus.
(7) Includes 26,250 shares of common stock issuable upon exercise of options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus.
(8) Includes 26,250 shares of common stock issuable upon exercise of options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus.
(9) Includes 7,500 shares of common stock issuable upon exercise of options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus. Mr. Lebow acts as trustee for two trusts which are the record holders of 7,044 shares of common stock in the aggregate.
(10) Includes 786,845 shares of common stock issuable upon exercise of options that are presently exercisable or will become exercisable within 60 days of the date of this prospectus.
(11) To the best of our knowledge, does not include shares held by the following
persons related to Bessemer Venture Partners III L.P. as to which Bessemer
Venture Partners III L.P. does not possess voting or investment control:
Michael I. Barach (2,294), Brimstone Island Co. L.P. (5,741), BVP III
Special Situations L.P. (1,149), Neil H. Brownstein (2,430), Robert
Buescher (740), William T. Burgin (6,538), Samantha Chen (137), David Cowan
(112), Richard Davis (610), Rachel Erickson (195), Christopher Gabrieli
(4,164), Gabrieli Family Foundation (906), Hardymon Family Limited
Partnership (2,795), H. Joseph Horowitz (3,247), Gautam Prakash (149), John
K. Rodakis (42), Thomas F. Ruhm (171), Robi Soni (84) and Ward W. Woods,
Jr. (1,352). Bessemer's address is 1400 Old Country Road, Suite 109,
Westburg, NY 11590.
(12) Fourcar's address is Coolsingel 139, 3012 AG Rotterdam, The Netherlands.
(13) Includes 297,117 shares held by Oak Investment Partners V, Limited Partnership and 6,683 shares held by Oak V Affiliates Fund, Limited Partnership. Oak Investments' address is 4550 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402.
(14) Vulcan Ventures' address is c/o Vulcan, Inc., 505 Union Station, 505 Fifth Avenue South, Suite 900, Seattle, WA 98104.
(15) Ms. Heichemer's mailing address is c/o Edward W. Stack, Dick's Sporting Goods, Inc., 200 Industry Drive, RIDC Park West, Pittsburgh, PA 15275.
(16) Ms. Myers' mailing address is c/o Edward W. Stack, Dick's Sporting Goods, Inc., 200 Industry Drive, RIDC Park West, Pittsburgh, PA 15275.
(17) Edward W. Stack maintains sole voting power with respect to these shares. Additionally, Richard T. Stack has granted Edward W. Stack the option to purchase up to 145,000 of these shares. Mr. Richard T. Stack's mailing address is c/o Edward W. Stack, Dick's Sporting Goods, Inc., 200 Industry Drive, RIDC Park West, Pittsburgh, PA 15275.
(18) Includes 22,475 shares held by Crosslink Crossover Fund IIA, L.P., 76,160 shares held by Crosslink Crossover Fund II, L.P., 23,799 held by Crosslink Omega Ventures II Cayman, L.P., and 92,232 held by Crosslink Omega Ventures II, L.P. for which Crosslink Capital, Inc. maintains voting control. Their address is Two Embarcadero Center, Suite 2200, San Francisco, CA 94111.
(19) Includes 40,344 shares held by DLJ Capital Corp., 70,768 shares held by DLJ First ESC L.L.C., 89,829 shares held by Sprout Growth L.P., 14,439 shares held by Sprout Growth, Ltd. and 71,749 shares held by the following persons for which, to the best of our knowledge, affiliates of these entities possess voting and investment control: Gary B. Appel (837), Nicole Sinek Arnaboldi and Leo P. Arnaboldi, as JTWROS (3,978), David Blatte (2,010), Joel Cohen (3,350), John G. Danhakl (1,676), Vincent DeGiaimo (1,676), Steven J. Dietz (590), Michael K. Hooks (1,173), Mark K. Lanigan (2,803), Kenneth D. Moelis (5,895), Herald L. Ritch (14,625), Susan Schnabel (3,621), James T. Sington (2,803), Charles O. Svenson (1,676), R. Scott Turicchi (5,895), Warren C. Woo (837), David L. Dennis (6,972), Scott M. Honour (916) and Frederick C. Lane (10,416), but does not include the 6,810 shares held by Richard E. Kroon an officer of an entity affiliated with the Sprout Group. Mr. Kroon disclaims beneficial ownership of all securities held by the Sprout Group, except to the extent of his equity interest in such Sprout Group entities. Their address is 277 Park Avenue, 21st Floor, New York, NY 10172.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our present certificate of incorporation provides for 14,502,004 shares of common stock, par value $.01 per share, and 3,120,159 shares of preferred stock, par value $.01 per share. As part of a recapitalization to occur immediately prior to the completion of this offering:
- our current certificate of incorporation will be amended and restated to authorize the issuance of up to ,000,000 shares of common stock, par value $.01 per share, ,000,000 shares of Class B common stock, par value $.01 per share, and 5,000,000 shares of preferred stock, par value $.01 per share, the rights and preferences of which may be established from time to time by our board of directors;
- our existing, pre-offering common stock will be split -for-l; and
- Edward W. Stack and his relatives will exchange their shares of common stock for shares of Class B common stock.
Edward W. Stack and his relatives consist of our Chairman and Chief Executive Officer, Edward W. Stack, along with Martin Stack, Donna Stack, Kim Myers, Nancy Heichemer, Richard T. Stack and their spouses. We refer to this group of individuals as the Stack Family. References in this section to "common stock" generally refer to our common stock, par value $.01 per share, references to "Class B common stock" refer to our Class B common stock, par value $.01 per share and references to "classes of our common stock" refer to all classes of common stock issuable under our amended and restated certificate of incorporation.
COMMON STOCK
Voting Rights. We have an existing class of common stock, each share of which entitles the holder to one vote per share. In addition to this existing class, we are creating Class B common stock in our new amended and restated certificate of incorporation. Holders of our common stock and Class B common stock have identical rights, except that holders of the common stock are entitled to one vote for each share held of record and holders of Class B common stock are entitled to 10 votes for each share held of record on all matters submitted to a vote of the stockholders, including the election of directors. Stockholders do not have cumulative voting rights. Holders of common stock and Class B common stock (or, if any holders of shares of preferred stock are entitled to vote together with the holders of the common stock and Class B common stock, as a single class with such holders of shares of preferred stock) vote together as a single class on all matters presented to the stockholders for their vote or approval, except as may be required by Delaware law.
Removal of Directors. If any shares of Class B common stock are outstanding, directors elected by the common stockholders may be removed with or without cause by the affirmative vote of the holders of shares of our capital stock representing the majority of the votes entitled to be cast at a meeting of the stockholders to elect directors. The right to remove directors without cause expires if there are no shares of Class B common stock outstanding.
Action by Written Consent. If any shares of Class B common stock are outstanding, any action that can be taken at a meeting of our stockholders may be taken by written consent in lieu of the meeting if we receive consents signed by stockholders having the minimum number of votes that would be necessary to approve the action at a meeting at which all shares entitled to vote on the matter were present. This could permit the holders of our Class B common stock to take all actions required to be taken by the stockholders without providing the other stockholders the opportunity to make nominations or raise other matters at a meeting. The right to take action by less than unanimous written consent expires if there are no shares of Class B common stock outstanding.
Conversion. Each share of Class B common stock is convertible at any time, at the option of the holder, into one share of common stock. Each share of Class B common stock shall convert automatically into one share of common stock upon any transfer of beneficial ownership to any persons other than to the following:
- the Stack Family and the estate, guardian, conservator or committee for any member of the Stack Family;
- any descendant of any member of the Stack Family (which we call a "Stack Descendant") and their respective estates, guardians, conservators or committees;
- any Stack Family Controlled Entity; and
- any trustees, in their respective capacities as such, of any Stack Family Controlled Trust.
A Stack Family Controlled Entity is (i) any not-for-profit corporation if at least a majority of its board of directors is composed of Stack Family members and/or Stack Descendants; (ii) any other corporation if at least 80% of the value of its outstanding equity is owned by Stack Family members and/or Stack Descendants; (iii) any partnership if at least 80% of the value of its partnership interests are owned by Stack Family members and/or Stack Descendants; and (iv) any limited liability or similar company if at least 80% of the value of the company is owned by Stack Family members and/or Stack Descendants. A Stack Family Controlled Trust is any trust the primary beneficiaries of which are members of the Stack Family, Stack Descendants, spouses of Stack Descendants and their respective estates, guardians, conservators or committees and/or charitable organizations which if the trust is a wholly charitable trust, at least 80% of the trustees of such trust consist of Stack Family members and/or Stack Descendants.
Each share of Class B common stock also converts automatically into one share of common stock if (i) a person ceases to be any of the specified persons listed above, other than upon the pledge of such person's shares of Class B common stock to a financial institution or (ii) on the record date for any meeting of our stockholders, the aggregate number of shares of Class B common stock beneficially owned by the Stack Family, Stack Descendants, Stack Family Controlled Entities and Stack Family Controlled Trusts is less than 1,000,000 shares of Class B common stock (appropriately adjusted for any future stock splits, dividends, reclassifications, recapitalizations, reverse stock splits or other similar transactions). If any shares of common stock require registration with or approval of any governmental authority under any federal or state law before such shares of common stock may be issued upon conversion, we must cause such shares to be registered or approved, as the case may be, and use our best efforts to list the shares to be delivered upon conversion prior to such delivery upon each national securities exchange upon which the outstanding common stock is listed at the time of such delivery. Once the shares of the Class B common stock are converted into shares of common stock, the number of shares classified as Class B common stock will be reduced and may not be reissued and the number of common stock shall be increased on a one-for-one basis.
Restrictions on Additional Issuances and Transfer. No additional shares of Class B common stock or any securities exchangeable or exercisable into shares of Class B common stock may be issued or sold by us except (i) pursuant to stock options or awards made under the 2002 stock option plan or any other plan adopted by the board of directors to provide additional incentives to our employees and non-employee directors (no such awards or options are outstanding as of the date of this prospectus); or (ii) in connection with a stock split or stock dividend or distribution on the Class B common stock in which the common stock is similarly split or receives a similar dividend or distribution. The Class B common stock does not have any restrictions on transfer, except as imposed by the federal securities laws and upon execution of lock-up agreements. The Class B common stock is not being registered under the federal securities laws in this offering and we have no plans to do so in the future.
Dividends. Except as limited by any preferences that may be applicable to any then-outstanding preferred stock, holders of our common stock and Class B common stock are entitled to receive ratably dividends or distributions, if any, as may be declared by the board of directors out of legally available funds. We may not pay dividends or make distributions to any class of common stock unless we simultaneously make the same dividend or distribution to each outstanding share of common stock regardless of class. In the case of dividends or distributions payable in common stock or Class B common stock, including stock splits or divisions, only shares of common stock will be distributed with respect to common stock and only shares of Class B common stock will be distributed with respect to Class B common stock. Holders of the common stock and Class B common stock are entitled to receive dividends at the same rate.
Merger and Reclassification. If we enter into any consolidation, merger, combination or other transaction in which shares of each class of common stock are exchanged for or changed into other stock or securities, cash and/or any other property, then the shares of each class of common stock will be exchanged for,
or changed into either (i) the same amount of stock, securities, cash and/or any other property, as the case may be, into which or for which each share of any other class of common stock is exchanged or changed, unless the shares of common stock are exchanged for, or changed into, shares of capital stock, in which case, the shares exchanged for, or changed into, may differ, but only to the extent that the common stock and the Class B common stock differ as provided in our new certificate of incorporation; or (ii) if holders of each class of common stock are to receive different distributions of stock, securities, cash and/or any other property, then an amount of stock, securities, cash and/or property having a value equal to the value per share of any other class of our common stock that was exchanged or changed as determined by an independent investment banking firm of national reputation selected by the board of directors.
None of the common stock or the Class B common stock may be subdivided or combined in any manner unless the shares of the other class are subdivided or combined in the same proportion.
Liquidation. In case of a liquidation, dissolution or winding up of Dick's, the holders of common stock and Class B common stock treated as a single class will be entitled to share ratably in the net assets legally available for distribution to stockholders after payment of all of our liabilities and the liquidation preferences of any preferred stock then outstanding.
Preemptive and Redemption Rights. If we make an offering of options, rights or warrants to subscribe for shares of any other class or classes of capital stock, other than Class B common stock, to all holders of a class of our common stock, we are required to make an identical offering to all holders of the other class of common stock unless the holders of the other class of common stock, voting as a separate class, determine that such offering need not be made to such class. All such options, rights or warrants offerings must offer the respective holders of the common stock and Class B common stock the right to subscribe at the same rate per share. Holders of common stock and Class B common stock do not have preemptive or subscription rights or conversion rights except as described above. There are no redemption or sinking fund provisions applicable to common stock or Class B common stock.
Other. All outstanding shares of common stock are, and the shares of common stock sold in this offering when issued and paid for will be, fully paid and non-assessable. As of , 2002, assuming the amendment to our charter, the -for-1 stock split and the share exchange with the Stack Family had occurred, shares of common stock were outstanding and shares of Class B common stock were outstanding. As of August 3, 2002, we had 106 stockholders.
The rights, preferences and privileges of holders of the common stock and Class B common stock may be affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future. After the closing of this offering, there will be no shares of preferred stock outstanding.
PREFERRED STOCK
Our board of directors has the authority, without further action by the stockholders, to issue from time to time shares of preferred stock in one or more series. The board of directors may fix the number of shares, designations, preferences, powers and other special rights of the preferred stock. The board of directors cannot create a series of preferred stock which has voting rights of more than one vote per share. The preferences, powers, rights and restrictions of different series of preferred stock may differ. Shares of the preferred stock of any series that have been redeemed or repurchased by us or that, if convertible or exchangeable, have been converted or exchanged in accordance with their terms, will be retired and may be reissued. The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to holders of common stock or adversely affect the rights and powers, including voting, liquidation and dividend rights, of the holders of common stock. The issuance may also have the effect of delaying, deferring or preventing a change in control of Dick's. We have no plans to issue any preferred stock.
REGISTRATION RIGHTS
Demand Registration Rights. After the consummation of this offering, all of the holders holding shares of our common stock that formally held preferred stock which was converted into our common stock will be entitled to request us to register these shares of common stock under the Securities Act. Under the terms of our
Second Amended and Restated Registration Rights Agreement entered into between us and these holders, at any time beginning the earlier of within three months after the date the registration statement covering the initial public offering of securities of ours under the Securities Act becomes effective or May 19, 2005, the holders of registrable securities (excluding holders of shares not previously converted from preferred stock) constituting at least 55% of the total shares of registrable securities (excluding those held by holders of shares not previously converted from preferred stock) may request that we register all or any portion of the shares held by such requesting holder or holders, if the reasonably anticipated aggregate price to the public of such sale would exceed $10,000,000 upon which we will use our best efforts to register such shares. In such an event, all remaining holders of these rights (excluding holders of shares not previously converted from preferred stock) are entitled to notice of the registration and have the right to request us, subject to limitations that the underwriters may impose on the number of shares included in the registration, to include their registrable shares in the registration as well. We are obligated to register such shares up to a maximum of three times under this agreement.
To the extent that the managing underwriter is of the opinion that the inclusion of all of the shares requested to be registered under this demand right would adversely affect the marketing of such shares, after any shares to be sold by us have been excluded, shares to be sold by the holders of the registrable securities will be reduced pro rata based on their ownership of such registrable securities.
Form S-3 Demand Registration Rights. Additionally, stockholders representing at least 25% of the total shares of registrable securities (excluding shares not previously converted from preferred stock) have the right to request us to file a registration statement covering all or any portion of their registrable securities on Form S-3 or any successor thereto. Under the agreement, the holders of registrable shares can request us to register their shares if the proposed public offering price of the shares held by those requesting registration exceeds $500,000 and we are entitled to use Form S-3 or any successor thereto to register such shares, upon which we will use our best efforts to register such shares. These rights are subject to a limit of two registrations in any 12-month period.
Piggyback Registration Rights. The holders of registrable securities have also been provided piggyback registration rights which apply when we register shares (but not when registration occurs pursuant to a Form S-4, S-8 or other form not available for registering restricted stock for sale to the public).
Our registration rights agreement also provides that, as it relates to any piggyback registration rights afforded to the former owners of our preferred stock, the number of shares included by any stockholder in an underwritten public offering may be reduced, up to 100% in the case of an initial public offering and not less than 30% of the total offering in the case of a subsequent public offering, if and to the extent the managing underwriter in the offering is of the opinion the inclusion of the selling stockholder shares would adversely affect the marketing of the securities sold by us. Subject to certain exceptions, these reductions in offered shares must first be applied to selling stockholders other than the former owners of our preferred stock, and then on a pro rata basis for any of the former holders of our preferred stock based on their ownership of registrable securities; provided that, an amendment to our registration rights agreement will provide that any reductions to shares offered by parties to the agreement will be made pro rata among all selling stockholders based on the amount of registrable securities requested to be included by such holder, including shares not previously converted from preferred stock.
Lock-up. This registration rights agreement also provides that in connection with our initial public offering, each holder of registrable securities agrees not to sell or otherwise dispose of any securities without the prior written consent of the underwriters for a period of up to 180 days if all other parties selling the shares of common stock and all members of our board and our officers agree to be similarly restricted. In an amendment to the registration rights agreement, each stockholder will agree to refrain from requesting the registration of their shares of stock prior to the expiration of the 180-day period following the consummation of this offering.
Termination. The rights of the holders of registrable shares terminate upon the earlier of eight years from the date of the closing of this offering or one year after the closing of this offering with respect to any holder who holds less than two percent of the aggregate registrable securities outstanding if all of that holder's securities may be sold within a three month period under Rule 144 of the Securities Act.
Expenses. We will pay all expenses, including fees of one counsel selected by holders of registrable securities, incurred by us in connection with the registration of securities, except for underwriting discounts and selling commissions applicable to the sale of registrable securities, which will be paid by the sellers of registrable securities participating in the registration.
Other. All registration rights of any of our stockholders have either been waived or complied with in connection with this offering.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our amended and restated certificate of incorporation and amended and restated bylaws provide that our former and current directors and officers and directors and officers of other entities who is or was serving at our request will be, and, at the discretion of the board of directors, non-officer employees and agents may be, indemnified by us, to the extent authorized by Delaware law, against all expenses and liabilities incurred in connection with such service for or on behalf of us, and further permits the advancing of expenses incurred in defense of claims.
LIMITATION OF LIABILITY
Under the terms of our certificate of incorporation and as permitted by Delaware law, our directors are not liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except liability for: (1) a breach of duty of loyalty to us or our stockholders, (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) dividend payments or stock repurchases in violation of Delaware law or (4) any transaction in which a director has derived an improper personal benefit. If the Delaware law is amended after our stockholders have approved the amended and restated certificate of incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by the Delaware law, as amended.
We maintain directors and officers' liability insurance to provide directors and officers with insurance coverage for losses arising from claims based on breaches of duty, negligence, error and other wrongful acts. At present, there is no pending litigation or proceeding, and we are not aware of any threatened litigation or proceeding, involving any director, officer, employee or agent where indemnification will be required or permitted under our amended and restated bylaws.
LISTING
We expect our common stock will be listed on the New York Stock Exchange, subject to official notice of issuance.
ANTI-TAKEOVER PROVISIONS
As long as shares of the Class B common stock remain outstanding, it would be very difficult to acquire control of us in a merger or other type of transaction if the Class B common stockholders opposed the merger or other type of transaction. Similarly, the common stockholders will not be able to remove or replace the directors.
Even if the Class B common stock were converted into common stock at a future date, provisions of Delaware law and our amended and restated certificate of incorporation and amended and restated bylaws to be adopted immediately prior to the closing of this offering could continue to make the following more difficult:
- the acquisition of us by means of a tender offer;
- the acquisition of us by means of a proxy contest or otherwise; or
- the removal of our incumbent officers and directors.
In the event that none of the shares of Class B common stock are outstanding, these provisions, summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first
negotiate with our board of directors. We believe the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging such proposals because negotiation of such proposals could result in an improvement of their terms.
Classified Board of Directors. Under our amended and restated certificate of incorporation and our amended and restated bylaws, our board of directors is divided into three classes of directors serving staggered three-year terms, with one-third of the board of directors being elected each year.
Removal of Directors. Under our amended and restated certificate of incorporation and our amended and restated bylaws, if none of the shares of Class B common stock are outstanding, our directors may only be removed for cause.
Stockholder Meetings. Under our amended and restated bylaws, only the board of directors by resolution adopted by the affirmative vote of a majority of the entire board of directors, the chairman of the board of directors or the chief executive officer may call special meetings of stockholders, other than special meetings of any class of common stock called by the holders of a majority of the shares of such class of common stock with respect to any matter as to which the holders of such class are entitled to vote as a separate class.
Requirements for Advance Notification of Stockholder Proposals and Director Nominations. Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual meeting of stockholders.
No Action by Written Consent. Under our amended and restated certificate of incorporation, if none of the shares of our Class B common stock remains outstanding, stockholders may only take action at an annual or special meeting of stockholders or by the unanimous written consent of all stockholders and may not act by partial written consent.
No Cumulative Voting. Our amended and restated certificate of incorporation and amended and restated bylaws do not provide for cumulative voting in the election of directors.
Undesignated Preferred Stock. The authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of us.
DGCL SECTION 203
We have expressly determined not to be governed by Section 203 of the Delaware General Corporation Law.
WARRANTS
In addition, as of August 3, 2002, there were outstanding warrants to purchase 8,229 shares of common stock, all of which, if exercised prior to this offering, will be converted into shares of common stock upon the completion of this offering. All of the warrants expire by their terms if not exercised before the business day prior to the effective date of this offering.
TRANSFER AGENT
The transfer agent for our common stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and there can be no assurance that a significant public market for the common stock will develop or be sustained after this offering. Future sales of substantial amounts of common stock, including shares issued upon exercise of outstanding options and warrants, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through sale of our equity securities. Sales of substantial amounts of our common stock in the public market or a perception that such sales may occur after the lock-up restrictions lapse could adversely affect the prevailing market price of our common stock and our ability to raise equity capital in the future.
Upon completion of this offering, we will have shares of common stock outstanding and shares of Class B common stock outstanding as of , 2002, and no exercise of outstanding options after this offering. Of these outstanding shares, the shares sold in this offering will be freely tradable without restriction under the Securities Act, unless purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act, or security holders subject to the lock-up agreements described in "Underwriting." All shares of our common stock outstanding prior to this offering are subject to the lock-up agreements. Beginning 180 days after the date of this prospectus and upon the expiration of the lock-up agreements, not including shares sold to our security holders in the offering, approximately additional shares will be available for sale in the public market, subject in some cases to compliance with the volume and other limitations of Rule 144. The following table shows when the shares will be available for sale in the public market after 180 days from the date of this prospectus.
NUMBER OF SHARES
ELIGIBLE FOR SALE COMMENT
----------------- -------
shares will be saleable in compliance with Rule 144 (subject
in some cases to volume limitations)
shares will be saleable in compliance with Rule 144(k)
shares will be saleable in compliance with Rule 701
shares subject to vested options will be saleable pursuant
to registration on Form S-8
shares held for less than one year and will not be saleable
in compliance with Rule 144 until such one year holding
period has been met
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Beginning 180 days after the date of this prospectus, approximately additional shares underlying the options will become available for sale in the public market.
RULES 144 AND 701
In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year including the holding period of any prior owner, except an affiliate of Dick's Sporting Goods, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding which will equal approximately shares immediately after this offering; and
- the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been our affiliate at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years including the holding period of any prior owner, except an affiliate of Dick's Sporting Goods, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions. Any employee, officer, director or consultant who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell such shares in reliance on Rule 144 without having to comply with the holding period, public information, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling such shares. As of , 2002, the holders of options exercisable for approximately shares of our common stock will be eligible to sell their shares pursuant to Rule 701 or pursuant to registration on Form S-8 upon the expiration of the 180-day lock-up period.
STOCK OPTIONS
Following the effectiveness of this offering, we will file a registration statement on Form S-8 registering shares of common stock subject to outstanding options and reserved for future issuance under our stock option plan. As of August 3, 2002, options to purchase a total of 2,493,045 shares were outstanding. In addition, a total of 4,800,000 shares are reserved for future issuance under our 2002 Stock Plan and 2002 Employee Stock Purchase Plan. Common stock issued upon exercise of outstanding vested options or issued under our 2002 Employee Stock Purchase Plan, other than common stock issued to affiliates are available for immediate resale in the open market.
WARRANTS
In addition, as of August 3, 2002, there were outstanding warrants to purchase 8,229 shares of common stock, all of which, if exercised prior to this offering, will be converted into common stock upon the completion of this offering. All of the warrants expire by their terms if not exercised before the business day prior to the effective date of this offering. All of the shares underlying such warrants are subject to lock-up agreements.
The following table illustrates how many shares of common stock underlying our warrants would be saleable beginning 181 days after the date of this prospectus and the restrictions, if any, upon such resale, assuming that the shares underlying the warrants are not registered by us. The warrants have an exercise price of $.01 per share:
NUMBER OF DAYS AFTER THE NUMBER OF SHARES OF COMMON STOCK
DATE OF THIS PROSPECTUS UNDERLYING THE WARRANTS RESTRICTIONS UPON RESALE
------------------------ -------------------------------- ------------------------
181 None
181 Shares are subject to Rule
144
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All of these warrants contain a "net exercise" provision permitting the holders to exercise warrants by receiving a net number of shares of common stock equal to the number of shares being exercised less the number of shares of common stock having a value equal to the aggregate exercise price of the warrants based on the then fair market value of the shares. If our warrantholders acquire shares of common stock upon the exercise of a warrant other than through a "net exercise" they will have to hold the shares acquired for at least one year following exercise prior to the sale, unless we register the shares under the Securities Act.
REGISTRATION RIGHTS
Beginning 180 days after the date of this prospectus, holders of shares of common stock will be entitled to certain demand registration rights for sale in the public market. Registration of such shares under the Securities Act would result in such shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, immediately upon the effectiveness of such registration.
UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a general discussion of the material United States federal income and estate tax consequences of the acquisition, ownership and disposition of our common stock by a non-U.S. holder. As used in this discussion, the term "non-U.S. holder" means a beneficial owner of our common stock that is not, for United States federal income tax purposes:
- an individual who is a citizen or resident of the United States;
- a corporation or partnership (or entity classified as a corporation or partnership for such purposes) created or organized in or under the laws of the United States or of any political subdivision of the United States (other than a partnership treated as foreign under United States Treasury regulations);
- an estate whose income is includible in gross income for United States federal income tax purposes regardless of its source; or
- a trust, if a United States court is able to exercise primary supervision over the administration of the trust and one or more United States persons have authority to control all substantial decisions of the trust or if the trust has a valid election in effect under applicable United States Treasury regulations to be treated as a "United States person" for such purposes.
An individual may be treated as a resident of the United States in any calendar year for United States federal income tax purposes, instead of a nonresident, by, among other ways, being present in the United States on at least 31 days in that calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For purposes of this calculation, you would count all of the days present in the current year, one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year. Residents are taxed for United States federal income purposes as if they were United States citizens.
This discussion does not consider:
- United States state and local or non-United States tax consequences;
- specific facts and circumstances that may be relevant to a particular non-U.S. holder's tax position, including, if the non-U.S. holder is a partnership or trust that the United States federal income tax consequences of holding and disposing of our common stock may be affected by certain determinations made at the partner or beneficiary level;
- the United States federal income tax consequences for the shareholders, partners or beneficiaries of a non-U.S. holder;
- special United States federal income tax rules that may apply to particular non-U.S. holders, such as financial institutions, insurance companies, tax-exempt organizations, United States expatriates, broker-dealers, and traders in securities; or
- special United States federal income tax rules that may apply to a non-U.S. holder that holds our common stock as part of a "straddle," "hedge," "conversion transaction," "synthetic security" or other integrated investment.
The following discussion is based on provisions of the United States Internal Revenue Code of 1986, as amended, applicable United States Treasury regulations and administrative and judicial interpretations, all as in effect on the date of this prospectus, and all of which are subject to change, retroactively or prospectively. The following summary assumes that a non-U.S. holder holds our common stock as a capital asset. EACH NON-U.S. HOLDER SHOULD CONSULT A TAX ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF SHARES OF OUR COMMON STOCK.
DIVIDENDS
We do not anticipate paying cash dividends on our common stock in the foreseeable future. See "Dividend Policy." In the event, however, that we pay dividends on our common stock, we generally will have to
withhold a United States federal withholding tax at a rate of 30%, or a lower rate under an applicable income tax treaty, from the gross amount of the dividends paid to a non-U.S. holder. Non-U.S. holders should consult their own tax advisors regarding their entitlement to benefits under a relevant income tax treaty.
Dividends that are effectively connected with a non-U.S. holder's conduct of a trade or business in the United States and, if an income tax treaty applies, that are attributable to a permanent establishment in the United States, will be taxed on a net income basis at the regular graduated rates and in the manner applicable to United States persons. In the event that we pay a dividend that is effectively connected with a non-U.S. holder's U.S. trade business and, if applicable, is attributable to such holder's U.S. permanent establishment, we will not have to withhold United States federal withholding tax if the non-U.S. holder complies with applicable certification and disclosure requirements. In addition, a "branch profits tax" may be imposed at a 30% rate, or a lower rate under an applicable income tax treaty, on dividends received by a foreign corporation that are effectively connected with the conduct of a trade or business in the United States.
In order to claim the benefit of an applicable income tax treaty in respect of dividends, a non-U.S. holder will be required to satisfy applicable certification and other requirements. However,
- in the case of our common stock held by a foreign partnership, the certification requirement will generally be applied to the partners of the partnership and the partnership will be required to provide certain information;
- in the case of our common stock held by a foreign trust, the certification requirement will generally be applied to the trust or the beneficial owners of the trust depending on whether the trust is a "foreign complex trust," "foreign simple trust," or "foreign grantor trust" as defined in the applicable United States Treasury regulations; and
- look-through rules will apply for tiered partnerships, foreign simple trusts and foreign grantor trusts.
A non-U.S. holder that is a foreign partnership or a foreign trust is urged to consult its own tax advisor regarding its status under these United States Treasury regulations and the certification requirements applicable to it.
A non-U.S. holder that is eligible for a reduced rate of United States federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the United States Internal Revenue Service.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be taxed on gain recognized on a disposition of our common stock unless:
- the gain is effectively connected with the non-U.S. holder's conduct of a trade or business in the United States and, if an income tax treaty applies, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States; in these cases, the gain will be taxed on a net income basis at the regular graduated rates and in the manner applicable to United States persons (unless an applicable income tax treaty provides otherwise) and, if the non-U.S. holder is a foreign corporation, the "branch profits tax" described above may also apply;
- the non-U.S. holder is an individual who holds our common stock as a capital asset, is present in the United States for more than 182 days in the taxable year of the disposition and meets other requirements; or
- are or have been a "United States real property holding corporation" for United States federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the non-U.S. holder held our common stock.
Generally, a corporation is a "United States real property holding corporation" if the fair market value of its "United States real property interests" equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that
we have not in the past been, we are not currently, and we do not anticipate becoming in the future, a United States real property holding corporation. The tax relating to stock in a United States real property holding corporation generally will not apply to a non-U.S. holder whose holdings, direct and indirect, at all times during the applicable period, constituted 5% or less of our common stock, provided that our common stock was regularly traded on an established securities market. We have applied to have our common stock listed on the New York Stock Exchange. Our common stock should therefore be considered to be regularly traded on an established securities market for any calendar quarter during which it is regularly quoted by brokers or dealers who hold themselves out to buy or sell our common stock at the quoted price.
FEDERAL ESTATE TAX
Our common stock that is owned or treated as owned by an individual who is a non-U.S. holder at the time of death will be included in the individual's gross estate for United States federal estate tax purposes, unless an applicable estate tax or other treaty provides otherwise and, therefore, may be subject to United States federal estate tax.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Dividends paid to you may be subject to information reporting and United States backup withholding tax at a rate of 30% (which rate under current law will be periodically reduced to 28% for payments made in 2006 through 2010 after which it will increase to 31%). If you are a non-U.S. holder, you will be exempt from such backup withholding tax if you provide a Form W-8BEN or otherwise meet documentary evidence requirements for establishing that you are a non-U.S. holder or otherwise establish an exemption.
The gross proceeds from the disposition of our common stock may be subject to information reporting and backup withholding tax at a rate of 30% (which rate under current law will be periodically reduced to 28% for payments made in 2006 through 2010 after which it will increase to 31%). If you sell your common stock outside the United States through a non-United States office of a non-United States broker and the sales proceeds are paid to you outside the United States, then the United States backup withholding and information reporting requirements generally will not apply to that payment. However, United States information reporting, but not backup withholding, will apply to a payment of sales proceeds, even if that payment is made outside the United States, if you sell your common stock through a non-United States office of a broker that:
- is a United States person;
- derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States;
- is a "controlled foreign corporation" for United States federal income tax purposes; or
- is a foreign partnership, if at any time during its tax year:
- one or more of its partners are United States persons who in the aggregate hold more than 50% of the income or capital interests in the partnership; or
- the foreign partnership is engaged in a United States trade or business,
unless the broker has documentary evidence in its files that you are a non-U.S. person and certain other conditions are met or you otherwise establish an exemption.
If you receive payments of the proceeds of a sale of our common stock to or through a United States office of a broker, the payment is subject to both United States backup withholding and information reporting unless you provide a Form W-8BEN certifying that you are a non-U.S. person or you otherwise establish an exemption.
You generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed your income tax liability by filing a refund claim with the United States Internal Revenue Service.
UNDERWRITING
We intend to offer the shares through the underwriters. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Banc of America Securities LLC and William Blair & Company, L.L.C. are acting as representatives of the underwriters named below. Subject to the terms and conditions described in a purchase agreement among us, the selling stockholders and the underwriters, we and the selling stockholders have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us and the selling stockholders, the number of shares listed opposite their names below.
NUMBER
OF SHARES
UNDERWRITER ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................
Goldman, Sachs & Co. .......................................
Banc of America Securities LLC..............................
William Blair & Company, L.L.C..............................
--------
Total...........................................
========
|
The underwriters have agreed to purchase all of the shares sold under the purchase agreement if any of these shares are purchased. If an underwriter defaults, the purchase agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreement may be terminated.
We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreement, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
COMMISSIONS AND DISCOUNTS
The representatives have advised us and the selling stockholders that the underwriters propose initially to offer the shares to the public at the initial public offering price on the cover page of this prospectus and to dealers at that price less a concession not in excess of $ per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.
The following table shows the public offering price, underwriting discount and proceeds before expenses to Dick's Sporting Goods and the selling stockholders. The information assumes either no exercise or full exercise by the underwriters of their over-allotment options.
WITHOUT WITH
PER SHARE OPTION OPTION
--------- ------- ------
Public offering price.......................... $ $ $
Underwriting discount.......................... $ $ $
Proceeds, before expenses, to Dick's Sporting
Goods........................................ $ $ $
Proceeds, before expenses, to the selling
stockholders................................. $ $ $
|
The expenses of the offering, not included the underwriting discount, are estimated at $ and are payable by Dick's Sporting Goods.
OVER-ALLOTMENT OPTION
The selling stockholders have granted options to the underwriters to purchase up to additional shares at the public offering price less the underwriting discount. The underwriters may exercise these options from time to time on one or more occasions for 30 days from the date of this prospectus solely to cover any over-allotments. If the underwriters exercise these options, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter's initial amount reflected in the above table.
RESERVED SHARES
At our request, the underwriters have reserved for sale, at the initial public offering price, up to % of the shares offered by this prospectus for sale to some of our directors, officers, employees, distributors, dealers, business associates and related persons. If these persons purchase reserved shares, this will reduce the number of shares available for sale to the general public. Any reserved shares that are not orally confirmed for purchase within one day of the pricing of this offering will be offered by the underwriters to the general public on the same terms as the other shares offering by this prospectus.
NO SALES OF SIMILAR SECURITIES
We and the selling stockholders, our executive officers and directors, all of our other stockholders and others who hold substantially all the options to purchase shares of common stock have agreed, with exceptions, not to sell or transfer any common stock for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch. Specifically, we and these other individuals have agreed not to directly or indirectly
- offer, pledge, sell or contract to sell any common stock,
- sell any option or contract to purchase any common stock,
- purchase any option or contract to sell any common stock,
- grant any option, right or warrant for the sale of any common stock,
- lend or otherwise dispose of or transfer any common stock,
- request or demand that we file a registration statement related to the common stock, or
- enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition.
Merrill Lynch has informed us that while it does not currently expect to release the entities or persons bound by the lock-up arrangements, including affiliates, prior to the end of the lock-up period, it retains the right to do so at any time without notice at its sole discretion.
The release of any lock-up by Merrill Lynch is considered on a case-by-case basis. Factors in deciding whether to release shares may include the length of time before the lock-up expires, the number of shares involved, the reason for the requested release, market conditions, the trading price of our common stock, and whether the person or entity seeking the release is us or one of our affiliates, shareholders, executive officers or directors.
NEW YORK STOCK EXCHANGE LISTING
We expect the shares to be approved for listing on the New York Stock Exchange under the symbol "DKS." In order to meet the requirements for listing on that exchange, the underwriters have undertaken to sell a minimum number of shares to a minimum number of beneficial owners as required by that exchange.
Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations among us, the selling stockholders and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the initial public offering price are:
- the valuation multiples of publicly-traded companies that the representatives believe to be comparable to us,
- our financial information,
- the history of, and the prospects for, our company and the industry in which we compete,
- an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues,
- the present state of our development, and
- the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.
The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.
NASD REGULATIONS
Because more than ten percent of the net proceeds of the offering may be paid to members or affiliates of members of the National Association of Securities Dealers, Inc. participating in the offering, the offering will be conducted in accordance with NASD Conduct Rule 2710(c)(8). This rule requires that the public offering price of an equity security be no higher than the price recommended by a qualified independent underwriter which has participated in the preparation of the registration statement and performed its usual standard of due diligence with respect to that registration statement. Merrill Lynch has agreed to act as qualified independent underwriter for the offering. The price of the shares will be no higher than that recommended by Merrill Lynch.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BID
Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.
If the underwriters create a short position in the commons stock in connection with the offering, i.e., if they sell more shares than are listed on the cover of this prospectus, the representatives may reduce that short position by purchasing shares in the open market. The representatives may also elect to reduce any short position by exercising all or part of the over-allotment option described above. Purchases of the common stock to stabilize its price or to reduce a short position may cause the price of the common stock to be higher than it might be in the absence of such purchases.
The representatives may also impose a penalty bid on underwriters and selling group members. This means that if the representative purchase shares in the open market to reduce the underwriter's short position or to stabilize the price of such shares, they may reclaim the amount of the selling concession from the underwriters
and selling group members who sold those shares. The imposition of a penalty bid may also affect the price of the shares in that it discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters makes any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
FINANCIAL ADVISORY SERVICES
At our request, the underwriters have severally agreed to pay Peter J. Solomon Securities Company Limited a fee of $1,000,000 upon the closing of this offering as payment for financial advisory services to us in connection with the offering.
INTERNET DISTRIBUTION
Merrill Lynch will be facilitating Internet distribution for this offering to certain of its Internet subscription customers. Merrill Lynch intends to allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the Internet Web site maintained by Merrill Lynch. Other than the prospectus in electronic format, the information on the Merrill Lynch Web site is not part of this prospectus.
In addition, a prospectus in electronic format may be made available on the website maintained by Goldman, Sachs & Co. and may also be made available on websites maintained by other underwriters. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the lead managers to underwriters that may make Internet distributions on the same basis as other allocations.
VALIDITY OF COMMON STOCK
The validity of the common stock offered hereby will be passed upon for us by Buchanan Ingersoll Professional Corporation, Pittsburgh, Pennsylvania. Fried, Frank, Harris, Shriver & Jacobson (a partnership including professional corporations), New York, New York has acted as counsel for the underwriters in connection with this offering.
EXPERTS
The consolidated financial statements as of February 2, 2002 and February 3, 2001 and for each of the three fiscal years in the period ended February 2, 2002, included in this prospectus and the related consolidated financial statement schedule, included elsewhere in the registration statement, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing herein and elsewhere in the registration statement, and have been so included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933 with respect to the common stock offered in this prospectus. This prospectus omits certain information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to Dick's Sporting Goods and the common stock offered in this prospectus, reference is made to such registration statement, exhibits and schedules. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. We currently do not file periodic reports with the SEC.
The registration statement, including the exhibits and schedules filed therewith, may be inspected free of charge at the public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be obtained from the Public Reference Section of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates and from the SEC's Internet site at http://www.sec.gov. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. We intend to list our common stock on the New York Stock Exchange. Reports, proxy statements and other information concerning Dick's Sporting Goods can be inspected at the New York Stock Exchange, Inc., 11 Wall Street, New York, NY 10005.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
------
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of February 3, 2001, February
2, 2002 and August 3, 2002 (Unaudited).................... F-3
Consolidated Statements of Income for the Fiscal Years Ended
January 29, 2000, February 3, 2001, and February 2, 2002
and for the 26 Weeks Ended August 4, 2001 (Unaudited) and
August 3, 2002 (Unaudited)................................ F-5
Consolidated Statements of Comprehensive Income for the
Fiscal Years Ended January 29, 2000, February 3, 2001, and
February 2, 2002 and for the 26 Weeks Ended August 4, 2001
(Unaudited) and August 3, 2002 (Unaudited)................ F-6
Consolidated Statements of Changes in Stockholders' Equity
for the Fiscal Years Ended January 29, 2000, February 3,
2001, and February 2, 2002 and for the 26 Weeks Ended
August 3, 2002 (Unaudited)................................ F-7
Consolidated Statements of Cash Flows for the Fiscal Years
Ended January 29, 2000, February 3, 2001, and February 2,
2002 and for the 26 Weeks Ended August 4, 2001 (Unaudited)
and August 3, 2002 (Unaudited)............................ F-8
Notes to Consolidated Financial Statements.................. F-9
|
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
DICK'S SPORTING GOODS, INC.:
We have audited the accompanying consolidated balance sheets of Dick's Sporting Goods, Inc. and subsidiaries as of February 2, 2002 and February 3, 2001, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for each of the three fiscal years in the period ended February 2, 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dick's Sporting Goods, Inc. and subsidiaries as of February 2, 2002 and February 3, 2001, and the results of their operations and their cash flows for each of the three fiscal years in the period ended February 2, 2002 in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP Pittsburgh, Pennsylvania |
July 1, 2002 (July 15, 2002 as to Note 15)
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FEBRUARY 3, FEBRUARY 2, AUGUST 3,
2001 2002 2002
----------- ----------- ---------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash..................................................... $ 8,279 $ 8,976 $ 13,874
Accounts receivable, net................................. 8,320 14,416 11,252
Inventories, net......................................... 163,149 202,413 249,762
Deferred income taxes.................................... 9,853 5,219 5,145
Net assets of discontinued operations.................... 3,513
Prepaid expenses and other current assets................ 3,553 5,243 5,503
-------- -------- --------
Total current assets................................ 196,667 236,267 285,536
-------- -------- --------
PROPERTY AND EQUIPMENT:
Buildings................................................ 2,752 2,752 2,752
Leasehold improvements................................... 56,150 68,887 67,568
Furniture, fixtures and equipment........................ 47,264 51,751 64,064
Vehicles................................................. 537 747 719
-------- -------- --------
106,703 124,137 135,103
Less accumulated depreciation and amortization........... (44,791) (52,342) (58,759)
-------- -------- --------
Net property and equipment............................ 61,912 71,795 76,344
-------- -------- --------
OTHER ASSETS:
Deferred income taxes.................................... 2,523 5,970 5,970
Investments.............................................. 5,770 4,893
Other.................................................... 3,411 3,008 4,871
-------- -------- --------
Total other assets.................................. 5,934 14,748 15,734
-------- -------- --------
TOTAL ASSETS............................................... $264,513 $322,810 $377,614
======== ======== ========
|
(Continued)
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FEBRUARY 3, FEBRUARY 2, AUGUST 3,
2001 2002 2002
----------- ----------- ---------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable......................................... $ 82,708 $ 95,573 $127,553
Accrued expenses......................................... 38,941 47,840 47,006
Deferred revenue and other liabilities................... 12,825 17,958 13,468
Income taxes payable..................................... 10,634 5,728 4,553
Current portion of long-term debt and capital leases..... 320 211 211
-------- -------- --------
Total current liabilities............................. 145,428 167,310 192,791
-------- -------- --------
LONG-TERM LIABILITIES:
Revolving credit agreement borrowings.................... 55,144 77,073 90,299
Long-term debt and capital leases........................ 18,183 3,577 3,466
Deferred revenue and other liabilities................... 7,016 11,745 12,074
-------- -------- --------
Total long-term liabilities........................... 80,343 92,395 105,839
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value, $.01 per share, authorized
shares 3,120,159, none issued and outstanding.........
Common stock, par value $.01 per share, authorized shares
20,000,000 and 14,502,004, issued and outstanding
shares 6,045,256, 7,284,379 and 7,284,379 at February
3, 2001, February 2, 2002 and August 3, 2002
(unaudited), respectively............................. 60 73 73
Additional paid-in capital............................... 90,192 96,375 96,375
Accumulated deficit...................................... (51,510) (28,039) (11,590)
Note receivable for common stock-related party (see Note
6).................................................... (6,196) (6,196)
Accumulated other comprehensive income................... 892 322
-------- -------- --------
Total stockholders' equity............................ 38,742 63,105 78,984
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................. $264,513 $322,810 $377,614
======== ======== ========
|
See notes to consolidated financial statements. (Concluded)
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED 26 WEEKS ENDED
--------------------------------------- -------------------------
JANUARY 29, FEBRUARY 3, FEBRUARY 2, AUGUST 4, AUGUST 3,
2000 2001 2002 2001 2002
----------- ----------- ----------- --------- ---------
(UNAUDITED) (UNAUDITED)
Sales..................................... $728,342 $893,396 $1,074,568 $487,532 $586,758
Cost of goods sold, including occupancy
and distribution costs.................. 564,446 684,552 810,999 372,024 436,366
-------- -------- ---------- -------- --------
GROSS PROFIT.......................... 163,896 208,844 263,569 115,508 150,392
Selling, general and administrative
expenses................................ 132,403 169,392 213,065 95,025 118,024
Pre-opening expenses...................... 3,488 5,911 5,144 1,866 3,212
-------- -------- ---------- -------- --------
INCOME FROM OPERATIONS................ 28,005 33,541 45,360 18,617 29,156
Interest expense.......................... 3,520 6,963 6,241 3,758 1,740
-------- -------- ---------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES................. 24,485 26,578 39,119 14,859 27,416
Provision for income taxes................ 9,794 10,631 15,648 5,943 10,967
-------- -------- ---------- -------- --------
INCOME FROM CONTINUING OPERATIONS..... 14,691 15,947 23,471 8,916 16,449
DISCONTINUED OPERATIONS:
Loss from discontinued operations and
disposal of DicksSportingGoods.com
(net of tax benefit of $4,869 and
$2,343 in fiscal 2000 and 1999,
respectively)......................... 3,514 7,304
-------- -------- ---------- -------- --------
NET INCOME............................ 11,177 8,643 23,471 8,916 16,449
ACCRETION OF MANDATORILY REDEEMABLE
PREFERRED STOCK......................... (14,404) (5,654)
-------- -------- ---------- -------- --------
(LOSS) INCOME APPLICABLE TO COMMON
STOCKHOLDERS............................ $ (3,227) $ 2,989 $ 23,471 $ 8,916 $ 16,449
======== ======== ========== ======== ========
EARNINGS (LOSS) PER COMMON SHARE --
Basic:
Income from continuing operations
including preferred stock activity
applicable to common stockholders..... $ 0.47 $ 2.50 $ 3.39 $ 1.36 $ 2.26
Discontinued operations................. (5.74) (1.77)
-------- -------- ---------- -------- --------
Earnings (loss) applicable to common
stockholders.......................... $ (5.27) $ 0.73 $ 3.39 $ 1.36 $ 2.26
======== ======== ========== ======== ========
Weighted average common shares
outstanding........................... 612 4,112 6,930 6,576 7,284
======== ======== ========== ======== ========
EARNINGS (LOSS) PER COMMON SHARE --
Diluted:
Income from continuing operations
including preferred stock activity
applicable to common shareholders..... $ 0.47 $ 1.99 $ 3.03 $ 1.35 $ 1.96
Discontinued operations................. (5.74) (0.91)
-------- -------- ---------- -------- --------
Earnings (loss) applicable to common
stockholders.......................... $ (5.27) $ 1.08 $ 3.03 $ 1.35 $ 1.96
======== ======== ========== ======== ========
Weighted average common shares
outstanding........................... 612 8,010 7,745 6,587 8,383
======== ======== ========== ======== ========
|
See notes to consolidated financial statements.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED 26 WEEKS ENDED
--------------------------------------- -------------------------
JANUARY 29, FEBRUARY 3, FEBRUARY 2, AUGUST 4, AUGUST 3,
2000 2001 2002 2001 2002
----------- ----------- ----------- --------- ---------
(UNAUDITED) (UNAUDITED)
NET INCOME........................... $11,177 $8,643 $23,471 $8,916 $16,449
OTHER COMPREHENSIVE INCOME:
Unrealized gain (loss) on
securities available-for-sale... 892 551 (570)
------- ------ ------- ------ -------
COMPREHENSIVE INCOME................. $11,177 $8,643 $24,363 $9,467 $15,879
======= ====== ======= ====== =======
|
See notes to consolidated financial statements.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
SERIES B NOTE
CONVERTIBLE RECEIVABLE
PREFERRED STOCK COMMON STOCK ADDITIONAL FOR
--------------------- ---------------------- PAID-IN ACCUMULATED COMMON
SHARES DOLLARS SHARES DOLLARS CAPITAL DEFICIT STOCK
---------- -------- ---------- --------- ---------- ----------- ----------
BALANCE, January 30, 1999... 1,708,242 $ 17 1,004,000 $ 10 $ 37 $(51,272) $
Accretion of convertible
and redeemable preferred
stock................... (14,404)
Net income................ 11,177
---------- -------- ---------- --------- -------- -------- --------
BALANCE, January 29, 2000... 1,708,242 17 1,004,000 10 37 (54,499)
Accretion of convertible
and redeemable preferred
stock................... (5,654)
Conversion of convertible
and redeemable preferred
stock................... (1,708,242) (17) 10,931,239 109 157,732
Repurchase and retirement
of common stock......... (5,889,983) (59) (67,577)
Net income................ 8,643
---------- -------- ---------- --------- -------- -------- --------
BALANCE, February 3, 2001... 6,045,256 60 90,192 (51,510)
Exercise of stock options
and issuance of common
stock................... 1,239,123 13 6,183 (6,196)
Unrealized gain on
securities
available-for-sale, net
of taxes of $480........
Net income................ 23,471
---------- -------- ---------- --------- -------- -------- --------
BALANCE, February 2, 2002... 7,284,379 73 96,375 (28,039) (6,196)
Unrealized loss on
securities
available-for-sale, net
of taxes of $380
(unaudited).............
Net income (unaudited).... 16,449
---------- -------- ---------- --------- -------- -------- --------
BALANCE, August 3, 2002
(unaudited)............... -- $ -- 7,284,379 $ 73 $ 96,375 $(11,590) $ (6,196)
========== ======== ========== ========= ======== ======== ========
ACCUMULATED
OTHER TREASURY STOCK
COMPREHENSIVE ------------------
INCOME SHARES DOLLARS TOTAL
------------- -------- ------- --------
BALANCE, January 30, 1999... $ 391,986 $(8,379) $(59,587)
Accretion of convertible
and redeemable preferred
stock................... (14,404)
Net income................ 11,177
------- -------- ------- --------
BALANCE, January 29, 2000... 391,986 (8,379) (62,814)
Accretion of convertible
and redeemable preferred
stock................... (5,654)
Conversion of convertible
and redeemable preferred
stock................... 157,824
Repurchase and retirement
of common stock......... (391,986) 8,379 (59,257)
Net income................ 8,643
------- -------- ------- --------
BALANCE, February 3, 2001... 38,742
Exercise of stock options
and issuance of common
stock...................
Unrealized gain on
securities
available-for-sale, net
of taxes of $480........ 892 892
Net income................ 23,471
------- -------- ------- --------
BALANCE, February 2, 2002... 892 63,105
Unrealized loss on
securities
available-for-sale, net
of taxes of $380
(unaudited)............. (570) (570)
Net income (unaudited).... 16,449
------- -------- ------- --------
BALANCE, August 3, 2002
(unaudited)............... $ 322 -- $ -- $ 78,984
======= ======== ======= ========
|
See notes to consolidated financial statements.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FISCAL YEAR ENDED 26 WEEKS ENDED
--------------------------------------- --------------------------
JANUARY 29, FEBRUARY 3, FEBRUARY 2, AUGUST 4, AUGUST 3,
2000 2001 2002 2001 2002
----------- ----------- ----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income........................ $11,177 $ 8,643 $23,471 $ 8,916 $ 16,449
Adjustments to reconcile net
income to net cash provided by
operating activities:
Loss from discontinued
operations................ 3,514 7,304
Depreciation and
amortization.............. 8,662 9,425 12,082 5,162 6,579
Deferred income taxes........ (1,054) (3,731) 1,187 74
Changes in assets and
liabilities:
Accounts receivable....... (2,567) (1,037) (6,096) (9,448) 3,164
Inventories............... (10,708) (23,572) (39,264) (49,578) (47,349)
Prepaid expenses and other
assets.................. (1,014) (2,640) (1,909) (49) (1,816)
Accounts payable.......... 13,555 3,614 9,424 24,058 25,971
Accrued expenses and
other................... (87) 19,253 3,993 (5,194) (2,009)
Deferred revenues and
other liabilities....... 3,171 5,806 5,606 (2,670) (4,214)
------- -------- ------- -------- --------
Net cash provided by (used in)
continuing operations........ 24,649 23,065 8,494 (28,803) (3,151)
Net cash (used in) provided by
discontinued operations...... (8,880) (5,452) 3,513 3,680
------- -------- ------- -------- --------
Net cash provided by (used in)
operating activities......... 15,769 17,613 12,007 (25,123) (3,151)
------- -------- ------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale-leaseback
transactions................... 8,991 13,213 10,254 2,467 3,094
Capital expenditures.............. (14,749) (35,719) (32,219) (15,234) (14,169)
------- -------- ------- -------- --------
Net cash used in investing
activities................... (5,758) (22,506) (21,965) (12,767) (11,075)
------- -------- ------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Revolving credit borrowings,
net............................ (13,930) 44,692 21,929 44,356 13,226
Payments on long-term debt and
capital leases................. (433) (372) (14,715) 328 (111)
Proceeds from issuance of long-
term debt...................... 1,163
Payment on repurchase of common
stock.......................... (44,809)
Increase in bank overdraft........ 4,145 8,016 3,441 963 6,009
------- -------- ------- -------- --------
Net cash (used in) provided by
financing activities......... (9,055) 7,527 10,655 45,647 19,124
------- -------- ------- -------- --------
NET INCREASE IN CASH................ 956 2,634 697 7,757 4,898
CASH, BEGINNING OF PERIOD........... 4,689 5,645 8,279 8,279 8,976
------- -------- ------- -------- --------
CASH, END OF PERIOD................. $ 5,645 $ 8,279 $ 8,976 $ 16,036 $ 13,874
======= ======== ======= ======== ========
|
See notes to consolidated financial statements.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS--Dick's Sporting Goods, Inc. (together with its subsidiaries, the "Company") is a specialty retailer selling sporting goods, footwear and apparel through its 125 specialty retail stores in the eastern, central and southern United States.
FISCAL YEAR--The Company's fiscal year ends on the Saturday closest to the end of January. Fiscal years 2001 (52 weeks), 2000 (53 weeks), and 1999 (52 weeks) ended on February 2, 2002, February 3, 2001, and January 29, 2000, respectively.
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include Dick's Sporting Goods, Inc. and its wholly owned subsidiaries, American Sports Licensing, Inc., formerly Dick's Asset Management Corporation and for the period October 1, 2000 through February 3, 2001 (see Note 10), DSG Holdings LLC whose operations consisted of its internet business. The Company's investment in DSG Holdings LLC was accounted for under the equity method of accounting for the period November 2, 1999 through September 30, 2000. Prior to November 2, 1999, the internet business was a component of the Company. All intercompany accounts and transactions have been eliminated in consolidation.
UNAUDITED FINANCIAL INFORMATION--The interim financial information as of August 3, 2002 and for the 26 weeks ended August 3, 2002 and August 4, 2001 is unaudited and has been prepared on the same basis as the audited financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the interim information. This information does not include all footnotes which would be required for complete annual financial statements in accordance with generally accepted accounting principles. Operating results for the 26 weeks ended August 3, 2002 are not necessarily indicative of the results that may be expected for the year ending February 1, 2003.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH MANAGEMENT--The Company's cash management system provides for the reimbursement of all major bank disbursement accounts on a daily basis. Accounts payable at February 3, 2001 and February 2, 2002 include $24,339,000 and $27,780,000, respectively, of checks drawn in excess of cash balances not yet presented for payment.
ACCOUNTS RECEIVABLE--Accounts receivable consists principally of amounts receivable from vendors. The allowance for doubtful accounts totaled $523,000 and $502,000, as of February 3, 2001 and February 2, 2002, respectively.
INVENTORIES--Inventories are stated at the lower of weighted average cost or market. Inventory cost consists of the direct cost of merchandise including freight-in. Inventories are net of reserves for shrinkage, obsolescence and vendor allowances totaling $8,431,000 and $10,566,000 at February 3, 2001 and February 2, 2002, respectively.
PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost and include capitalized leases. For financial reporting purposes, depreciation and amortization are computed using the straight-line method over the following estimated useful lives:
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Buildings................................................... 40 years Leasehold improvements...................................... 10-20 years Furniture, fixtures and equipment........................... 3-7 years Vehicles.................................................... 5 years |
For property and equipment under capital lease agreements, amortization is calculated using the straight-line method over the shorter of the estimated useful lives of the assets or the lease term.
Renewals and betterments are capitalized and repairs and maintenance are expensed as incurred.
The Company periodically evaluates its long-lived assets to assess whether the carrying values have been impaired, using the provisions of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The Company did not record a charge for asset impairment in fiscal 1999, 2000 or 2001.
INVESTMENTS--Investments consist of restricted, unregistered common stock and warrants to purchase unregistered common stock. Common stock for which restrictions lapse within one year is classified as "available-for-sale" in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and is carried at fair value. Common stock for which restrictions extend beyond one year is carried at the fair value at the date of acquisition. Fair value at the date of acquisition was determined by an independent appraisal. Fair value subsequent to the date of acquisition is determined by using the methodology employed by the independent appraiser. Unrealized holding gains and losses on stock for which restrictions lapse within one year are included in other comprehensive income and are shown as a component of stockholders' equity as of the end of each fiscal year. At February 2, 2002, investments were carried at $5,770,000, with $1,914,000 representing the fair value of the stock for which restrictions lapse within one year. Unrealized holding gains on stock for which restrictions lapse within one year as of February 2, 2002 were $892,000, net of tax (see Note 11).
DEFERRED REVENUE AND OTHER LIABILITIES--Deferred revenue and other liabilities is primarily comprised of deferred rent which represents the difference between rent paid and the amounts expensed for operating leases, deferred revenue related to gift cards, and deferred revenue related to the investment in GSI Commerce, Inc. ("GSI") (see Note 11).
PRE-OPENING EXPENSES--Pre-opening expenses, which consist primarily of marketing, payroll and recruiting costs, are expensed as incurred.
INCOME TAXES--The Company utilizes the asset and liability method of accounting for income taxes under the provisions of SFAS No. 109, "Accounting for Income Taxes," and provides deferred income taxes for temporary differences between the amounts reported for assets and liabilities for financial statement purposes and for income tax reporting purposes.
REVENUE RECOGNITION--Revenue from retail sales is recognized at the point of sale. Recognition of revenue for cash received for customer programs such as gift cards is deferred, and the revenue is recognized upon the redemption of the gift card. Sales are recorded net of estimated returns. Revenue from layaway sales is recognized upon receipt of final payment from the customer.
ADVERTISING COSTS--Production costs of advertising are expensed as incurred and the costs to run the advertisements are expensed the first time the advertisement takes place. Advertising expense, net of cooperative funds received from vendors, was approximately $29,563,000, $33,507,000 and $42,823,000 for fiscal 1999, 2000, and 2001, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company has financial instruments which include long-term debt and revolving debt. The carrying amounts of the Company's debt instruments approximate their fair value,
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
estimated using the Company's current incremental borrowing rates for similar types of borrowing arrangements.
SEGMENT INFORMATION--The Company is a specialty retailer that offers a broad range of products in its specialty retail stores in the eastern, central and southern United States. Given the economic characteristics of the store formats, the similar nature of the products sold, the type of customer, and method of distribution, the continuing operations of the Company are one reportable segment.
DERIVATIVES--The Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," effective February 4, 2001, and the adoption of this standard did not have an effect on its consolidated financial position, results of operations or cash flows because the Company has not entered into any derivative contracts and maintains no derivative instruments or embedded derivative instruments.
RECENT ACCOUNTING PRONOUNCEMENTS--In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that all business combinations initiated after June 30, 2001, be accounted for using the purchase method of accounting. SFAS No. 142 changes the accounting for goodwill and certain other intangible assets from an amortization method to an impairment only approach. The Company does not believe that the adoption of SFAS No. 142, effective February 3, 2002, will have a material impact on its financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which provides guidance that will eliminate inconsistencies in accounting for the impairment or disposal of long-lived assets under existing accounting pronouncements. The Company does not believe that the adoption of SFAS No. 144, effective February 3, 2002, will have a material impact on its financial position or results of operations.
RECLASSIFICATIONS--Certain reclassifications have been made to fiscal 1999 and 2000 consolidated financial statement amounts to conform to the fiscal 2001 presentation.
2. ACCRUED EXPENSES
Accrued expenses consist of the following as of the fiscal periods (in thousands):
2000 2001
------- -------
Accrued payroll, withholdings and benefits.................. $13,539 $18,538
Other accrued expenses...................................... 25,402 29,302
------- -------
$38,941 $47,840
======= =======
|
3. REVOLVING CREDIT AGREEMENT
The Company's revolving credit facility (the "Credit Agreement"), as
amended, provides for financing up to $170,000,000 subject to a borrowing base
equal to the lesser of 70% of eligible inventory or 85% of the inventory
liquidation value net of certain reserves (as defined by the Credit Agreement).
The Credit Agreement expires on May 30, 2003. As of February 3, 2001 and
February 2, 2002, the Company's unused borrowing capacity under the Credit
Agreement was $50,198,000 and $52,865,000, respectively. Borrowings made
pursuant to the Credit Agreement bear interest based upon a formula at either
(a) the prime rate, or (b) the one month London Interbank Offering Rate
("LIBOR"), plus the applicable margin (0% for the prime rate option or 1.25% for
LIBOR as of February 2, 2002). Borrowings are collateralized by the assets of
the Company, excluding store and distribution center equipment and fixtures that
have a net carrying value of $14,144,000 as of February 2, 2002.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At February 3, 2001 and February 2, 2002, the prime rate was 8.50% and 4.75%, respectively, and LIBOR was 5.56% and 1.83%, respectively, and the weighted average interest rate on borrowings outstanding under the Credit Agreement was 7.52% and 3.12%, respectively.
The Credit Agreement contains restrictive covenants including the maintenance of a certain fixed charge coverage ratio and prohibits payment of any dividends.
The Credit Agreement provides for letters of credit not to exceed the lesser of (a) $25,000,000, (b) $170,000,000 less the outstanding loan balance and (c) the borrowing base minus the outstanding loan balance. As of February 3, 2001 and February 2, 2002, the Company had outstanding letters of credit totaling $4,188,000 and $7,858,000, respectively.
The following table provides information about the Credit Agreement borrowings as of and for the periods (dollars in thousands):
2000 2001
-------- --------
Balance, fiscal period-end.................................. $ 55,144 $ 77,073
Average interest rate....................................... 7.73% 4.93%
Maximum outstanding during the year......................... $134,409 $151,700
Average outstanding during the year......................... $ 67,752 $100,252
|
4. DEBT
Debt, exclusive of capital lease obligations, consists of the following as of the end of the fiscal periods (dollars in thousands):
2000 2001
------- ------
THIRD-PARTY:
Promissory notes payable to former preferred shareholders
including interest at 7% due on or before September
2008................................................... $14,393 $ --
Notes payable and term loans in various monthly
installments through fiscal 2020 with interest rates
ranging from 4% to 12%................................. 1,109 928
RELATED PARTY:
Note payable to a former principal stockholder, due in
monthly installments of approximately $14, including
interest at 12%, through May 1, 2006................... 642 548
Less current portion of:
Third-party............................................ (179) (55)
Related party.......................................... (93) (105)
------- ------
$15,872 $1,316
======= ======
|
Certain of the agreements pertaining to long-term debt contain financial and other restrictive covenants, none of which are more restrictive than those of the Credit Agreement as discussed in Note 3.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Scheduled principal payments on long-term debt as of February 2, 2002 are as follows (in thousands):
FISCAL
------
2002........................................................ $ 160
2003........................................................ 157
2004........................................................ 174
2005........................................................ 193
2006........................................................ 84
Thereafter.................................................. 708
------
$1,476
======
|
5. LEASES
CAPITAL LEASE OBLIGATIONS--The Company leases two buildings from a former stockholder, who is related to current stockholders of the Company, under a capital lease which expires in April 2021. The gross and net carrying values of assets under capital leases are approximately $3,139,000 and $1,623,000 as of February 3, 2001, and $3,139,000 and $1,499,000 as of February 2, 2002, respectively.
Scheduled lease payments under capital lease obligations as of February 2, 2002 are as follows (in thousands):
FISCAL
------
2002........................................................ $ 240
2003........................................................ 240
2004........................................................ 240
2005........................................................ 240
2006........................................................ 240
Thereafter.................................................. 3,435
------
4,635
Less amount representing interest........................... 2,323
------
Present value of net scheduled lease payments............... 2,312
Less amounts due in one year................................ 51
------
$2,261
======
|
OPERATING LEASE AGREEMENTS--The Company leases substantially all of its stores, as well as certain office facilities, distribution centers and equipment, under noncancelable operating leases which expire at various dates through 2022. Certain of the store lease agreements contain renewal options for additional periods of five to ten years and contain certain escalation clauses. The lease agreements typically provide primarily for the payment of minimum annual rentals, plus contingent rent stated as a percentage of gross sales over certain base amounts, in addition to costs of utilities, property taxes, maintenance, common areas and insurance. Rent expense under these operating leases was approximately $48,130,000, $58,923,000 and $71,642,000 for fiscal 1999, 2000, and 2001, respectively. The Company entered into sale-leaseback transactions related to store fixtures, buildings and equipment that resulted in cash receipts of $8,991,000, $13,213,000, and $10,254,000 for fiscal 1999, 2000, and 2001, respectively. The gain or loss on the sale-leaseback transactions was insignificant, and was deferred.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Scheduled lease payments due (including lease commitments for 21 stores not yet opened at February 2, 2002) under noncancelable operating leases as of February 2, 2002 are as follows (in thousands):
FISCAL
------
2002........................................................ $ 85,660
2003........................................................ 90,257
2004........................................................ 88,090
2005........................................................ 84,025
2006........................................................ 81,106
Thereafter.................................................. 706,817
----------
$1,135,955
==========
|
6. STOCKHOLDERS' EQUITY
STOCK OPTIONS--At February 2, 2002, the aggregate number of common shares reserved for grant under the Company's Stock Option Plan (the "Plan") is 4,300,000 shares. The stock option activity during the fiscal years ended is as follows:
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE GRANT DATE
SHARES PRICE FAIR VALUE
---------- --------- ----------
Outstanding options at January 29, 1999............. 3,626,218 $ 7.99
Granted........................................... 797,350 10.00 $3.88
Cancelled......................................... (421,750) 10.00
----------
Outstanding options at January 29, 2000............. 4,001,818 8.18
Granted........................................... 79,300 10.00 $ --
Cancelled......................................... (218,100) 10.00
----------
Outstanding options at February 3, 2001............. 3,863,018 8.12
Granted........................................... 44,000 10.00 $ --
Cancelled......................................... (106,913) 10.00
Exercised......................................... (1,239,123) 5.00
----------
Outstanding options at February 2, 2002............. 2,560,982 $ 9.58
==========
Options exercisable at February 2, 2002............. 1,734,761 $ 9.38
==========
Options exercisable at February 3, 2001............. 2,537,622 $ 7.14
==========
Options exercisable at January 29, 2000............. 2,072,776 $ 6.49
==========
|
Stock options vest over four years in 25% increments from the date of grant. Certain stock options that were issued in 1992 and were originally scheduled to expire in 2002 have been extended by an additional 10 years. All other options expire 10 years from the date of grant.
At February 2, 2002, options for the purchase of 219,542 shares were vested and outstanding that have an exercise price between $5.00 and $5.50 per share and have a weighted-average exercise price of $5.11 per share and a weighted-average remaining contractual life of 7.2 years. There are also options for the purchase of 2,341,440 shares outstanding with an exercise price of $10.00 per share, that have a weighted-average remaining
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
contractual life of 6.7 years. Of the options that have an exercise price of $10.00 per share, 1,515,219 are vested. The weighted-average remaining contractual life of all options outstanding at February 2, 2002 is 6.7 years.
The Company applies the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for the Plan. Accordingly, no compensation expense has been recognized where the exercise price of the option was equal to or greater than the fair market value of the stock on the date of grant.
Had compensation expense for the options granted during fiscal 1999, 2000, and 2001 been determined based on the fair value at the grant dates for awards consistent with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net income and earnings per share in fiscal 1999, 2000, and 2001 would have been reduced to the pro forma amounts indicated below.
1999 2000 2001
----------- ---------- -----------
Net income-- As reported $11,177,000 $8,643,000 $23,471,000
Pro forma $10,480,000 $7,496,000 $22,451,000
Basic (loss) income applicable to
common shareholders-- As reported $ (5.27) $ 0.73 $ 3.39
Pro forma $ (6.41) $ 0.45 $ 3.24
Diluted (loss) income applicable
to common shareholders-- As reported $ (5.27) $ 1.08 $ 3.03
Pro forma $ (6.41) $ 0.94 $ 2.90
|
The fair value of each option has been estimated on the date of grant using the Black-Scholes options pricing model using the minimum value method with the following assumptions for the periods presented: no dividend yield; expected life of 7.5 years; a risk-free interest rate of 5.80%, 5.31%, and 5.20% for fiscal 1999, fiscal 2000, and fiscal 2001, respectively.
NOTE RECEIVABLE FOR COMMON STOCK--During fiscal 2001, 1,239,123 stock options were exercised in exchange for a note receivable from a related party. The note receivable is due and payable the earlier of May 16, 2011 or upon the ceasing of the borrower's employment with the Company and bears interest at 5.5% per year, payable annually.
7. PREFERRED STOCK
As of January 29, 2000, the Company had 12,516,766 shares of preferred stock authorized and 9,396,612 shares issued. All series of preferred stock were convertible to common shares at the option of the holder. In preference to Series B preferred shares, series A, C, D, E, F, and G preferred stock which were redeemable for cash at certain fixed dates, were entitled to cumulative annual dividends, as defined. The undeclared dividends on such series were accreted to accumulated deficit over the holding period. Because of the redemption feature on such series, series A, C, D, E, F and G preferred stock were not classified within stockholders' equity.
In fiscal 2000, the preferred shareholders elected to convert all outstanding preferred shares to common stock resulting in the conversion of 9,396,612 shares of preferred stock to 10,931,239 shares of common stock. The Company repurchased approximately 60% of the common stock from the former preferred shareholders for cash of $44,809,000 and promissory notes totaling $13,751,000 which accrued interest at 7% annually. The Company repaid the promissory notes on September 9, 2001. The converted common stock held by the former preferred shareholders has a preference in the event of liquidation, merger, or sale of the Company equal to approximately $33,000,000.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES
The components of the provision for income taxes from continuing operations are as follows (in thousands):
FISCAL FISCAL FISCAL
1999 2000 2001
------ ------- -------
Current:
Federal................................................ $9,285 $12,601 $11,940
State.................................................. 1,556 1,761 800
------ ------- -------
10,841 14,362 12,740
------ ------- -------
Deferred:
Federal................................................ (890) (2,990) 2,333
State.................................................. (157) (741) 575
------ ------- -------
(1,047) (3,731) 2,908
------ ------- -------
Total provision..................................... $9,794 $10,631 $15,648
====== ======= =======
|
The provision for income taxes differs from the amounts computed by applying the federal statutory rate as follows for the following periods:
FISCAL FISCAL FISCAL
1999 2000 2001
------ ------ ------
Federal statutory rate...................................... 35.0% 35.0% 35.0%
State tax, net of federal benefit........................... 4.5 5.0 5.0
Other....................................................... 0.5
---- ---- ----
Effective income tax rate................................... 40.0% 40.0% 40.0%
==== ==== ====
|
Components of deferred tax assets (liabilities) consist of the following as of the fiscal periods ended (in thousands):
2000 2001
------- -------
Property and equipment...................................... $ 447 $ 1,911
Inventories................................................. 3,894 (1,908)
Other accrued expenses not currently deductible for tax
purposes.................................................. 5,491 8,045
Deferred rent............................................... 2,544 3,141
------- -------
Total deferred taxes........................................ $12,376 $11,189
======= =======
|
9. (LOSS) EARNINGS PER COMMON SHARE
(Loss) earnings per share is calculated using the principles of SFAS No. 128, "Earnings Per Share" ("EPS"). Under SFAS No. 128, the convertible preferred stock outstanding for a portion of fiscal 2000 has a dilutive effect for purposes of calculating diluted EPS. The number of incremental shares from the assumed exercise of stock options is calculated by applying the treasury stock method. The effect of the conversion of preferred stock was excluded from the fiscal 1999 calculation and stock options outstanding totaling 3,626,218
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and 4,001,818 were excluded from the fiscal 1999 and 2000 calculations as they were anti-dilutive. The earnings per share calculations are as follows (dollars in thousands, except per share data):
FISCAL YEAR ENDED 26 WEEKS ENDED
------------------------- -------------------------
AUGUST 4, AUGUST 3,
1999 2000 2001 2001 2002
----- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
Earnings Per Common Share--Basic:
Income from continuing operations
including preferred stock activity
applicable to common shareholders...... $ 287 $10,293 $23,471 $8,916 $16,449
Weighted average common shares
outstanding............................ 612 4,112 6,930 6,576 7,284
Earnings per common share from continuing
operations including preferred stock
activity-basic......................... $0.47 $ 2.50 $ 3.39 $ 1.36 $ 2.26
Earnings Per Common Share--Diluted:
Income from continuing operations
including preferred stock activity
applicable to common shareholders...... $ 287 $10,293 $23,471 $8,916 $16,449
Dilutive effect of preferred stock
accretion.............................. 5,654
----- ------- ------- ------ -------
Dilutive earnings for common
shareholders........................... $ 287 $15,947 $23,471 $8,916 $16,449
===== ======= ======= ====== =======
Weighted average common shares
outstanding............................ 612 4,112 6,930 6,576 7,284
Convertible preferred stock............... 3,890
Stock options and warrants................ 8 815 11 1,099
----- ------- ------- ------ -------
Weighted average common shares
outstanding............................ 612 8,010 7,745 6,587 8,383
===== ======= ======= ====== =======
Earnings per common share from continuing
operations including preferred stock
activity-diluted....................... $0.47 $ 1.99 $ 3.03 $ 1.35 $ 1.96
|
10. DISCONTINUED OPERATIONS OF DICKSSPORTINGGOODS.COM
During January 2001, the Board of Directors approved a plan to discontinue the operations of DSG Holdings LLC, also known as DicksSportingGoods.com, by ceasing its operations in April 2001. The equity interest in operations of DicksSportingGoods.com, the operations as a wholly-owned subsidiary, the operations as a component of the Company, and the loss on disposal have been classified as "Discontinued Operations" in the fiscal 1999 and 2000 Consolidated Statements of Income. The net assets at February 3, 2001 have been classified as "Net assets of discontinued operations" in the Consolidated Balance Sheets. During fiscal 2001, the operations of DSG Holdings LLC ceased and the net assets of discontinued operations were realized in an amount that was not materially different from that recorded as of February 3, 2001. Cash flows in connection with the discontinued operations are reported separately in the Consolidated Statements of Cash Flows.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net assets of the Company's discontinued operations as of February 3, 2001 are as follows (in thousands):
Current assets.............................................. $ 7,609
Property and equipment, net................................. 986
Other assets................................................ 5,996
-------
Total assets.............................................. $14,591
=======
Current liabilities......................................... $11,078
=======
Net assets.................................................. $ 3,513
=======
|
Summarized results of operations and estimated net loss from disposal of the discontinued operations for fiscal 1999 and 2000 are as follows (in thousands):
1999 2000
------- -------
Total operating revenues.................................... $ 928 $ 2,964
======= =======
Operating loss before income taxes.......................... $(5,857) $(4,757)
Income tax benefit.......................................... 2,343 1,903
------- -------
Loss from discontinued operations........................... $(3,514) $(2,854)
======= =======
Estimated loss from disposal before income taxes............ $ $(7,416)
Income tax benefit.......................................... 2,966
------- -------
Estimated net loss from disposal............................ $ $(4,450)
======= =======
Total....................................................... $(3,514) $(7,304)
======= =======
|
11. INVESTMENTS
In April 2001, the Company entered into an internet commerce agreement with GSI. Under the terms of this 10-year agreement, GSI is responsible for all financial and operational aspects of the internet site which operates under the domain name "DickSportingGoods.com", which name has been licensed to GSI by the Company. The Company and GSI entered into a royalty arrangement that was subsequently converted into an equity ownership at a price that was less than the GSI market value per share, which consists of restricted, unregistered common stock of GSI and warrants to purchase unregistered common stock of GSI (see Note 1). The Company recognized the difference between the fair value of the GSI stock and its cost as deferred revenue to be amortized over the 10-year term of the agreement. Deferred revenue at February 2, 2002 was $4,043,000. In total, the number of shares the Company holds represents less than 5% of GSI's outstanding common stock.
12. RETIREMENT SAVINGS PLAN
The Company's retirement savings plan, established pursuant to Section 401(k) of the Internal Revenue Code, covers all employees who have completed one year of service and have attained 21 years of age. Under the terms of the retirement savings plan, the Company provided a 30% (calendar 1999), 40% (calendar 2000), and 50% (calendar 2001) matching of each participant's contribution up to 10% of the participant's compensation, and may make a discretionary contribution. The Company's expense recorded for the contribution was approximately $485,000, $910,000, and $1,272,000 for fiscal 1999, 2000, and 2001, respectively. No employer discretionary contributions were made during fiscal 1999, 2000, and 2001.
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. COMMITMENTS AND CONTINGENCIES
The Company is involved in legal proceedings incidental to the normal conduct of its business. Although the outcome of any pending legal proceedings cannot be predicted with certainty, management believes that adequate insurance coverage is maintained and that the ultimate resolution of these matters will not have a material adverse effect on the Company's liquidity, financial position or results of operations.
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid by the Company totaled $3,382,000, $6,647,000 and $6,136,000 for fiscal 1999, 2000 and 2001, respectively. Income tax payments during fiscal 1999, 2000 and 2001 were $4,997,000, $9,524,000 and $14,481,000, respectively.
During fiscal 2001, 1,239,123 stock options were exercised in exchange for a note receivable in the amount of $6,196,000.
During fiscal 2001, the Company and GSI entered into an internet commerce agreement which included a royalty arrangement that was subsequently converted into an equity ownership. The Company recognized the difference between the fair value of the GSI stock and its cost as an additional investment and deferred revenue of $4,256,000 (see Note 11).
The Company recognized accretion of $14,404,000 and $5,654,000 on convertible and redeemable preferred stock as a charge to accumulated deficit during fiscal 1999 and 2000, respectively.
15. SUBSEQUENT EVENTS
On July 15, 2002, the Board of Directors approved, subject to the completion of an initial public offering of the Company's common stock; i) an increase in the authorized common stock, ii) the formation of a new class of common stock ("Class B"), $.01 par value, convertible into common stock at the option of the holder with voting rights ten times that of the existing common stock, iii) a common stock split, iv) the issuance of Class B shares to the principal stockholder and his family, in exchange for their existing common stock, and v) the establishment of the 2002 Stock Option Plan and an Employee Stock Purchase Plan.
On July 15, 2002, the Company amended the Credit Agreement to increase the aggregate revolving credit commitment from $170,000,000 to $180,000,000 and to extend the Credit Agreement to May 30, 2006.
******
[Map of Dick's store locations as of 8/3/02 and graphic showing number of stores opened at the end of last five fiscal years]
Through and including , (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
SHARES
[DICK'S SPORTING GOODS, INC. LOGO]
COMMON STOCK
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
WILLIAM BLAIR & COMPANY
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the sale and distribution of the securities being registered, other than underwriting discounts and commissions. All of the amounts shown are estimated except the Securities and Exchange Commission registration fee, the NASD filing fee and the NYSE listing fee.
Securities and Exchange Commission registration fee......... $18,400
National Association of Securities Dealers, Inc. filing
fee....................................................... $20,500
Transfer Agent's fees and expenses.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Legal fees and expenses for selling stockholders' counsel... *
Director and officer insurance premium...................... *
Blue sky fees and expenses.................................. *
NYSE listing fee............................................ *
Accountants' fees and expenses.............................. *
Miscellaneous............................................... *
-------
Total Expenses.............................................. $ *
=======
|
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and Dick's charter limit the monetary liability of directors to Dick's and to its stockholders and provide for indemnification of Dick's officers and directors for liabilities and expenses that they may incur in such capacities. In general, officers and directors are indemnified with respect to actions taken in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of Dick's, and with respect to any criminal action or proceeding, actions that the indemnitee had no reasonable cause to believe were unlawful. In addition, Dick's bylaws provide that Dick's shall indemnify its officers and directors to the fullest extent permitted by Delaware law, including some instances in which indemnification is otherwise discretionary under Delaware law. Reference is made to Dick's bylaws filed as Exhibit 3.3 hereto.
Dick's has an insurance policy which insures the directors and officers of Dick's against certain liabilities which might be incurred in connection with the performance of their duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, Dick's has issued and sold unregistered securities in the transactions described below.
Options. From May 4, 1999 to the present, Dick's has issued stock options to purchase a total of 944,650 shares of common stock to employees and members of Dick's Board of Directors. All of these options have an exercise price of $10.00 per share. The grants of such options were exempt from registration pursuant to Rule 701 under the Securities Act, as all of the issuances of these options were made in reliance on the provisions of Rule 701. All sales of common stock made pursuant to the exercise of stock options were made in reliance on Rule 701 under the Securities Act. No underwriters were involved and no commission was paid as part of these terms.
II-1
Promissory Notes. On June 9, 2000, Dick's issued promissory notes totaling approximately $13.8 million aggregate in principal amount to certain of its common stockholders. The promissory notes were issued in connection with these stockholders converting shares of our formerly outstanding preferred stock held by them into shares common stock and our repurchase of certain shares of common stock from these holders. The notes were sold in reliance on the exemption from registration contained in Section 3(a)(9) of the Securities Act for securities exchanged by the issuer with existing stockholders. All holders receiving the notes were existing common stockholders of Dick's. There were no underwriters in the offering and no commission or remuneration was paid or given directly or indirectly for soliciting such exchange.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration statement:
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1* Form of Underwriting Agreement
3.1+ Certificate of Incorporation
3.2 Form of Amended and Restated Certificate of Incorporation
3.3+ Bylaws
3.4 Form of Amended and Restated Bylaws
4.1* Form of Stock Certificate
4.2 Form of Series E Warrant, Class B
5* Opinion of Buchanan Ingersoll Professional Corporation
10.1 Associate Savings and Retirement Plan
10.2 Second Amended and Restated Registration Rights Agreement,
dated June 9, 2000 by and among Dick's Sporting Goods, Inc.
and certain of its stockholders, as amended
10.3 Amended and Restated Credit Agreement dated as of July 26,
2000 among Dick's Sporting Goods, Inc., the Lenders Party
thereto and General Electric Capital Corporation, as amended
by the First Amendment to Amended and Restated Credit
Agreement dated as of May 18, 2001, the Second Amendment to
Amended and Restated Credit Agreement dated as of July 2001,
the Third Amendment to Amended and Restated Credit Agreement
dated as of August 3, 2001, the Fourth Amendment to Amended
and Restated Credit Agreement dated as of September 2001,
the Fifth Amendment to Amended and Restated Credit Agreement
dated as of February 2002, the Sixth Amendment to Amended
and Restated Credit Agreement dated as of April 3, 2002, and
the Seventh Amendment to Amended and Restated Credit
Agreement dated as of July 15, 2002
10.4 1992 Stock Option Plan
10.5 2002 Stock Plan
10.6 Promissory Note in the aggregate principal amount of
$6,195,615 made by Edward W. Stack in favor of Dick's
Sporting Goods, Inc. dated as of May 18, 2001
10.7 Dick's Sporting Goods, Inc. (successor in interest to Dick's
Acquisition Corp.) 12% Subordinated Debenture, dated May 1,
1986 issued to Richard J. Stack
10.8 Lease Agreement, dated February 4, 1999, as amended for
388,000 square foot distribution center located in Smithton,
Pennsylvania
10.9 Lease Agreement, dated November 3, 1999, for 75,000 square
foot distribution center in Conklin, NY
10.10 Form of Agreement entered into between Dick's Sporting
Goods, Inc. and various executive officers, which sets forth
form of severance
10.11* Exchange Agreement dated , between Dick's Sporting
Goods, Inc. and Edward W. Stack and the other parties
thereto
10.12* Employment Agreement dated between Dick's Sporting
Goods, Inc. and Edward W. Stack
|
II-2
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.13 Agreement of Shareholders dated November 12, 1992 between
Dick's Sporting Goods, Inc., Edward W. Stack and Richard T.
Stack
21+ Subsidiaries
23.1 Consent of Deloitte & Touche LLP
23.3* Consent of Buchanan Ingersoll Professional Corporation
(included in its opinion filed as Exhibit 5 hereto)
24.1+ Power of Attorney (included on signature page to this
Registration Statement)
|
+ Previously filed.
* To be filed by amendment.
(b) Financial Statement Schedules. The following financial statement schedule is filed herewith: Schedule II -- Valuation and Qualifying Accounts.
(i) Financial statement schedules not listed above have been omitted because they are inapplicable, are not required under applicable provisions of Regulation S-X, or the information that would otherwise be included in such schedules is contained in the registrant's financial statements or accompanying notes.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused Amendment No. 1 to this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Pittsburgh, Pennsylvania on August 26th, 2002.
DICK'S SPORTING GOODS, INC.
By: /s/ EDWARD W. STACK
------------------------------------
Edward W. Stack
Chairman of the Board and Chief
Executive Officer
|
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, Amendment No. 1 to this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ EDWARD W. STACK Chairman of the Board, Chief
------------------------------------- Executive Officer and Director
Edward W. Stack August 26, 2002
* President and Director
-------------------------------------
William J. Colombo August 26, 2002
/s/ MICHAEL F. HINES Chief Administrative Officer and
------------------------------------- Chief Financial Officer (principal
Michael F. Hines financial and accounting officer) August 26, 2002
* Director
-------------------------------------
David Fuente August 26, 2002
* Director
-------------------------------------
Walter Rossi August 26, 2002
* Director
-------------------------------------
Lawrence J. Schorr August 26, 2002
* Director
-------------------------------------
Steve E. Lebow August 26, 2002
* /s/ MICHAEL F. HINES
-------------------------------------
Michael F. Hines, Attorney-in-fact
Dated: August 26, 2002
|
II-4
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
DICK'S SPORTING GOODS, INC.
We have audited the consolidated financial statements of Dick's Sporting Goods, Inc. and subsidiaries as of February 2, 2002 and February 3, 2001 and for each of the three fiscal years in the period ended February 2, 2002, and have issued our report thereon dated July 1, 2002 (July 15, 2002 as to Note 15); such financial statements and report are included elsewhere in this registration statement. Our audits also included the financial statement schedule of Dick's Sporting Goods, Inc. and subsidiaries, listed in Item 16. This financial statement schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP Pittsburgh, Pennsylvania July 1, 2002 |
II-5
DICK'S SPORTING GOODS, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)
CHARGED
BALANCE AT TO COSTS BALANCE AT
BEGINNING AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
---------- -------- ---------- ----------
FISCAL 1999:
Inventory reserves................................ $6,130 $8,266 $(7,079) $ 7,317
Allowance for doubtful accounts................... 649 787 (307) 1,129
FISCAL 2000:
Inventory reserves................................ $7,317 $5,672 $(4,558) $ 8,431
Allowance for doubtful accounts................... 1,129 212 (818) 523
FISCAL 2001:
Inventory reserves................................ $8,431 $8,214 $(6,079) $10,566
Allowance for doubtful accounts................... 523 224 (245) 502
|
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1* Form of Underwriting Agreement
3.1+ Certificate of Incorporation
3.2 Form of Amended and Restated Certificate of Incorporation
3.3+ Bylaws
3.4 Form of Amended and Restated Bylaws
4.1* Form of Stock Certificate
4.2 Form of Series E Warrant, Class B
5* Opinion of Buchanan Ingersoll Professional Corporation
10.1 Associate Savings and Retirement Plan
10.2 Second Amended and Restated Registration Rights Agreement,
dated June 9, 2000 by and among Dick's Sporting Goods, Inc.
and certain of its stockholders, as amended
10.3 Amended and Restated Credit Agreement dated as of July 26,
2000 among Dick's Sporting Goods, Inc., the Lenders Party
thereto and General Electric Capital Corporation, as amended
by the First Amendment to Amended and Restated Credit
Agreement dated as of May 18, 2001, the Second Amendment to
Amended and Restated Credit Agreement dated as of July 2001,
the Third Amendment to Amended and Restated Credit Agreement
dated as of August 3, 2001, the Fourth Amendment to Amended
and Restated Credit Agreement dated as of September 2001,
the Fifth Amendment to Amended and Restated Credit Agreement
dated as of February 2002, the Sixth Amendment to Amended
and Restated Credit Agreement dated as of April 3, 2002, and
the Seventh Amendment to Amended and Restated Credit
Agreement dated as of July 15, 2002
10.4 1992 Stock Option Plan
10.5 2002 Stock Plan
10.6 Promissory Note in the aggregate principal amount of
$6,195,615 made by Edward W. Stack in favor of Dick's
Sporting Goods, Inc. dated as of May 18, 2001
10.7 Dick's Sporting Goods, Inc. (successor in interest to Dick's
Acquisition Corp.) 12% Subordinated Debenture, dated May 1,
1986 issued to Richard J. Stack
10.8 Lease Agreement, dated February 4, 1999, as amended for
388,000 square foot distribution center located in Smithton,
Pennsylvania
10.9 Lease Agreement, dated November 3, 1999, for 75,000 square
foot distribution center in Conklin, NY
10.10 Form of Agreement entered into between Dick's Sporting
Goods, Inc. and various executive officers, which sets forth
form of severance
10.11* Exchange Agreement dated , between Dick's Sporting
Goods, Inc. and Edward W. Stack and the other parties
thereto
10.12* Employment Agreement dated between Dick's Sporting
Goods, Inc. and Edward W. Stack
10.13 Agreement of Shareholders dated November 12, 1992 between
Dick's Sporting Goods, Inc., Edward W. Stack and Richard T.
Stack
21+ Subsidiaries
23.1 Consent of Deloitte & Touche LLP
23.3* Consent of Buchanan Ingersoll Professional Corporation
(included in its opinion filed as Exhibit 5 hereto)
24.1+ Power of Attorney (included on signature page to this
Registration Statement)
|
+ Previously filed.
* To be filed by amendment.
Exhibit 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
of
DICK'S SPORTING GOODS, INC.
DICK'S SPORTING GOODS, INC., a corporation organized and existing under the laws of the State of Delaware (hereinafter called the "Corporation"), hereby certifies pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware (the "General Corporation Law") as follows:
FIRST: The Corporation's name is Dick's Sporting Goods, Inc. and it was originally incorporated under the name "Dick's Clothing & Sporting Goods, Inc."
SECOND: The Certificate of Incorporation of the Corporation was filed with the Secretary of State on November 25th, 1996 and was amended on April 26th, 1999, amended further on June 2, 1999 and amended further on January 29, 2002.
THIRD: This Amended and Restated Certificate of Incorporation amends and restates the Certificate of Incorporation of the Corporation, as previously amended and now in effect and shall become effective immediately prior to the closing of the offering contemplated by Registration Statement No. 333-96587. This Amended and Restated Certificate of Incorporation was adopted by the Board of Directors and Stockholders of the Corporation entitled to vote in respect thereof in the manner and by the vote prescribed by Sections 228 and 242 of the General Corporation Law to read as follows:
1. NAME. The name of the corporation is Dick's Sporting Goods, Inc. (the "Corporation").
2. ADDRESS; REGISTERED OFFICE AND AGENT. The address of the Corporation's registered office is 1013 Centre Road, City of Wilmington, County of New Castle, State of Delaware; and its registered agent at such address is Corporation Service Company.
3. PURPOSES. The purpose of the Corporation is to engage in, carry on and conduct any lawful act or activity for which corporations may be organized under the General Corporation Law.
4. CAPITAL STOCK.
4.1. AUTHORIZED CAPITAL STOCK. The total number of shares of stock that the Corporation shall have the authority to issue is one hundred twenty five million (125,000,000) shares, consisting of (a) five million (5,000,000) shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"), issuable in one or more series as hereinafter provided (b) one hundred million (100,000,000) shares of Common Stock, par value $.01 per share (the " Common Stock") and (b) twenty million (20,000,000) shares of Class B Common Stock, par value $.01 per share (the "Class B Common Stock"). The number of authorized shares of any
class or classes of capital stock of the Corporation may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the stock of the Corporation entitled to vote generally in the election of directors irrespective of the provisions of Section 242(b)(2) of the General Corporation Law or any corresponding provision hereinafter enacted.
4.2. TERMS OF COMMON STOCK. All shares of Common Stock will be identical in all respects and will entitle the holders thereof to the same rights, privileges and preferences, except as otherwise provided herein.
(a) VOTING RIGHTS. The holders of shares of Common Stock shall have the following voting rights:
(i) Each share of Common Stock shall entitle the holder thereof to one vote in person or by proxy on all matters submitted to a vote of the stockholders of the Corporation.
(ii) Except as required by applicable law, the holders of shares of Common Stock shall vote together with the holders of Class B Common Stock as one class on all matters submitted to a vote of stockholders of the Corporation (or, if any holders of shares of Preferred Stock are entitled to vote together with the holders of Common Stock and Class B Common Stock, as a single class with such holders of shares of Preferred Stock).
(b) DIVIDENDS AND DISTRIBUTIONS.
Subject to the preferences applicable to Preferred Stock outstanding and subject to 4.3(b) if any shares of Class B Common Stock are outstanding, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions in cash, property or shares of stock of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefore.
4.3. TERMS OF CLASS B COMMON STOCK. All shares of Class B Common Stock will be identical in all respects and will entitle the holders thereof to the same rights, privileges and preferences, except as otherwise provided herein.
(a) VOTING RIGHTS. The holders of shares of Class B Common Stock shall have the following voting rights:
(i) Each share of Class B Common Stock shall entitle the holder thereof to ten votes in person or by proxy on all matters submitted to a vote of the stockholders of the Corporation.
(ii) Except as required by applicable law, the holders of shares of Class B Common Stock and Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation (or, if any holders of shares of Preferred Stock are entitled to vote together with the holders of Common Stock and Class B Common Stock, as a single class with such holders of shares of Preferred Stock).
(b) DIVIDENDS AND DISTRIBUTIONS.
Subject to the preferences applicable to Preferred Stock outstanding at any time and to the provisions of this Section 4.3(b), the holders of shares of Class B Common Stock shall be entitled to receive such dividends and other distributions in cash, property or shares of stock of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefore. The Corporation shall not (1) pay dividends or make distributions to any holders of Common Stock unless simultaneously with such dividend or distribution, as the case may be, the Corporation makes the same dividend or distribution with respect to each outstanding share of Class B Common Stock or (2) pay dividends or make distributions to any holders of Class B Common Stock unless simultaneously with such dividend or distribution, as the case may be, the Corporation makes the same dividend or distribution with respect to each outstanding share of Common Stock; provided, however, in the case of dividends or other distributions payable in Common Stock or Class B Common Stock, including distributions pursuant to stock splits or divisions of Common Stock or Class B Common Stock, only shares of Common Stock shall be distributed with respect to Common Stock and only shares of Class B Common Stock shall be distributed with respect to Class B Common Stock and the number of shares of Common Stock payable per share of outstanding Common Stock shall equal the number of shares of Class B Common Stock payable per share of outstanding Class B Common Stock. In the case of dividends or other distributions consisting of other voting securities of the Corporation or of voting securities of any corporation which is a wholly-owned subsidiary of the Corporation, the Corporation shall declare and pay such dividends in two separate classes of such voting securities, identical in all respects, except that (i) the voting rights of each such security paid to the holders of Common Stock shall be one-tenth of the voting rights of each such security paid to the holders of Class B Common Stock, and (ii) such security paid to the holders of Class B Common Stock shall convert into the security paid to the holders of Common Stock upon the same terms and conditions applicable to the conversion of Class B Common Stock into Common Stock and shall have the same restrictions on ownership applicable to the Class B Common Stock. In the case of dividends or other distributions consisting of securities convertible into, or exchangeable for, voting securities of the Corporation or voting securities of another corporation which is a wholly-owned subsidiary of the Corporation, the Corporation shall provide that such convertible or exchangeable securities and the underlying securities be identical in all respects (including, without limitation, the conversion or exchange rate), except that (i) the voting rights of each security underlying the convertible or exchangeable security paid to the holders of Common Stock shall be one-tenth of the voting rights of each security underlying the convertible or exchangeable security paid to the holders of the Class B Common Stock and (ii) such underlying securities paid to the holders of Class B Common Stock shall convert into the underlying securities paid to the holders of Common Stock upon the same terms and conditions applicable to the conversion of Class B Common Stock into Common Stock and shall have the same restrictions on ownership applicable to the Class B Common Stock.
(c) CONVERSION OF CLASS B COMMON STOCK.
(i) Each holder of Class B Common Stock shall be entitled to convert, at any time and from time to time, any or all of the shares of such holder's Class B Common Stock as the case may be, on a one-for-one basis, into the same number of fully paid
and non-assessable shares of Common Stock. Such right shall be exercised by the surrender of the certificate or certificates representing the shares of Class B Common Stock to be converted to the Corporation at any time during normal business hours at the principal executive offices of the Corporation or at the offices of the Transfer Agent, accompanied by a written notice of the holder of such shares stating that such holder desires to convert such shares, or a stated number of the shares represented by such certificate or certificates, into an equal number of shares of the Common Stock, and (if so required by the Corporation or the Transfer Agent) by instruments of transfer, in form satisfactory to the Corporation and to the Transfer Agent, duly executed by such holder or such holder's duly authorized attorney, and transfer tax stamps or funds therefore, if required pursuant to section 4.3(c)(vi).
(ii) (A) If, on the record date for any meeting of
stockholders of the Corporation, the number of shares of Class B Common Stock
outstanding is less than 1,000,000 (adjusted for any subsequent stock splits,
stock dividends, reclassifications, recapitalizations and reverse stock splits
and similar transactions), each share of Class B Common Stock then issued or
outstanding shall thereupon be converted automatically as of such date into one
(1) fully paid and non-assessable share of Common Stock. Upon the making of such
determination, notice of such automatic conversion shall be given by the
Corporation by means of a press release and written notice to all holders of
Class B Common Stock, and shall be given as soon as practicable, and the
Secretary of the Corporation shall be instructed to, and shall promptly request
from each holder of Class B Common Stock that each such holder promptly deliver
the certificate representing each such share of Class B Common Stock to the
Corporation for exchange hereunder, together with instruments of transfer, in
form satisfactory to the Corporation and Transfer Agent, duly executed by such
holder or such holder's duly authorized attorney, and together with transfer tax
stamps or funds therefore, if required pursuant to Section 4.3(c)(vi).
(B) Upon the transfer of any shares of Class B Common Stock to any person other than a Class B Permitted Holder (as defined below), each such share of Class B Common Stock transferred to any person other than a Class B Permitted Holder shall thereupon be converted automatically as of such date into one (1) fully paid and non-assessable share of Common Stock. For the purposes of this Article Four, a "Class B Permitted Holder" shall include only the following persons: (i) Edward W. Stack, Martin Stack, Donna Stack, Kim Myers, Nancy Heichemer, Richard T. Stack and Karin Stack (collectively, the "Stack Family"), and their respective spouses (either former or current), estates, guardians, conservators or committees; (ii) each descendant of a member of the Stack Family (a "Stack Descendant") and their respective spouses (either former or current), estates, guardians, conservators or committees; (iii) each Stack Family Controlled Entity (as defined below); and (iv) the trustees, in their respective capacities as such, of each Stock Family Controlled Trust (as defined below). The term "Stack Family Controlled Entity" means (i) any not-for-profit corporation if at least a majority of its board of directors is composed of Stack Family members and/or Stack Descendants; (ii) any other corporation if at least 80% of the value of its outstanding equity is owned by Stack Family members or Stack Descendants or their respective spouses (either former or current) or Stack Family Controlled Trusts; (iii) any partnership if at least 80% of the value of its outstanding equity is owned by Stack Family members or Stack Descendants or their respective spouses (either former or current) or Stack Family Controlled Trusts and (iv) any limited liability or similar company if at least 80% of the economic interest of the Company is
owned by Stack Family members or Stack Descendants or their respective spouses (either former or current) or Stack Family Controlled Trusts. The term "Stack Family Controlled Trust" includes trusts the primary beneficiaries of which are members of the Stack Family, Stack Descendants, spouses (either current or former) of Stack Family members or Stack Descendants and their respective estates, guardians, conservators or committees and/or charitable organizations (collectively, "Stack Beneficiaries"), provided that if the trust is a wholly charitable trust, at least 80% of the trustees of such trust consist of Stack Family members or Stack Descendants. For purposes of this provision, the primary beneficiaries of a trust will be deemed to be Stack Beneficiaries if, under the maximum exercise of discretion by the trustee in favor of persons who are not Stack Beneficiaries, the value of the interests of such persons in such trust, computed actuarially, is 50% or less. The factors and methods prescribed in section 7520 of the Internal Revenue Code of 1986, as amended, for use in ascertaining the value of certain interests shall be used in determining a beneficiary's actuarial interest in a trust for purposes of applying this provision. For purposes of this provision, the actuarial value of the interest in a trust of any person in whose favor a testamentary power of appointment may be exercised shall be deemed to be zero. For purposes of this provision, in the case of a trust created by a Stack Descendant, the actuarial value of the interest in such trust of any person who may receive trust property only at the termination of the trust and then only in the event that, at the termination of the trust, there are no living issue of such Stack Descendant shall be deemed to be zero.
(C) For purposes of this Section 4.3(c)(ii):
(1) the relationship of any person that is derived by or through legal adoption shall be considered a natural relationship;
(2) a minor who is a descendant of a member of the Stack Family and for whom shares of Class B Common Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Class B Permitted Holder and the custodian who is the record holder of such shares shall not be considered the Class B Permitted Holder of such shares;
(3) an incompetent stockholder who is a Class B Permitted Holder but whose shares are owned or held by a guardian or conservator shall be considered a Class B Permitted Holder of such shares and such guardian or conservator who is the holder of such shares shall not be considered the Class B Permitted Holder of such shares;
(4) unless otherwise specified, the term "person" means and includes natural persons, corporations, partnerships, unincorporated associations, firms, joint ventures, trusts and all other entities; and
(5) except as provided in Section 4.3(c)(ii)(C)(2) and (3) above, for purposes of determining whether the holder of shares of Class B Common Stock is a Class B Permitted Holder, the record holder of such shares shall be considered the holder; provided, however, that if such record holder is a nominee, the holder for purposes of determining whether the holder of shares of Class B Common Stock is a Class B
Permitted Holder shall be the first person in the chain of ownership of such share of Class B Common Stock who is not holding such share solely as a nominee.
(D) At such time as a person ceases to be a Class B Permitted Holder, any and all shares of Class B Common Stock held by such person at such time shall automatically convert into shares of Common Stock, provided that, no conversion shall occur upon the pledge of a Class B Permitted Holder's shares of Class B Common Stock to a financial institution.
(iii) As promptly as practicable following the surrender of a certificate representing shares of Class B Common Stock converted in the manner provided in Section 4.3(c)(i) or Section 4.3(c)(ii), as applicable, and the payment in cash of any amount required by the provisions of Section 4.3(c)(vi), the Corporation will deliver or cause to be delivered at the office of the Transfer Agent, a certificate or certificates representing the number of full shares of Common Stock issuable upon such conversion, issued in such name or names as such holder may direct. Upon the date any such conversion occurs, all rights of the holder of such shares as such holder shall cease, and the person or persons in whose name or names the certificates or certificates representing the shares of Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Common Stock; provided, however, that if any conversion date occurs on any date when the stock transfer books of the Corporation shall be closed, the person or persons in whose name or names the certificate or certificates representing shares of Common Stock are to be issued shall be deemed the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which the stock transfer books are open.
(iv) In the event of a reclassification or other similar transaction as a result of which the shares of Common Stock are converted into another security, then a holder of Class B Common Stock shall be entitled to receive upon conversion the amount of such security that such holder would have received if such conversion had occurred immediately prior to the record date of such reclassification or other similar transaction. No adjustments in respect of dividends shall be made upon the conversion of any share of Class B Common Stock; provided, however, that if a share shall be converted subsequent to the record date for the payment of a dividend or other distribution on shares of Class B Common Stock but prior to such payment, then the registered holder of such share at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on such share on such date notwithstanding the conversion thereof or the Corporation's default in payment of the dividend due on such date.
(v) The Corporation covenants that it will at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance upon conversion of the outstanding shares of Class B Common Stock, such number of shares of Common Stock that shall be issuable upon the conversion of all such outstanding shares of Class B Common Stock; provided that, nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class B Common Stock by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. The Corporation covenants that if any shares of Common Stock require registration with or approval of any governmental authority
under any federal or state law before such shares of Common Stock may be issued upon conversion, the Corporation will cause such shares to be duly registered or approved, as the case may be. The Corporation will use its best efforts to list the shares of Common Stock required to be delivered upon conversion prior to such delivery upon each national securities exchange upon which the outstanding Common Stock is listed at the time of such delivery. The Corporation covenants that all shares of Common Stock that shall be issued upon conversion of the shares of Class B Common Stock will, upon issue, be validly issued, fully paid and non-assessable.
(vi) The issuance of certificates for shares of Common Stock upon conversion of shares of Class B Common Stock shall be made without charge to the holders of such shares for any stamp or other similar tax in respect of such issuance; provided, however, that, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class B Common Stock converted, then the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax that may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid.
(vii) When shares of Class B Common Stock are converted into shares of Common Stock as provided herein (a) the authorized number of shares of Class B Common Stock shall be reduced by the number of shares of Class B Common Stock so converted so that such shares of Class B Common Stock so converted may not be reissued and (b) the authorized number of shares of Common Stock shall be increased by the number of shares of Common Stock issued upon conversion of the Class B Common Stock so converted.
(d) RESTRICTIONS ON ISSUANCE. The Corporation shall not issue or sell any shares of Class B Common Stock or any securities (including, without limitation, any rights, options, warrants or other securities) convertible, exchangeable or exercisable into shares of Class B Common Stock other than (a) pursuant to options or other awards made to a Series B Permitted Holder pursuant to the Corporation's 2002 Stock Plan or any other stock plan adopted by the Board of Directors of the Corporation to provide additional incentives to employees of the Corporation or its subsidiaries and/or to non-employee members of the Board of Directors of the Corporation and (b) in connection with a transaction contemplated by Section 4.3(b) or 4.3(e). Any issuance or sale of shares of Class B Common Stock (or securities convertible into, or exchangeable or exercisable for, shares of Class B Common Stock) in violation of this Section 4.3(d) shall be null and void ab initio.
(e) STOCK SPLITS. The Corporation shall not in any manner subdivide (by any stock split, stock dividend, reclassification, recapitalization or otherwise) or combine (by reverse stock split, reclassification, recapitalization or otherwise) the outstanding shares of the Common Stock or Class B Common Stock unless the outstanding shares of both the Common Stock and Class B Common Stock shall be proportionately subdivided or combined.
(f) OPTIONS, RIGHTS OR WARRANTS
(i) Except as provided in Section 4.3(d), the Corporation shall not make any offering of options, rights or warrants to subscribe for shares of Class B Common Stock. If the Corporation makes an offering of options, rights or warrants to subscribe for shares
of any class or classes of capital stock (other than Class B Common Stock) to all holders of either the Common Stock or Class B Common Stock then the Corporation shall simultaneously make an identical offering to all holders of the other class unless the holders of the other class, voting as a separate class, determine that such offering need not be made to such class. All such options, rights or warrants offerings shall offer the respective holders of Common Stock and Class B Common Stock the right to subscribe at the same rate per share.
(ii) Subject to Section 4.3(c)(iv) and 4.3(i), the Corporation shall have the power to create and issue, whether or not in connection with the issue and sale of any shares of stock or other securities of the Corporation, rights or options entitling the holders thereof to purchase from the Corporation any shares of its capital stock of any class or classes at the time authorized (other than Class B Common Stock), such rights or options to have such terms and conditions, and to be evidenced by or in such instrument or instruments, as shall be approved by the Board of Directors.
(g) MERGERS, CONSOLIDATION, ETC. In the event that the Corporation shall enter into any consolidation, merger, combination or other transaction in which shares of the Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then, and in such event, the shares of Common Stock and Class B Common Stock shall be exchanged for or changed into either (1) the same amount of stock, securities, cash and/or any other property, as the case may be, into which, or for which, each share of Common Stock is exchanged or changed; provided, however, that if shares of Common Stock are exchanged for or changed into shares of capital stock, such shares so exchanged for or changed into may differ to the extent and only to the extent that the Common Stock and the Class B Common Stock differ as provided herein or (2) if holders of Common Stock and Class B Common Stock are to receive different distributions of stock, securities, cash and/or any other property, an amount of stock, securities, cash and/or property per share having a value, as determined by an independent investment banking firm of national reputation selected by the Board of Directors, equal to the value per share into which, or for which, each share of the other class of stock is exchanged or changed.
(h) LIQUIDATION RIGHTS. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation and after making provision for the holders of each series of Preferred Stock, if any, the remaining assets and funds of the Corporation, if any, shall be divided among and paid ratably to the holders of the shares of the Common Stock and the Class B Common Stock treated as a single class.
(i) NO PREEMPTIVE RIGHTS. Except as provided in Section 4.3(f), the holders of shares of Common Stock and Class B Common Stock are not entitled to any preemptive right to subscribe for, purchase or receive any part of any new or additional issue of stock of any class, whether now or hereafter authorized, or of bonds, debentures or other securities convertible into or exchangeable for stock.
(j) RESTRICTIONS ON TRANSFER. No Class B Permitted Holder may, directly or indirectly, sell, assign or otherwise transfer (collectively, "Transfer") any share of Class B Common Stock or any interest therein or any rights incident to ownership thereof to any
other Class B Permitted Holder for consideration or value constituting a price greater than the then Market Price of the Common Stock. Any Transfer of shares of Class B Common Stock in violation of this Section 4.3(j) shall be null and void ab initio and the Corporation shall not register (or shall instruct the Corporation's transfer agent and registrar for such shares not to register) such Transfer and the purported transferor will continue to own such shares of Class B Common Stock and have all rights incident to ownership of such shares of Class B Common Stock. For purposes of this paragraph "Market Price" shall mean:
(i) If the Common Stock is listed on any established stock exchange or national market system reporting sales transactions, including, without limitation, the Nasdaq National Market, its Market Price shall be the mean between the highest and lowest selling prices for a share of the Common Stock as quoted on such exchange or system for the date of Transfer as reported in the Wall Street Journal (central edition ) or such other source as the Board of Directors deems reliable. If there are no sales quoted on such exchange or system for the date of the Transfer but there were sales quoted on such exchange or system with respect to dates within a reasonable period both before and after such date of Transfer, the Market Value shall be determined by taking a weighted average of the means between the highest and lowest sales prices quoted with respect to the nearest date before and the nearest date after the date of the Transfer as reported in the Wall Street Journal (central edition ) or such other source as the Board of Directors deems reliable. The average is to be weighted inversely by the respective numbers of trading days between the selling dates and the date of the Transfer. If there are no sales quoted on such exchange or system for the date of Transfer and there are no sales quoted on such exchange or system with respect to dates during a reasonable period before and after the date of Transfer, its Market Price shall be determined as the mean between bona fide bid and asked prices on the date of Transfer or, if there are no such bid and asked prices on the date of Transfer, by a weighted average of the means between the bona fide bid and asked prices on the nearest trading day before and the nearest trading day after the date of Transfer if such trading days are during a reasonable period before and after the date of Transfer.
(ii) In the absence of a market for the Common Stock within the meaning of (i), above, the Market Price thereof shall be determined in good faith by the Board of Directors.
(k) LEGEND. Each share of Class B Common Stock shall contain the following legend, in addition to all other legends required by applicable federal or state law or by contract:
The securities represented by this certificate are subject to restrictions on transfer as provided in the Corporation's Amended and Restated Certificate of Incorporation (the "Charter"), as amended from time to time, a copy of which is on file with the secretary of the Corporation and (i) may not be transferred to any person other than a Class B Permitted Holder (as defined in the Charter) without being automatically converted into Common Stock of the Corporation or (ii) transferred at a price greater than the then applicable Market Price (as defined in the Charter) of the Common Stock. Prior to any transfer of any shares of Class B Common Stock represented by this certificate for value to a Class B Permitted
Holder, both the holder of this certificate and the purchaser (who shall be a Class B Permitted Holder) of the securities represented by this certificate shall certify in writing to the Corporation (in form and substance acceptable to the Corporation which certification shall provide evidence acceptable to the Corporation of the price at which the shares of Class B Common Stock represented by this certificate will be transferred and the then applicable Market Price of the Common Stock) that the shares of Class B Common Stock represented by this certificate will not be transferred at a price greater than the then applicable Market Price of the Common Stock.
4.4. PREFERRED STOCK. Shares of Preferred Stock may be issued from time
to time in one or more series of any number of shares provided that the
aggregate number of shares issued and not canceled of any and all series shall
not exceed the total number of shares of Preferred Stock hereinabove authorized.
The Board of Directors is authorized, by resolution adopted and filed in
accordance with law, to provide for the issue of such series of shares of
Preferred Stock. Each series of shares of Preferred Stock: (a) may have such
voting powers, full or limited, or may be without voting powers; provided,
however, that, the Board of Directors may not issue any shares of Preferred
Stock that have voting rights of more than one vote per share or that have the
right as a class (or together with any other classes of Preferred Stock) to
elect a majority of the Board of Directors; (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 non-cumulative, 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 or series of stock; (d)
may have such rights upon the dissolution of, or upon any distribution of the
assets of, the Corporation; (e) may, subject to Section 4.3(d), 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 or such other corporation or other entity at such price or prices or
at such rates of exchange and with such adjustments; (f) may be entitled to the
benefit of a sinking fund to be applied to the purchase or redemption of shares
of such series in such amount or amounts; (g) may be entitled to the benefit of
conditions and restrictions upon the creation of indebtedness of the Corporation
or any subsidiary, upon the issue of any additional shares (including additional
shares of such series or of any other series) and upon the payment of dividends
or the making of other distributions on, and the purchase, redemption or other
acquisition by the Corporation or any subsidiary of, any outstanding shares of
the Corporation; and (h) may have such other relative, participating, optional
or other special rights, qualifications, limitations or restrictions thereof,
all as shall be stated in said resolution or resolutions providing for the issue
of such shares of Preferred Stock. Any of the voting powers, designations,
preferences, rights and qualifications, limitations or restrictions of any such
series of Preferred Stock may be made dependant upon facts ascertainable outside
of the resolution or resolutions provided for the issue of such Preferred Stock
adopted by the Board of Directors pursuant to the authority vested in it by this
Section 4.4, provided that the manner in which such facts shall operate upon the
voting powers, designations, preferences, rights and qualifications, limitations
or restrictions of such series of Preferred Stock is clearly and expressly set
forth in the resolution or resolutions provided for the issue of such Preferred
Stock. The term "facts" as used in the next preceding sentence shall have the
meaning given to it in Section 151(a) of the General Corporation Law as in
effect on the date hereof. Shares of Preferred Stock of any series that
have been redeemed or repurchased by the Corporation (whether through the operation of a sinking fund or otherwise) or that, if convertible or exchangeable, have been converted or exchanged in accordance with their terms shall be retired and have the status of authorized and unissued shares of Preferred Stock of the same series and may be reissued as a part of the series of which they were originally a part or may, upon the filing of an appropriate certificate with the Delaware Secretary of State, be reissued as part of a new series of shares of Preferred Stock to be created by resolution or resolutions of the Board of Directors or as part of any other series of shares of Preferred Stock, all subject to the conditions or restrictions on issuance set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of shares of Preferred Stock.
5. BOARD OF DIRECTORS.
5.1. NUMBER OF DIRECTORS. The number of Directors shall be such members as set forth or determined in the By-laws; provided that the number of Directors shall be not less than three nor more than 11. The use of the phrase "Entire Board" refers to the total number of directors in office, whether or not present at a meeting of the Board, but disregarding vacancies.
5.2. The Board of Directors shall be divided into three classes designated as Class A, Class B and Class C, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. At the annual meeting of stockholders in calendar 2003, the term of office of the Class A directors shall expire and Class A directors shall be elected for a full term of three years. At the annual meeting of stockholders in calendar 2004, the term of office of the Class B directors shall expire and Class B directors shall be elected for a full term of three years. At the annual meeting of stockholders in calendar 2005, the term of office of the Class C directors shall expire and Class C directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose term expire at such annual meeting. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. So long as any shares of Class B Common Stock are outstanding, any or all of the directors may be removed with or without cause by the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes entitled to be cast at a meeting of the stockholders to elect directors. If no shares of Class B Common Stock are outstanding, directors may only be removed for cause by the stockholders. Elections of directors need not be by written ballot except and to the extent provided in the By-laws of the Corporation. No stockholder will be permitted to cumulate votes at any election of directors.
5.3. POWERS OF THE BOARD OF DIRECTORS. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors selected as provided by law and this Amended and Restated Certificate of Incorporation and the By-laws of
the Corporation (the "By-laws"). In furtherance, and not in limitation, of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to:
(a) adopt, amend, alter, change or repeal By-laws of the Corporation; provided, however, that no By-law hereafter adopted shall invalidate any prior act of the Corporation that would have been valid if such new By-laws had not been adopted;
(b) subject to the By-laws as from time to time in effect, determine the rules and procedures for the conduct of the business of the Board of Directors and the management and direction by the Board of Directors of the business and affairs of the Corporation, including the power to designate and empower committees of the Board of Directors, to elect, or authorize the appointment of, and empower officers and other agents of the Corporation, and to determine the time and place of, the notice requirements for, and the manner of conducting, Board meetings, as well as other notice requirements for, and the manner of taking, Board action; and
(c) exercise all such powers and do all such acts as may be exercised or done by the Corporation, subject to the provisions of the General Corporation Law and this Amended and Restated Certificate of Incorporation and By-laws of the Corporation.
6. LIABILITY OF DIRECTORS.
6.1. LIMITATION OF LIABILITY. No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this provision shall not eliminate or limit the liability of a director (a) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under section 174 of the General Corporation Law or (d) for any transaction from which the director derived any improper personal benefits. If the General Corporation Law is amended after approval by the stockholders of this article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so amended.
6.2. AMENDMENTS. Any repeal or modification of Section 6.1 hereof by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.
7. INDEMNIFICATION.
7.1. To the extent not prohibited by law, the Corporation shall indemnify any person who is or was made, or threatened to be made, a party to any threatened, pending or completed action, suit or proceeding (a "Proceeding"), whether civil, criminal, administrative or investigative, including, without limitation, an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director or officer of the Corporation, or, at the request of the Corporation, is or was serving as a director or officer of any other corporation or in a capacity with comparable authority or responsibilities for any partnership, joint venture, trust,
employee benefit plan or other enterprise (an "Other Entity"), against judgments, fines, penalties, excise taxes, amounts paid in settlement and costs, charges and expenses (including attorneys' fees, disbursements and other charges). Persons who are not directors or officers of the Corporation (or otherwise entitled to indemnification pursuant to the preceding sentence) may be similarly indemnified in respect of service to the Corporation or to an Other Entity at the request of the Corporation to the extent the Board at any time specifies that such persons are entitled to the benefits of this Section 7.
7.2. The Corporation shall, from time to time, reimburse or advance to any director or officer or other person entitled to indemnification hereunder the funds necessary for payment of expenses, including attorneys' fees and disbursements, incurred in connection with any Proceeding, in advance of the final disposition of such Proceeding; provided, however, that, if required by the General Corporation Law, such expenses incurred by or on behalf of any director or officer or other person may be paid in advance of the final disposition of a Proceeding only upon receipt by the Corporation of an undertaking, by or on behalf of such director or officer (or other person indemnified hereunder), to repay any such amount so advanced if it shall ultimately be determined by final judicial decision from which there is no further right of appeal that such director, officer or other person is not entitled to be indemnified for such expenses.
7.3. The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Section 7 shall not be deemed exclusive of any other rights to which a person seeking indemnification or reimbursement or advancement of expenses may have or hereafter be entitled under any statute, this Amended and Restated Certificate of Incorporation, the By-laws, any agreement, any vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office.
7.4. The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Section 7 shall continue as to a person who has ceased to be a director or officer (or other person indemnified hereunder) and shall inure to the benefit of the executors, administrators, legatees and distributees of such person.
7.5. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of an Other Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Section 7, the By-laws or under section 145 of the General Corporation Law or any other provision of law.
7.6. The provisions of this Section 7 shall be a contract between the Corporation, on the one hand, and each director and officer who serves in such capacity at any time while this Section 7 is in effect and any other person entitled to indemnification hereunder, on the other hand, pursuant to which the Corporation and each such director, officer, or other person intend to be, and shall be, legally bound. No repeal or modification of this Section 7 shall affect any rights or obligations with respect to any state of facts then or theretofore existing or
thereafter arising or any proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.
7.7. The rights to indemnification and reimbursement or advancement of expenses provided by, or granted pursuant to, this Section 7 shall be enforceable by any person entitled to such indemnification or reimbursement or advancement of expenses in any court of competent jurisdiction. The burden of proving that such indemnification or reimbursement or advancement of expenses is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board, its independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that such indemnification or reimbursement or advancement of expenses is proper in the circumstances nor an actual determination by the Corporation (including its Board, its independent legal counsel and its stockholders) that such person is not entitled to such indemnification or reimbursement or advancement of expenses shall constitute a defense to the action or create a presumption that such person is not so entitled. Such a person shall also be indemnified for any expenses incurred in connection with successfully establishing his or her right to such indemnification or reimbursement or advancement of expenses, in whole or in part, in any such proceeding.
7.8. Any director or officer of the Corporation serving in any capacity of (a) another corporation of which a majority of the shares entitled to vote in the election of its directors is held, directly or indirectly, by the Corporation or (b) any employee benefit plan of the Corporation or any corporation referred to in clause (a) shall be deemed to be doing so at the request of the Corporation.
7.9. Any person entitled to be indemnified or to reimbursement or advancement of expenses as a matter of right pursuant to this Section 7 may elect to have the right to indemnification or reimbursement or advancement of expenses interpreted on the basis of the applicable law in effect at the time of the occurrence of the event or events giving rise to the applicable Proceeding, to the extent permitted by law, or on the basis of the applicable law in effect at the time such indemnification or reimbursement or advancement of expenses is sought. Such election shall be made, by a notice in writing to the Corporation, at the time indemnification or reimbursement or advancement of expenses is sought; provided, however, that if no such notice is given, the right to indemnification or reimbursement or advancement of expenses shall be determined by the law in effect at the time indemnification or reimbursement or advancement of expenses is sought.
8. ADOPTION, AMENDMENT AND/OR REPEAL OF BY-LAWS. The Board may from time to time adopt, amend or repeal the By-laws; provided, however, that any By-laws adopted or amended by the Board may be amended or repealed, and any By-laws may be adopted, by the stockholders of the Corporation by vote of the holders of shares of stock of the Corporation representing a majority of the votes entitled to be cast in the election of directors of the Corporation.
9. ACTION BY STOCKHOLDERS. So long as there are shares of Class B Common Stock outstanding, the stockholders of the corporation entitled to take action on any matter may consent in writing to the taking of any such action without a meeting if the Corporation receives consents signed by stockholders having the minimum number of votes that would be necessary
to approve the action of a meeting at which all shares of stock entitled to vote on the matter were present. At such time when there are no shares of Class B Common Stock outstanding, the stockholders of the Corporation entitled to take action on any matter may consent in writing to the taking of any such action without a meeting if, and only if, the Corporation receives consents signed by all stockholders entitled to vote on the matter.
10. SECTION 203 OF GENERAL CORPORATION LAW. The Corporation hereby expressly elects not to be governed by Section 203 of the General Corporation Law.
11. AMENDMENT TO AMENDED AND RESTATED CERTIFICATE. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation.
Exhibit 3.4
AMENDED AND RESTATED BY-LAWS
OF
DICK'S SPORTING GOODS, INC.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year at such date and time, within or without the State of Delaware, as the Board of Directors shall determine.
SECTION 2. SPECIAL MEETINGS. Except as otherwise required by law, or by
the sentence immediately following this sentence, special meetings of the
stockholders may be called only at the direction of the Board of Directors by
resolution adopted by the affirmative vote of a majority of the entire Board, by
the Chairman of the Board or by the Chief Executive Officer. Notwithstanding the
immediately preceding sentence, meetings, special or otherwise, of holders of
any class of capital stock may be called by the holders of a majority of the
shares of such class of capital stock with respect to any matter as to which the
holders of such class of capital stock are entitled to vote as a separate class.
Except as otherwise required by law or the immediately preceding sentence,
stockholders of the Corporation shall not have the right to request or call a
special meeting of the stockholders. Any such meeting held pursuant to this
Section 2 shall be held at such date and time, within or without the State of
Delaware, as may be specified by such order. Whenever the directors shall fail
to fix such place, the meeting shall be held at the principal executive office
of the Corporation.
SECTION 3. NOTICE OF MEETINGS. Written notice of all meetings of the stockholders, stating the place, date and hour of the meeting and the place within the city or other municipality or community at which the list of stockholders may be examined, shall be mailed or delivered to each stockholder not less than 10 nor more than 60 days prior to the meeting. Notice of any special meeting shall state in general terms the purpose or purposes for which the meeting is to be held and the business transacted at any such meeting shall be limited to matters relating to the purpose or purposes set forth in the notice of meeting.
SECTION 4. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 5. STOCKHOLDER LISTS. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 6. QUORUM. Except as otherwise provided by law or the Corporation's Certificate of Incorporation, a quorum for the transaction of business at any meeting of stockholders shall consist of the holders of record of the issued and outstanding shares of the capital stock of the Corporation representing a majority of the votes entitled to be cast at the meeting, present in person or by proxy. At all meetings of the stockholders at which a quorum is present, all matters, except as otherwise provided by law or the Certificate of Incorporation, shall be decided by the vote of the holders of capital stock of the Corporation representing a majority of the votes entitled to cast thereat present in person or by proxy. If there be no such quorum, the holders of capital stock of the Corporation representing a majority of such votes so present or represented may adjourn the meeting from time to time, without further notice, until a quorum
shall have been obtained. When a quorum is once present it is not broken by the subsequent withdrawal of any stockholder.
SECTION 7. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman, if any, or if none or in the Chairman's absence the Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the President, if any, or if none or in the President's absence a Vice-President, or, if none of the foregoing is present, by a chairman to be chosen by the stockholders entitled to vote who are present in person or by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the presiding officer of the meeting shall appoint any person present to act as secretary of the meeting.
SECTION 8. VOTING; PROXIES; REQUIRED VOTE. (a) At each meeting of stockholders, every stockholder shall be entitled to vote in person or by proxy appointed by instrument in writing, subscribed by such stockholder or by such stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period), and, unless the Certificate of Incorporation provides otherwise, shall have one vote for each share of stock entitled to vote registered in the name of such stockholder on the books of the Corporation on the applicable record date fixed pursuant to these By-laws. At all elections of directors the voting may but need not be by ballot and a plurality of the votes cast there shall elect. Except as otherwise required by law or the Certificate of Incorporation, any other action shall be authorized by a majority of the votes cast.
(b) As long as the Class B Common Stock of the Corporation remains outstanding, any action required or permitted to be taken at any meeting of stockholders may, except as otherwise required by law, be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of record of the issued and outstanding capital stock of the Corporation having a majority of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and the writing or writings are filed with the permanent records of the Corporation. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
(c) Where a separate vote by a class or classes, present in person or represented by proxy, shall constitute a quorum entitled to vote on that matter, the affirmative vote of the majority of shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class, unless otherwise provided in the Corporation's Certificate of Incorporation.
SECTION 9. INSPECTORS. Unless otherwise required by law, the Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not so appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, if any, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballot or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors.
SECTION 10. NOMINATING AND PROPOSAL PROCEDURES. Without limiting any
other notice requirements imposed by law, the Certificate of Incorporation or
these By-laws, any nomination for election to the Board of Directors or other
proposal to be presented by any stockholder at a stockholders' meeting (the
"Proponent") will be properly presented only if written notice of the
Proponent's intent to make such nomination or proposal has been personally
delivered to and otherwise in fact received by the Secretary of the Corporation
not later than (i) for the annual meeting, at least 150 days prior to the
anniversary date of the prior year's annual meeting, or (ii) for any special
meeting, the close of business on the tenth day after notice of such meeting is
first given to stockholders; provided, however, that nothing contained herein
shall limit or restrict the right of any stockholder to present at a
stockholders' meeting any proposal made by such stockholder in accordance with
Rule 14a-8 promulgated pursuant to the Securities Exchange Act of 1934, as
amended, as it may hereafter be amended, or any successor rule. Such notice by
the Proponent to the Corporation shall set forth in reasonable detail
information concerning the nominee (in the case of a nomination for election to
the Board of Directors) or the substance of the proposal (in the case of any
other stockholder proposal), and shall include: (a) the name and residence
address and business address of the stockholder who intends to present the
nomination or other proposal or of any person who participates or is expected to
participate in making such nomination and of the person or persons, if any, to
be nominated and the principal occupation or employment and the name, type of
business and address of the business, corporation or other organization in which
such employment is carried on of each such stockholder, participant and nominee;
(b) a representation that the Proponent is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to present the nomination or other proposal specified in
the notice; (c) a description of all arrangements or understandings between the
Proponent and any other person or persons (naming such person or persons)
pursuant to which the nomination or other proposal is to be made by the
Proponent; (d) such other information regarding each proposal and each nominee
as would have been required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had the nomination
or other proposal been made by the Board of Directors; and (e) the consent of
each nominee, if any, to serve as a director of the Corporation if elected.
Within fifteen (15) days following the receipt by the Secretary of a notice of
nomination or proposal pursuant hereto, the Secretary shall advise the Proponent
in writing of any deficiencies in the notice and of any additional information
the Corporation is requiring to determine the eligibility of the proposed
nominee or the substance of
the proposal. A Proponent who has been notified of deficiencies in the notice of nomination or proposal and/or of the need for additional information shall cure such deficiencies and/or provide such additional information within fifteen (15) days after receipt of the notice of such deficiencies and/or the need for additional information. The presiding officer of a meeting of stockholders may, in his or her sole discretion, refuse to acknowledge a nomination or other proposal presented by any person that does not comply with the foregoing procedure and, upon his or her instructions, all votes cast for such nominee or with respect to such proposal may be disregarded.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business, property and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors.
SECTION 2. QUALIFICATION; NUMBER; TERM; REMUNERATION. (a) Each director shall be at least 18 years of age. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of directors constituting the entire Board shall be such number as may be fixed from time to time by action of the Board of Directors, but in no event less than or more than the minimum number or maximum number set forth in the Certificate of Incorporation, and absent action by the Board of Directors the number of directors constituting the entire Board shall be set at six (6). The use of the phrase "entire Board" herein refers to the total number of directors which the Corporation would have if there were no vacancies.
(b) Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office for the time periods as set forth in the Corporation's Certificate of Incorporation.
(c) Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
SECTION 3. QUORUM AND MANNER OF VOTING. Except as otherwise provided by law, a majority of the entire Board shall constitute a quorum. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting from time to time to another time and place without notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
SECTION 4. PLACES OF MEETINGS. Meetings of the Board of Directors may be held at any place within or without the State of Delaware, as may from time to time be fixed by resolution of the Board of Directors, or as may be specified in the notice of meeting.
SECTION 5. ANNUAL MEETING. Following the annual meeting of stockholders, the newly elected Board of Directors shall meet for the purpose of the election of officers and the transaction of such other business as may properly come before the meeting. Such meeting may be held without notice immediately after the annual meeting of stockholders at the same place at which such stockholders' meeting is held.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall from time to time by resolution determine. Notice need not be given of regular meetings of the Board of Directors held at times and places fixed by resolution of the Board of Directors. Where appropriate communication facilities are reasonably available, any or all Directors shall have the right to participate in all or any part of a meeting of the Board of Directors, or any Committee thereof, by means of conference telephone or any means of communication by which all persons participating in the meeting are able to hear each other.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, President, Vice-Chairman or by a majority of the directors then in office.
SECTION 8. NOTICE OF SPECIAL MEETINGS. A notice of the place, date and time and the purpose or purposes of each special meeting of the Board of Directors shall be given to each director by mailing the same at least two days before the special meeting, or by telegraphing or telephoning the same or by delivering the same personally not later than the day before the day of the meeting.
SECTION 9. ORGANIZATION. At all meetings of the Board of Directors, the Chairman, if any, or if none or in the Chairman's absence or inability to act the President, or in the President's absence or inability to act any Vice-President who is a member of the Board of Directors, or in such Vice-President's absence or inability to act a chairman chosen by the directors, shall preside. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors when present, and, in the Secretary's absence, the presiding officer may appoint any person to act as secretary.
SECTION 10. RESIGNATION. Any director may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation.
SECTION 11. VACANCIES. Unless otherwise provided in these By-laws, vacancies on the Board of Directors, whether caused by resignation, death, disqualification, removal, an increase in the authorized number of directors or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by a sole remaining director, or at a special meeting of the stockholders, by the holders of shares entitled to vote for the election of directors.
SECTION 12. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all the
directors consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors.
ARTICLE III
COMMITTEES
SECTION 1. APPOINTMENT. From time to time the Board of Directors by a resolution adopted by a majority of the entire Board may appoint any committee or committees for any purpose or purposes, to the extent lawful, which shall have powers as shall be determined and specified by the Board of Directors in the resolution of appointment.
SECTION 2. PROCEDURES, QUORUM AND MANNER OF ACTING. Each committee shall fix its own rules of procedure, and shall meet where and as provided by such rules or by resolution of the Board of Directors. Except as otherwise provided by law, the presence of a majority of the then appointed members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee. Each committee shall keep minutes of its proceedings, and actions taken by a committee shall be reported to the Board of Directors.
SECTION 3. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all the members of the committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the committee.
SECTION 4. TERM; TERMINATION. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee appointed by the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The Corporation shall have as officers, a Chairman of the Board, a President, a Chief Financial Officer, a Secretary and a Treasurer. The Corporation may also have, at the discretion of the Board of Directors, one or more Vice Presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as the Board may from time to time deem proper. Any two or more offices may be held by the same person except the offices of the President and Secretary.
SECTION 2. ELECTION OF OFFICERS. The officers of the Corporation shall be chosen by the Board of Directors.
SECTION 3. TERM OF OFFICE AND REMUNERATION. The term of office of all officers shall be one year and until their respective successors have been elected and qualified, but any officer may be removed from office, either with or without cause, at any time by the Board of Directors. Any vacancy in any office arising from any cause may be filled for the unexpired portion of the term by the Board of Directors. The remuneration of all officers of the Corporation may be fixed by the Board of Directors or in such manner as the Board of Directors shall provide.
SECTION 4. RESIGNATION; REMOVAL. Any officer may resign at any time upon written notice to the Corporation and such resignation shall take effect upon receipt thereof by the President or Secretary, unless otherwise specified in the resignation. Any officer shall be subject to removal, with or without cause, at any time by vote of a majority of the entire Board.
SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the Board of Directors and shall have such other powers and duties as may from time to time be assigned by the Board of Directors.
SECTION 6. PRESIDENT AND CHIEF EXECUTIVE OFFICER. The President and Chief Executive Officer shall have general management and supervision of the property, business and affairs of the Corporation and over its other officers; may appoint and remove assistant officers and other agents and employees, other than officers referred to in Section 1 of this Article IV; and may execute and deliver in the name of the Corporation powers of attorney, contracts, bonds and other obligations and instruments.
SECTION 7. VICE-PRESIDENT. A Vice-President may execute and deliver in the name of the Corporation contracts and other obligations and instruments pertaining to the regular course of the duties of said office, and shall have such other authority as from time to time may be assigned by the Board of Directors or the President.
SECTION 8. CHIEF FINANCIAL OFFICER.
(a) The Chief Financial Officer shall keep, or cause to be kept, the books and records of account of the Corporation.
(b) The Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositories as may be designated from time to time by resolution of the Board of Directors. He or she shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and the Board, whenever they request it, an account of all of his transactions as Chief Financial Officer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed from time to time by the Board or as the President may from time to time delegate.
SECTION 9. TREASURER. The Treasurer shall in general have all duties incident to the position of Treasurer and such other duties as may be assigned by the Board of Directors or the President.
SECTION 10. SECRETARY. The Secretary shall in general have all the duties incident to the office of Secretary and such other duties as may be assigned by the Board of Directors or the President.
SECTION 11. ASSISTANT OFFICERS. Any assistant officer shall have such powers and duties of the officer such assistant officer assists as such officer or the Board of Directors shall from time to time prescribe.
ARTICLE V
BOOKS AND RECORDS
SECTION 1. LOCATION. The books and records of the Corporation may be kept at such place or places within or outside the State of Delaware as the Board of Directors or the respective officers in charge thereof may from time to time determine. The record books containing the names and addresses of all stockholders, the number and class of shares of stock held by each and the dates when they respectively became the owners of record thereof shall be kept by the Secretary as prescribed in the By-laws and by such officer or agent as shall be designated by the Board of Directors.
SECTION 2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other corporate notices may be delivered personally or mailed to each stockholder at the stockholder's address as it appears on the records of the Corporation.
ARTICLE VI
CERTIFICATES REPRESENTING STOCK
SECTION 1. CERTIFICATES; SIGNATURES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate, signed by or in the name of the Corporation by the Chairman or Vice-Chairman of the Board of Directors, or the President or Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, representing the number of shares registered in certificate form. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The name of the holder of record of the shares
represented thereby, with the number of such shares and the date of issue, shall be entered on the books of the Corporation.
SECTION 2. TRANSFERS OF STOCK. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, shares of capital stock shall be transferable on the books of the Corporation only by the holder of record thereof in person, or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares, properly endorsed, and the payment of all taxes due thereon.
SECTION 3. FRACTIONAL SHARES. The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided.
The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a new certificate of stock in place of any certificate, theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.
ARTICLE VII
DIVIDENDS
Subject always to the provisions of law and the Certificate of Incorporation, the Board of Directors shall have full power to determine whether any, and, if any, what part of any, funds legally available for the payment of dividends shall be declared as dividends and paid to stockholders; the division of the whole or any part of such funds of the Corporation shall rest wholly within the lawful discretion of the Board of Directors, and it shall not be required at any time, against such discretion, to divide or pay any part of such funds among or to the stockholders as dividends or otherwise; and before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
ARTICLE VIII
RATIFICATION
Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles of practices of accounting, may be ratified before or after judgment, by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.
ARTICLE IX
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. The Corporation shall indemnify and hold harmless those persons, and to the extent, set forth in the Corporation's Certificate of Incorporation.
SECTION 2. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this Article and the Corporation's Certificate of Incorporation shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, these By-laws, agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 3. AMENDMENT OR REPEAL. Any repeal or modification of the foregoing provisions of this Article IX or any amendment to the Corporation's Certificate of Incorporation shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
ARTICLE X
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the Corporation and the year of its incorporation, and shall be in such form and contain such other words and/or figures as the Board of Directors shall determine. The corporate seal may be used by printing, engraving, lithographing, stamping or otherwise making, placing or affixing, or causing to be printed, engraved, lithographed, stamped or otherwise made, placed or affixed, upon any paper or document, by any process whatsoever, an impression, facsimile or other reproduction of said corporate seal.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Corporation shall be that which is determined by the Board of Directors, and is subject to change by the Board of Directors.
ARTICLE XII
WAIVER OF NOTICE
Whenever notice is required to be given by these By-laws or by the Certificate of Incorporation or by law, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice.
ARTICLE XIII
BANK ACCOUNTS, DRAFTS, CONTRACTS, ETC.
SECTION 1. BANK ACCOUNTS AND DRAFTS. In addition to such bank accounts as may be authorized by the Board of Directors, the primary financial officer or any person designated by said primary financial officer, whether or not an employee of the Corporation, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he may deem necessary or appropriate, payments from such bank accounts to be made upon and according to the check of the Corporation in accordance with the written instructions of said primary financial officer, or other person so designated by the Treasurer.
SECTION 2. CONTRACTS. The Board of Directors may authorize any person or persons, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances.
SECTION 3. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. The Chairman, the President or any other person designated by either of them shall have the power and authority to execute and deliver proxies, powers of attorney and other instruments on behalf of the Corporation in connection with the rights and powers incident to the ownership of stock by the Corporation. The Chairman, the President or any other person authorized by proxy or power of attorney executed and delivered by either of them on behalf of the Corporation may attend and vote at any meeting of stockholders of any company in which the Corporation may hold stock, and may exercise on behalf of the Corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, or otherwise as specified in the proxy or power of attorney so authorizing any such person. The Board of Directors, from time to time, may confer like powers upon any other person.
SECTION 4. FINANCIAL REPORTS. The Board of Directors may appoint the primary financial officer or other fiscal officer and/or the Secretary or any other officer to cause to be prepared and furnished to stockholders entitled thereto any special financial notice and/or financial statement, as the case may be, which may be required by any provision of law.
ARTICLE XIV
AMENDMENTS
The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the By-laws of the Corporation, subject, however, to any limitation thereof contained in these By-laws. By-laws adopted by the Board of Directors may be repealed or changed, and new By-laws made, by the stockholders, and the stockholders may prescribe that any By-law made by them shall not be altered, amended or repealed by the Board of Directors. The stockholders also shall have the power to adopt, amend or repeal the By-laws of the Corporation.
Exhibit 4.2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, OFFERED FOR SALE OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO COUNSEL FOR THE COMPANY THAT THE TRANSACTION SHALL NOT RESULT IN A VIOLATION OF STATE OR FEDERAL SECURITIES LAWS.
No. FIELD A
FOR VALUE RECEIVED, DICK'S CLOTHING & SPORTING GOODS, INC., a New York
corporation (the "Company"), hereby certifies that FIELD B, with a mailing address of FIELD C, or a permitted assign thereof, is entitled to purchase from the Company, at any time or from time to time, commencing only on the Warrant Exercise Date (as hereinafter defined), and prior to 5:00 p.m., New York City time, on the Warrant Expiration Date (as hereinafter defined), the Exercise Number (as hereinafter defined) of fully paid and non-assessable shares of the Series E Convertible Preferred Stock, par value $.01 per share (the "Series E Preferred Stock"), of the Company for purchase price of one cent ($.01) per share.
"Administration Expense" means the Company's corporate expense before pre-operating costs, PROVIDED, that if Store Contribution exceeds the FY 1998 Store Contribution Percentage, the excess of such amount shall be used to reduce Administration Expense for FY 1998. Administration Expense shall be calculated using the information reflected in the FY 1998 Audited Statements.
"Aggregate Exercise Price" means the aggregate purchase price payable hereunder for the Warrant Shares, consisting of the Per Share Exercise Price times the aggregate number of Warrant Shares purchasable hereunder.
"Certificate" means the Company's Amended and Restated Certificate of Incorporation, as it may be amended from time to hereafter.
"Class A Warrants" means the Series E Warrants, Class A, for the purchase of shares of Series E Preferred Stock (or Common Stock, if a Conversion Event has occurred), issued pursuant to paragraph 4(c)( 7A) of the Certificate.
"Class C Warrant" means the Series E Warrants, Class C, for the purchase of shares of Series E Preferred Stock (or Common Stock, if a Conversion Event has occurred), issued pursuant to paragraph 4(c)(7C) of the Certificate.
"Common Stock" means the Company's common stock, par value $.01 per share.
"Conversion Event" means the conversion of all outstanding shares of Series E Preferred Stock to Common Stock pursuant to the mandatory conversion provision of the Series E Preferred Stock contained in the Certificate.
"Convertible Security" means any stock or security convertible into or exchangeable for Common Stock.
"Exercise Number" means the aggregate number of Warrant Shares
purchasable upon the exercise of this Warrant, which shall be equal to such
number of Warrant Shares as is obtained by multiplying (a) the number obtained
by multiplying the sum of (i) the aggregate number of outstanding shares of
Common Stock issued and outstanding on the Warrant Exercise Date, plus (ii) the
number of shares of Common Stock of the Company issuable upon the exercise of
all Options that have been granted by the Company as of the Warrant Exercise
Date and upon the conversion of all Convertible Securities outstanding as of the
Warrant Exercise Date including shares issuable upon the exercise of the Class B
Warrants (whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable), but excluding shares
issuable upon the exercise of the Class A Warrants and the Class C Warrants
(except as provided in subparts (iii) and (iv) below), plus (iii) the number of
shares of Series E Preferred Stock (or Common Stock, if a Conversion Event has
occurred) issuable upon the exercise of the Class A Warrants, if the Class A
Warrants become exercisable prior to the exercise of this Warrant, plus (iv) the
number of shares of Series E Preferred Stock (or Common Stock, if a Conversion
Event has occurred) issuable upon the exercise of the Class C Warrants, if the
Class C Warrants become exercisable prior to the exercise of this Warrant, times
(b) three percent (3%), times (c) a fraction, the numerator of which is the
Initial Preferred Shares and the denominator of which is the aggregate number of
shares of Series E Preferred Stock, Series F Preferred Stock and Series G
Preferred Stock outstanding at the Warrant Exercise Date.
"FY 1998" means the fiscal year ended on or about February 28, 1998.
"FY 1998 Audited Statements" means the Company's audited financial statements for FY 1998.
"FY 1998 Store Contribution Percentage" means six percent (6.00%).
"Holder" means the holder of this Warrant.
"Initial Preferred Share" means the number of shares of Series E Preferred Stock, Series F Preferred Stock and/or Series G Preferred Stock purchased by the Original Holder pursuant to the Series E, F and G Purchase Agreement, which is FIELD D.
"Options" means any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock.
"Original Holder" means FIELD E.
"Sale of the Company" means the consolidation or merger of the Company into or with any other entity or entities which results in the exchange of outstanding shares of the Company for securities or other consideration issued or paid or caused to be issued or paid by any such entity or affiliate thereof, and the sale or transfer by the Company of more than fifty-five percent (55%) of its assets.
"Per Share Exercise Price" means the price payable hereunder for each of the Warrant Shares, which shall be one cent ($.01) per share.
"Series C Preferred Stock" means the Company's Series C Convertible Preferred Stock, $.01 par value.
"Series D Preferred Stock" means the Company's Series D Convertible Preferred Stock, $.01 par value, $.01 par value.
"Series E Preferred Stock" means the Company's Series E Convertible Preferred Stock, $.01 par value.
"Series E, F and G Purchase Agreement" means the Series E, F and G Convertible Preferred Stock Purchase Agreement dated as of February 12, 1996, as amended, among the Company and certain of its shareholders.
"Series F Preferred Stock" means the Company's Series F Convertible Preferred Stock, $.01 par value.
"Series G Preferred Stock" means the Company's Series G Convertible Preferred Stock, $.01 par value.
"Series E Warrants" means the warrants to purchase Series E Preferred Stock (or Common Stock, if there has been a Conversion Event) issued to holders of the Company's Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock
and Series G Preferred Stock in accordance with paragraph 4(c)(7) of the Certificate, designated as Class A Warrants, Class B Warrants and Class C Warrants.
"Stock" means the Series E Preferred Stock, together with any other equity securities (including the Common Stock into which the Series E Preferred Stock is convertible) which may be issued by the Company with respect thereto or in substitution therefor.
"Stockholders' Agreement" means the Amended and Restated Stockholders' Agreement dated November 22, 1993, as amended, among the Company and its shareholders.
"Store Contribution" means the Company's sales (excluding proceeds from real estate sale-lease back transactions) less cost of sales, store payrolls, bonuses, employee fringe benefits, taxes, employee health insurance premiums and other expenses, advertising and store general and administrative expenses, PROVIDED, that cash reserves for store closings of up to one million dollars ($1,000,000) over any two-year period may be excluded from the calculation of Store Contribution if such reserves are approved by the vote of at least eighty percent (80%) of the Company's Board of Directors. Store Contribution shall be calculated using the information reflected in the Company's audited financial statements for FY 1998.
"Warrant" means this Series E Warrant, Class B, for the purchase of shares of Series E Preferred Stock (or Common Stock, if a Conversion Event has occurred).
"Warrant Exercise Date" means the date the Company's FY 1998 Audited Statements are issued by the independent certified public accountant performing the audit thereon if, and only if, the FY 1998 Audited Statements indicate that a Warrant Exercise Event has occurred.
"Warrant Exercise Event" means the occurrence, for FY 1998, as reflected on the Company's FY 1998 Audited Statements, of one or both of the following: (a) Store Contribution is less than or equal to the FY 1998 Store Contribution Percentage of the Company's sales (excluding proceeds from real estate sale-leaseback transactions), or (b) Administration Expense exceeds twenty million dollars ($20,000,000).
"Warrant Share" means the shares of Stock purchasable hereunder.
"Warrant Expiration Date" means the earlier of (a) seven (7) years from the Warrant Exercise Date, or (b) the effective date of a Sale of the Company, or (c) one (1) business day prior to the effective date of an underwritten public offering of shares of Common Stock of the Company.
(a) This Warrant may be exercised, in whole at any time or in part from time to time, commencing only upon the Warrant Exercise Date, and prior to 5:00 P.M., New York City time, on the Warrant Expiration Date, by the Holder by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the address set forth in Subsection 9(a) hereof, together with proper payment of the Aggregate Exercise Price, or the proportionate part thereof if this Warrant is exercised in part. Payment for Warrant Shares shall be made by certified or official bank check payable to the order of the Company. If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Stock, and the Holder is entitled to receive a new Warrant covering the Warrant Shares which have not been exercised and setting forth the proportionate part of the Aggregate Exercise Price applicable to such Warrant Shares. Upon such surrender of this Warrant, the Company will (i) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Series E Preferred Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Stock to which the holder shall be entitled, pay to the Holder cash in an amount equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), PROVIDED, that if there has been a Conversion Event on or before the date of any whole or partial exercise of this Warrant, then, upon surrender of this Warrant, the Company will issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled in accordance with the conversion terms of the Series E Preferred Stock and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay to the Holder cash in an amount equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, if any, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant.
(b) If (i) the FY 1998 Audited Statements are issued, and no Warrant Exercise Event has occurred, or (ii) there is a Sale of the Company or an underwritten public offering of shares of the Common Stock before the end of FY 1998, this Warrant shall not become exercisable and shall be cancelled and terminated automatically with no further action by the Company or any Holder hereof required.
(c) In lieu of exercising this Warrant, on and after the Warrant Exercise Date and prior to the Warrant Expiration Date, the Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election in which event the Company shall issue to the Holder a number of shares of Stock computed using the following formula:
FMV
where:
X = the number of shares of Stock to be issued to the Holder.
Z = the number of Warrant Shares purchasable under this
Warrant at the time of such exercise.
FMV = the fair market value of one share of Common Stock at the
time of such exercise as determined pursuant to the
provisions of paragraph 4(c)(3E) of the Certificate.
EP = Exercise Price.
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The Company agrees that it will at all times reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Series E Preferred Stock, the shares of the Common Stock into which the shares of Series E Preferred Stock are convertible, and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, free and clear of all restrictions on sale or transfer and free and clear of all pre-emptive rights.
(a) In case the Company shall, after the Warrant Exercise Date (i) pay a dividend or make a distribution on its capital stock in shares of Series E Preferred Stock, or after a Conversion Event, in shares of Common Stock, (ii) subdivide its outstanding shares of Series E Preferred Stock, or after a Conversion Event, Common Stock, into a greater number of shares, (iii) combine its outstanding shares of Series E Preferred Stock, or after a Conversion Event, its outstanding shares of Common Stock, into a smaller number of shares, or (iv) issue by reclassification of its Series E Preferred Stock, or after a Conversion Event, issue by reclassification of its Common Stock, any shares of capital stock of the Company, then, in such event, the Per Share Warrant Price shall be adjusted, subject to Sections 4(c) and (d) hereof, so that the Holder of this Warrant upon the exercise hereof shall be entitled to receive the number of shares of Series E Preferred Stock or, after a Conversion Event, shares of Common Stock, or other capital stock of the Company which it would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Section 4(a) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this Subsection 4(a), the Holder, when this Warrant is surrendered for exercise, shall become entitled
to receive shares of two or more classes of capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder of this Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares of such classes of capital stock.
(b) In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), that occurs after the Warrant Exercise Date, the Holder of this Warrant shall have the right thereafter to convert this Warrant into the kind and amount of securities, cash or other property which it would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale of conveyance had this Warrant been converted immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance. This Section 4(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances that occur after the Warrant Exercise Date. The issuer of any shares of stock or other securities or property thereafter deliverable on the conversion of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holder of this Warrant not less than thirty (30) days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.
(c) Notwithstanding anything herein to the contrary, the Per Share Exercise Price shall not be adjusted to a number that is less than the par value per share of the Warrant Shares purchasable hereunder.
(d) No adjustment in the Per Share Exercise Price shall be required unless such adjustment would require an increase or decrease of at least $0.005 per share of Stock; PROVIDED, HOWEVER, that any adjustments which by reason of this Section 4(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 4 shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. Anything in this Section 4 to the contrary notwithstanding, the Company shall be entitled to make such adjustments in the Per Share Exercise Price, in addition to those required by this Section 4, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or other event hereafter made by the Company to its shareholders shall not be taxable.
(d) If the Board of Directors of the Company shall declare any dividend or other distribution with respect to the Series E Preferred Stock or the Common Stock, other than a cash distribution out of earned surplus, the Company shall mail notice thereof to the Holder of
this Warrant not less than 15 days prior to the record date fixed for determining shareholders entitled to participate in such dividend or other distribution.
The Company agrees that the shares of the Stock represented by each and every certificate for Warrant Shares delivered on the exercise of this Warrant shall, at the time of such delivery, be validly issued and outstanding, fully paid and non-assessable, and not subject to pre-emptive rights, and the Company will take all such actions as may be necessary to assure that the par value or stated value, if any, per share of the Stock is at all times equal to or less than the then Per Share Warrant Price. The Company further covenants and agrees that it will pay, when due and payable, any and all Federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any Warrant Share or certificate therefor.
(a) Title to this Warrant is transferable only in connection with the transfer of the Initial Preferred Shares to which this Warrant is attached, and then only on the books of the Company by the registered holder in person or by duly authorized attorney. The Holder hereof acknowledges that by virtue of its ownership of the Initial Preferred Shares the Holder is a party to the Stockholders' Agreement, and that transferability of the Initial Preferred Shares and the Warrant is limited as set forth therein.
(b) This Warrant may not be sold, transferred, assigned or hypothecated by the Holder except in compliance with the provisions of the Securities Act of 1933, as amended (the "Act") and applicable state securities laws. The Company may treat the registered Holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. The Company shall permit any Holder of a Warrant or his fully authorized attorney, upon written request during ordinary business hours, to inspect and copy or make extracts from its books showing the registered holders of Warrants. All warrants issued upon the transfer or assignment of this Warrant will be dated the same date as this Warrant, and all rights of the Holder thereof shall be identical to those of the Holder.
(c) Upon exercise of this Warrant, the Holder agrees that it will become a party to and bound by the terms and conditions of the Stockholders' Agreement among the Company and its shareholders, if such Stockholders' Agreement has not been terminated in accordance with its terms prior to the exercise of this Warrant.
(d) If requested in writing by the underwriters for the initial public offering of securities of the Company, the Holder shall agree not to sell publicly any shares of Common Stock issued pursuant to the exercise of this Warrant or pursuant to the conversion of Series E Preferred stock issued pursuant to the exercise of this Warrant (other than shares of Common Stock being registered in such offering), without the consent of such underwriters, for a period of not more than ninety (90) days following the effective date of the registration statement relating to such offering.
Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination.
Except as otherwise provided herein, this Warrant does not confer upon the holder any right to vote or to consent to or receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof.
No notice of other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepared, addressed to:
(a) the Company at 400 Cherrington Parkway, Suite 200, Coraopolis, Pennsylvania 15108, or such other address as the Company has designated in writing to the Holder, or
(b) the Holder at the address set forth on the first page of this warrant, or such other address as the Holder has designated in writing to the Company.
The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof.
This Warrant shall be governed by and construed in accordance with the law of the State of New York without giving effect to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, DICK'S CLOTHING & SPORTING GOODS, INC. has caused this Warrant to be signed by its Vice President - Chief Financial Officer and attested this ___ day of April, 1996.
DICK'S CLOTHING & SPORTING GOODS, INC.
ATTEST:
The undersigned, _________________________ pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase ____________ shares of the Series E Convertible Preferred Stock (or, after a Conversion Event (as defined in the Warrant), the Common Stock) of DICK'S CLOTHING & SPORTING GOODS, INC. covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant.
Dated: Signature:
--------------------------- -----------------------------
Address:
--------------------------------
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FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers unto ______________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
____________________________________ attorney, to transfer said Warrant on the
books of DICK'S CLOTHING & SPORTING GOODS, INC.
Dated: Signature:
--------------------------- -----------------------------
Address:
--------------------------------
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FOR VALUE RECEIVED, __________________________ hereby assigns and transfers unto ___________________ the right to purchase __________ shares of the Series E Convertible Preferred Stock (or, after a Conversion Event (as defined in the Warrant), the Common Stock) of DICK'S CLOTHING & SPORTING GOODS, INC. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced hereby, and does irrevocably constitute and appoint _________, attorney to transfer that part of said Warrant on the books of DICK'S CLOTHING & SPORTING GOODS, INC.
Dated: Signature:
--------------------------- -----------------------------
Address:
--------------------------------
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Exhibit 10.1
Dicks Clothing and Sporting Goods, Inc.
Associate Savings & Retirement Plan
October 1, 1994
Page
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Introduction 1
1. Who Can Participate 1
2. Elective Contribution Forms 2
3. Contributions 2
A. Your Contributions 2
B. Matching Contributions 2
C. Qualified Matching Contributions 3
D. Qualified Non-Elective Contributions 3
E. Rollover Contributions 4
4. Making Changes 4
5. Limitations on Contributions 4
6. Trust Fund 5
7. Investments 6
8. Vesting 6
9. Break In Service Rules 7
10. Receiving Money While Employed 7
A. Hardship Withdrawals 7
B. Withdrawals at Age 65 8
C. Distributions at Age 70-1/2 9
D. Plan Loans 9
11. Plan Distributions 10
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Page
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12. Distribution Upon Death 10
A. Designation of Beneficiary 11
B. Death Prior to Commencement of Benefit Payment 11
C. Death After Commencement of Benefit Payment 12
13. Taxes of Distribution 12
14. Benefits Not Assignable 13
15. Claims Procedure 13
A. If A Claim Is Denied 13
B. Review Procedure 14
16. Account Statement 14
17. Plan Administration 14
18. Pension Benefit Guaranty Corporation 14
19. Top Heavy Rules 15
20. Amendment and Termination 15
21. Your Rights Under ERISA 15
22. General Information 17
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INTRODUCTION
This is the Summary Plan Description for the Dicks Clothing and Sporting Goods, Inc. Associate Savings & Retirement Plan (the "Plan") as it was amended and restated as of October 1, 1994. The Plan is a tax-qualified defined contribution plan with a cash or deferred arrangement.
The Plan may be amended from time to time to keep it in compliance with federal laws affecting pension plans and to keep the Plan current with developments related to the Dicks Clothing and Sporting Goods, Inc. (the "Company") and its benefit programs. Your rights and benefits as a participant are generally governed by the terms of the Plan as in effect when you last worked for the Company.
The Summary Plan Description is intended to serve as an easy-to-read explanation of the Plan as in effect as of the date indicated on the cover page of this Summary. It summarizes, in a very condensed form, the Plan's important provisions as they apply to participants who are employees of the Company on or after that date. CAUTION: Although the Company has made a sincere effort to make this Summary as complete and accurate as possible, this Summary is not a substitute for the Plan document itself. The detailed provisions of the Plan document, not this Summary, govern the actual rights and benefits to which you may be or become entitled. The Plan document is available for your inspection during regular business hours at the Company's offices.
Nothing in the Plan or in this Summary Plan Description confers on you any rights of continued employment with the Company. Moreover, your participation in the Plan does not prohibit changes in the terms of, or the termination of, your employment by the Company.
As an employee of the Company, you are eligible to participate in the Plan ("eligible employee") provided that you are not (1) covered by a collective bargaining agreement, (2) a non-resident alien earning no U.S. source income or (3) a leased employee.
If you were a participant as of September 30, 1994, you will remain a participant under this Plan. If you have completed one year of service and attained age 21 as of October 1, 1994, you are eligible to become a participant on October 1, 1994. If you become an eligible employee after October 1, 1994, you are eligible to become a participant in the Plan as of the January 1 or July 1 next following your:
- attainment of age 21; and
- completion of not less than one Year of Service.
For this purpose, a "year of service" is any computation period during which you complete at least 1,000 hours of service. A "computation period," in turn, is a 12-consecutive month period, which begins either on the date you join the Company or in any Plan Year starting after such date. An "Hour of Service" is, in general, an hour for which you are entitled to be paid by the Company.
In general, if you leave the Company after having become a participant, you will again become a participant immediately upon the entry date following your return to service at the Company.
As a participant, you can elect to make contributions of a portion of your compensation to the Plan by completing and filing with the Company an Enrollment Form. Your completed Enrollment Form must indicate the percentage of your compensation you want to contribute to the Plan, as well as the way you want your contributions invested in the trust fund (see Section 6). You can begin making elective contributions as of the date on which you become a participant in the Plan. To do so, your completed Enrollment Form must be received by the Company at least 30 days prior thereto.
You can elect to have from 2% to 15% of your compensation contributed to the Plan. Your contributions are based upon total compensation, which includes all compensation paid while a participant in the plan. In addition, if you are a highly compensated employee, your contributions may be restricted (see LIMITATIONS ON CONTRIBUTIONS, below).
Your contributions are made through automatic payroll deductions every pay period. These contributions are considered to be the Company's contributions for federal income tax purposes, because they are made from your compensation before you receive it. Because of this, your contributions are not subject to current federal income tax. They are, however, subject to Social Security tax and certain state and local income taxes.
The Company may contribute for each participant a matching contribution equal to a percentage of the participant's elective contributions not to exceed 10 percent of compensation. The decision to make matching contributions and the amount of such contributions will be made each year by the Company. As a participant, you will share in the Company's matching contribution for any Plan Year provided you:
- made elective contributions during the Plan Year and did not withdraw your contributions before December 31;
- are still employed (or on an authorized leave of absence) by the Company on December 31 and completed at least 1,000 Hours of Service during the Plan Year; or
- died, retired or became disabled during the Plan Year.
The Company may contribute for each non-highly compensated employee, or for any group of such employees, a "qualified matching contribution" equal to a percentage of the employee's elective contributions. The decision to make qualified matching contributions will be made each Plan Year by the Company. These amounts are used to satisfy certain non-discrimination tests and are nonforfeitable when made.
The Company may contribute for each non-highly compensated employee or for any group of such employees, a "qualified non-elective contribution" in an amount to be determined by the Company. These amounts are used to satisfy certain non-discrimination tests and are nonforfeitable when made.
If you were a participant in a former employer's qualified plan, and you are entitled to receive an "eligible rollover distribution" from that plan, you may, in accordance with the rules and procedures established by your former employer, elect to have all or a portion of the distribution paid to this Plan as a direct rollover. Also, if you have received an "eligible rollover distribution" from your former employer's qualified plan, you may, within 60 days of receiving the distribution, roll over all or a portion of that distribution to this Plan. In either case, you cannot roll over any portion of your distribution representing a return of your after-tax contributions. You may also roll over an amount from an individual retirement account, the assets of which are attributable SOLELY to a prior rollover of a qualified plan distribution. No portion of an individual retirement account to which you have contributed on a year to year basis can be rolled over to this Plan.
After you choose your initial elective contribution percentage, you may increase or decrease it at the time permitted by the Company. Elective contribution percentage changes are made on forms available from the Company. This form must be completed and delivered to the Company according to dates established by the Company.
It is important to note that the total of your elective contributions in any year may not exceed the dollar limit for that year set by the Internal Revenue Service ("IRS"). The IRS limit may change from year to year. For 1994, the limit is $9,240.
If your elective contributions to the Plan total more than the IRS limit for a year, these (together with any income attributable thereto) will be returned to you by April 15 of the following year. If you work for more than one employer, and your total elective contributions to this Plan and a 401(k) plan of another employer exceed the IRS limit for a year, you may request a withdrawal of such excess amount from this Plan no later than the first day in March of the following year. Excess elective contributions are taxable for the year contributed, but would not be subject to the 10% penalty tax on early withdrawals if distributed by the following April 15.
If your annual compensation causes you to be classified as "highly compensated" under IRS regulations, your elective contributions to the Plan are monitored to ensure that you and other highly compensated participants do not set aside too much in relation to the contributions of other eligible employees. If you do, the excess will be repaid to you by the Plan. You will be notified if this applies to you.
Aggregate contributions to the Plan and to other retirement plans in which you participate are subject to limitations imposed by the Internal Revenue Code and IRS Regulations. For example, the amount of annual compensation on which your elective contributions are based is limited to $150,000 for 1994. If you are affected by these restrictions, you will be notified.
Contributions made to the Plan are held in a trust fund. The trust assets do not belong to the Company, but are held for the exclusive benefit of Plan participants and beneficiaries. It is the duty of the Trustee to administer the trust fund.
The Company will periodically transfer your elective contributions to the trust. These transfers will be made as soon as practicable after the elective contributions have been withheld from your compensation. The Company will transfer other Plan contributions to the trust at such times and in such amounts as it determines. Contributions are credited to your accounts as soon as the contributions have been received by the Trustee. Participant statements are produced quarterly.
Your contributions are placed in an individual account established and maintained for you as a Plan participant by the Trustee. Your individual account is the sum of your:
- Elective Contribution Account -- consisting of your elective contributions;
- Qualified Non-Elective and Matching Contribution Account -- consisting of the Company's nonforfeitable non-elective and matching contributions;
- Employer Contribution Account -- consisting of matching Company contributions with respect to a percentage of your compensation; and
- Rollover Contribution Account -- consisting of amounts rolled over or transferred from other qualified plans or IRAs.
The Plan Administrator will offer three or more investment funds for
participants to select from. Your accounts will initially be invested in one or
more of the investments as you select, on a form provided by the Company. You
may, at the time permitted by the Company, change your election as to how
contributions are to be invested, or elect to transfer the balances of your
accounts among the investment funds. You made a change in investment elections,
or an election to transfer account balances, in one of two ways. First, you may
indicate the desired investment election change or account balance transfer on
a change request form, provided to you by the Company. You file this form with
The Barclay Group, Springhouse Corporate Center II, 323 Norristown Road,
Ambler, PA 19002, attention: Customer Service. Second, you may request the
investment election change or account balance transfer by calling The Barclay
Group directly, at 1-800-543-1801 (toll free) on any business day from 8:30
a.m. to 7:00 p.m., identifying yourself by use of the PIN number given to you
by The Barclay Group. You may obtain written confirmation of your initial
investment election, or as to any change in investment election or account
balance transfer that you direct, by calling Barclay at the above number, on
any business day before 3:00 p.m.
By providing you with the array of investment choices, combined with your ability to change the mix of those investments, it is intended that the Plan constitute a plan described in section 404(c) of the Employee Retirement Income Security Act, and Title 29 of the Code of Federal Regulations, section 2550.404c-1. It is further intended that the Plan Administrator, the Company and any other fiduciary of the Plan be relieved of liability for any losses which are the direct and necessary result of your investment instructions.
Your interest in your Elective Contribution Account, Qualified Non-Elective and Matching Contribution Account and Rollover Contribution Account is 100% vested at all times. Your interest in your Matching Contribution Account will become vested according to the following schedule.
Percentage
Years of Service Vested
---------------- ------
less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
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For this purpose, a "year of service" is a Plan Year in which you complete at
least 1,000 hours of service. You will be credited here, with 190 hours for
each month in which you complete at least 1 hour of service (as defined in
Section 1 above). You will automatically become 100% vested in your Matching
Contribution Account if, while you are employed by the Company, you attain age
65 or higher, die or become disabled. For this purpose, you are treated as
"disabled" if the Company determines that you are unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment, which can be expected to result in death or to be for a
continuous period of at least 12 months. Forfeitures resulting from a
terminated participant's failure to be fully vested in the Company's
Contribution will be used to reduce future contributions of the Company.
A one year Break in Service occurs in any Plan Year during which you do not have more than 500 Hours of Service. Years of Service prior to the Breaks in Service shall not be taken into account if you have no vested interest in your Matching Contribution Account and the number of consecutive Breaks in Service equals or exceeds the greater of (1) the aggregate number of Years of Service (excluding Years of Service not required to be taken into account by reason of any prior Breaks in Service), or (2) five.
If you return to the Company before 5 one year Breaks in Service, your nonvested account balance will be restored, provided you repay to the Plan any vested amount distributed to you. If you forfeit any of the nonvested portion of your Matching Contribution account balance, such forfeiture will be used to reduce employer contributions.
While you are employed by the Company, there are several ways for you to receive money from the Plan - through hardship withdrawals of contributions, through loans, or because you have attained age 65 or 70-1/2. Please note, hardship withdrawals may be subject to an early distribution tax penalty.
You may receive all or part of your Elective Contribution Account and the vested portion of your Employer Account if you incur a "hardship." However, earnings on elective contributions cannot be withdrawn. A hardship withdrawal may be made only if it is both on account of your immediate and heavy financial need of and is necessary to meet such financial need. A withdrawal will be deemed to be made on account of an immediate and heavy financial need only if the withdrawal is used:
(1) to pay medical expenses, within the meaning of Section 213(d) of the Internal Revenue Code, incurred or to be incurred by you, your spouse, or any of your dependents;
(2) for costs directly related to the purchase (excluding mortgage payments) of your principal residence;
(3) to pay tuition and related educational fees for the next 12 months of post-secondary education for you, your spouse, children, or dependents; or
(4) to prevent your eviction from your principal residence or foreclosure of the mortgage on your principal residence.
A withdrawal will be deemed to be necessary to satisfy an immediate and heavy financial need if the amount of the withdrawal does not exceed the amount required to relieve the financial need. For this purpose, the amount of the financial need may include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the hardship withdrawal.
To receive a hardship withdrawal, the following conditions apply:
(1) you have received all withdrawals and distributions, other than hardship withdrawals, and all non-taxable loans currently available under all plans maintained by the Company;
(2) your elective contributions under this Plan and your contributions under any other plan of the Company will be suspended for at least 12 months after the receipt of the hardship distribution; and
(3) your elective contributions to the Plan for your taxable year immediately following the taxable year of the hardship withdrawal is limited to the excess of (a) the annual limit on elective contributions for such next taxable year over (b) the amount of your elective contributions for the taxable year of the hardship withdrawal.
You may apply for a hardship withdrawal by filing a written request with the Company.
You may take a withdrawal of all or a portion of your vested accounts at any time after you reach age 65 by filing a written request with the Company.
If you remain in employment with the Company until age 70-1/2, then the distributions of your vested accounts must be made by the April 1st following the calendar year in which you attain age 70-1/2. If you are affected by this rule, you will be notified at the appropriate time.
You may apply to the Company for a loan from the Plan. Your application must be in writing on forms which the Company will provide to you. The Company may also request that you provide additional information, such as financial statements, tax returns and credit reports. After considering your application, the Company may, in its discretion, determine that you qualify for the loan. The Company will inform the Trustee that you qualify.
- Loans must be made available to all participants on a uniform and non-discriminatory basis.
- All loans must be adequately secured. To obtain a Plan loan, you must pledge a security interest in 50% of your vested account balance under the Plan. The Company also requires that repayments on the loan obligation be by payroll deduction.
- The interest rate applied to all loans will be based on the bank's interest rates.
- All loans must have a definite repayment period which provides for payments to be made not less frequently than quarterly, and for the loan to be amortized on a level basis over a reasonable period of time, not to exceed five years. However, if you use the loan to acquire your principal residence, you may repay the loan over a reasonable period of time that may be longer than five years.
- All loans will be considered a directed investment from your account under the Plan. All payments of principal and interest by you on a loan will be credited to your account.
- The amount the Plan may loan to you is limited by rules under the Internal Revenue Code. Any new loan will be limited to the lesser of:
- $50,000, reduced by the excess (if any) of (1) the highest outstanding balance of any other loans from the Plan during the one-year period prior to the date of the new loan over (2) the outstanding balance of any other loans from the Plan on the date of the new loan; or
- 1/2 of your vested account balances.
- No loan in an amount less than $1,000 will be made.
- If you fail to make payments when they are due under the loan, you will be considered to be "in default." The Trustee would then have authority to take all reasonable actions to collect the balance owing on the loan. This could include filing a lawsuit or foreclosing on the security for the loan. Under certain circumstances, a loan that is in default may be considered a distribution from the Plan, and could result in taxable income to you. In any event, your failure to repay a loan will reduce the benefit you would otherwise be entitled to from the Plan.
- If the Plan is sponsored by a sole proprietorship, a partnership or an S Corporation and you own more than 10 percent of the partnership or more than five percent of the stock of the S Corporation, you or a member of your family are not eligible for a loan from the Plan.
If you retire or otherwise separate from service with the Company, other than by reason of death, the balance of your vested Plan accounts becomes distributable to you. Such balance may be distributed to you in one of the following ways:
A. single sum; or
B. purchase of an annuity.
If you do not properly elect to receive an optional method of payment, the form of payment will be as follows. If you are not married on the date your pension begins, your form of payment will be the single-life form - a monthly pension payable to you for the rest of your lifetime with no payments continuing to anyone else after your death. If you are married on the date your pension begins, your form of payment will be the Qualified Joint and Survivor form - a reduced monthly pension payable for your lifetime. After your death, your spouse at the time of your first pension payment will receive 50% of your reduced monthly pension for the rest of his or her life. In lieu of the Qualified Joint and Survivor Annuity form of payment a participant, during the 90-day period ending on the date his or her payment beings, may elect to receive monthly amount in the form of a single-life annuity or other optional form of payment discussed above; provided, however, that no such election shall take effect unless the spouse of the participant consents in writing to such election.
If your account balance is $3,500 or less at the time you separate from service, you will automatically receive a lump-sum cash payment as soon as practicable after such date. If your account balance exceeds $3,500 then no distributions may be made to you from your accounts unless you consent to the distribution, in writing, within the 30 day period ending on the day the distribution is to be made. The Company will furnish you with a written explanation of your right to defer your distribution until age 70-1/2 and the effect of the deferral.
If an immediate distribution of your accounts cannot be made to you
because you did not consent to the distribution, distribution of your vested
accounts will be made as soon as practicable after the earliest to occur of
(a) the date on which you attain age 65, (b) the date of your death, or (c)
the date on which the Company receives written notice from you requesting and
consenting to, an immediate distribution of the total balance of your vested
accounts. The distribution will be made in the form of a single lump-sum cash
payment. This payment will be equal to the balance of your vested Plan accounts
at the time the payment is made.
When you enroll in the Plan, you should complete the beneficiary designation form which is provided by the Company. Your beneficiary will always be your spouse unless:
- you do not have a spouse, or
- you designate a beneficiary other than your spouse.
If you are married, in order to designate a nonspouse beneficiary, you must obtain the written notarized consent of your spouse on the beneficiary designation form.
If you fail to designate a beneficiary, or if no designated beneficiary survives you payment will be made to your spouse, if any. If there is no spouse, your beneficiary will be the personal representative of your estate, or if no personal representative exists, to any person determined by a court to be your beneficiary for this purpose.
If you die while you are in service with the Company, or after your service has terminated but prior to the distribution of your Plan account balances, then your accounts will be distributed to your beneficiary as soon as practicable after your death. The distribution will be made in the form of a single-lump sum cash payment, in an amount equal to the balance of your Plan accounts at the time the payment is made.
If distribution of your interest has begun in monthly installments and you die before your entire interest has been distributed to you, then the remaining portion of your benefit payments shall be distributed at least as rapidly as under the method of periodic distribution being used at the time of your death.
Under current law, you defer paying federal income taxes on all contributions to the Plan until your account balances are distributed. Investment earnings accumulating in the Plan also are not taxed until they are paid out to you. All distributions from the Plan, including in-service hardship withdrawals, in-service withdrawals after age 59-1/2 and distributions because of separation from service, retirement, or death, will be subject to taxes. You are required to pay Federal income tax in the year you receive a distribution. Federal income tax will be withheld at the rate of 20% unless your distribution is transferred directly to an IRA or another qualified plan. The Internal Revenue Code also imposes a 10-percent penalty on the amount of all early distributions. The following are early distributions:
- in-service withdrawals prior to age 59-1/2; or
- distributions in case of separation from service prior to age 55, unless the distribution is on account of death or disability.
If you wish to defer federal income taxes on your distribution, you may roll your funds into an Individual Retirement Account (IRA), or to another employer's plan (for example, a 401(k) plan, a pension plan or a profit sharing plan), if permitted.
More details concerning your options and federal income tax treatment will be provided before you receive your distribution. Since the tax laws are complicated and are subject to change, we recommend that you consult your tax advisor before receiving a hardship withdrawal or any distribution.
No benefit under the Plan may be assigned or pledged as collateral or security for a loan (other than certain plan loans described above) nor may any benefit be subject to your debts or to other legal obligations. There is an exception, however, to this rule. The Plan Administrator may be required by law to recognize obligations you incur as a result of court ordered property settlement, child support or alimony payments. The Plan Administrator must honor a "qualified domestic relations order." A "qualified domestic relations order" is defined as a decree or order issued by a court that provides for property settlement in connection with a divorce or separation, that obligates you to pay child support or alimony, or otherwise allocates a portion of your assets in the Plan to your spouse, former spouse, child or other dependent. If a qualified domestic relations order is received by the Plan Administrator, all or a portion of your benefits may be used to satisfy the obligation. The Plan Administrator will determine the qualification of any domestic relations order received.
All claims for benefits under the Plan should be filed with the Plan Administrator. If a request for a distribution or withdrawal is denied, you are entitled to a full review of your claim by the Plan Administrator. The steps in the review process are outlined below.
You will normally receive a written notification of the denial within 60 days after filing your claim. The notice explains:
- the reason(s) for the denial;
- the Plan provisions on which it is based, any additional material or information needed to make the claim acceptable and the reason it is necessary; and
- the procedure for requesting a review.
If special circumstances require more than 60 days for processing the claim, you will be notified of that fact, in writing, within 60 days of filing. The notice you receive will:
- explain what special circumstances make an extension necessary; and
- indicate the date a final decision is expected to be made.
The extension may be made for an additional 60 days. If you receive no response of any kind within 60 days after filing a claim, you should consider the claim denied. You may proceed to Step B, just as though you had received a denial notice.
- submit a written request to the Plan Administrator for a review of the denial;
- look at relevant documents; and
- submit issues and comments in writing.
A decision on the denial normally will be made within 60 days after the request for a review is received. You will receive a copy of the decision, in writing, including the specific reasons for it and references to the Plan provisions on which it is based.
If special circumstances require review period of longer than 60 days, the time for making a final decision may be extended. However, the total review period cannot be longer than 120 days.
You will receive statements of your account balance at least quarterly, which will include the following information:
- the amount of money you contributed;
- the amount of money the Company contributed;
- the amount of money you rolled over, if any;
- the earnings or losses on these contributions;
- the specific funds in which your accounts are invested;
- the total market value of your account;
- the administration fees, if any; and
- the amount of distributions.
The administration of the Plan is supervised by the Company as the Plan Administrator.
Because the Plan is an individual account plan, its benefits are not guaranteed by the Pension Benefit Guaranty Corporation or any other federal agency.
The Internal Revenue Code requires plans that are "top-heavy" to meet certain special requirements. While this Plan is not now "top-heavy," the Department of Labor requires that we provide you with a brief statement of these special requirements.
A Plan is deemed to be "top-heavy" if adjusted account balances attributable to "key employees" under the Plan (plus all other retirement plans of the Company) equal more than 60 percent of the total adjusted account balances for all participants. In general, "key employees" are certain officers and shareholders of the Company and its subsidiaries or divisions.
If the Plan becomes "top-heavy," we will advise you. In that case, a minimum contribution may be required for all non-key employees employed on the last day of the Plan year who are eligible to participate at any time during the Plan year, even if they are credited with less than 1,000 hours of service in the Plan year.
The Board of Directors of the Company established the Plan with the intent of being maintained indefinitely. However, the Board of Directors of the Company has the right to amend, modify or terminate the Plan at any time. In no event will an amendment have the effect of reducing your account balances.
If the Plan is terminated, all contributions will be discontinued. You will automatically become fully vested in your Plan accounts. All funds will continue to be held in the trust until distributions are otherwise required to be made, unless an earlier distribution is directed by the Company.
As a participant in the Plan you are entitled to certain rights and protection under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA gives all Plan participants the right to:
- Examine, without charge, at the office of the Plan Administrator and at other specified locations, such as your personnel office, all Plan documents, including copies of all documents filed by the Plan with the U.S. Department of Labor such as detailed annual reports and this summary plan description.
- Obtain copies of certain Plan documents and other Plan information upon written request to the Company. The Company may make reasonable charge for the copies.
- Receive a summary each year of the Plan's annual financial report. The Company is required by law to furnish each participant with a copy of this summary annual report.
- Obtain a statement telling you what benefits you would receive if you terminated employment. The Plan must provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of an employee benefit plan. The people who operate your Plan, called "fiduciaries" of the Plan, have a duty to do so prudently and in the best interest of you and other Plan participants and beneficiaries. No one, including your Employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or from exercising your rights under ERISA.
If your request for a benefit under this Plan is denied in whole or in part, you must receive a written explanation of the reason for the denial. You have the right to have your claim reviewed and reconsidered.
Under ERISA, there are steps you can take to enforce your rights. For example, if you request materials from the Plan and do not receive them within 30 days, you may choose to file suit in a federal court. In such case, the court may require the Plan Administrator to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If your request for benefits is denied or ignored, in whole or in part, you may choose to file suit in a state or federal court.
If it should happen that the Plan fiduciaries misuse the Plan's money, or if you are discriminated against for asserting your rights, or if you have any questions about this statement or about your rights under ERISA you may seek assistance from the nearest area office of the Labor-Management Services Administration, U.S. Department of Labor, or you may choose to file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim frivolous.
22. General Information
-------------------
Name of Plan: Dicks Clothing and Sporting Goods, Inc. Associate
Savings & Retirement Plan
Plan Number: 003
Plan Year: January 1 through December 31
Employer and Plan Sponsor: Dicks Clothing and Sporting Goods, Inc.
400 Cherrington Parkway
Coraopolis, PA 15108
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Employer Identification Number (EIN): 15-0556036
Plan Administrator: Dicks Clothing and Sporting Goods, Inc.
400 Cherrington Parkway
Coraopolis, PA 15108
(412) 269-4400
Attention: Wendy Lucas
Type of
Administration: Self-administered
Trustee: Capital Guardian Trust Company
135 South State College Boulevard
Brea, CA 92621
Agent for Legal Service: Dicks Clothing and Sporting Goods, Inc.
400 Cherrington Parkway
Coraopolis, PA 15108
Fund Investment: American Funds Distributors, Inc.
135 South State College Boulevard
Brea, CA 92621
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Exhibit 10.2
SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
June 9, 2000
To the parties to the Amended and Restated Registration Rights Agreement dated November 22, 1993 by and among Dick's Sporting Goods, Inc., as amended
Ladies and Gentlemen:
Reference is made to the Amended and Restated Registration Rights Agreement dated November 22, 1993, as amended (the "Prior Restated Agreement"), by and among Dick's Sporting Goods, Inc., a Delaware corporation (formerly Dick's Clothing & Sporting Goods, Inc., a New York corporation) (the "Company") and the persons who held the Company's Common and Preferred Stock. This Second Amended and Restated Registration Rights Agreement (this "Second Restated Agreement" or this "Agreement") amends the Prior Restated Agreement and supersedes and restates the Prior Restated Agreement in its entirety.
The holders of 65% of the Restricted Stock, including 65% of the former holders of Company's Series A, C, D, E, F and G Preferred Stock, voting as a single class, as provided by Section 13(d) of the Prior Restated Agreement, have approved this Second Restated Agreement. This Second Restated Agreement is being entered into effective upon the conversion of all the Company's Preferred Stock into Common Stock (the "Conversion"). The Company covenants and agrees with the parties hereto, as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following respective meanings:
"COMMISSION" shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the Common Stock, $.01 par value, of the Company, as constituted as of the date of this Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the sale shall be in effect from time to time.
"INSIDER SHARES" means the shares of Common Stock that are not shares of Investor Common Stock.
"INVESTOR COMMON STOCK" shall mean the shares of Common Stock issued in connection with the Conversion to the former holders of the Company's Series A, C, D, E, F and G Preferred Stock.
"INVESTORS" shall mean the holders of Investor Common Stock.
"REGISTRATION EXPENSES" shall mean the expenses so described in Section 8.
"RESTRICTED STOCK" shall mean (1) the Investor Common Stock, excluding Investor Common Stock which has been (a) registered under the Securities Act pursuant to an effective registration statement filed thereunder and disposed of in accordance with the registration statement covering them or (b) publicly sold pursuant to Rule 144 under the Securities Act, and (2) except for purposes of Section 4 and 6 hereof, the Insider Shares, but excluding shares of Common Stock which have been (a) registered under the Securities Act pursuant to an effective registration statement filed thereunder and disposed of in accordance with the registration statement covering them, or (b) publicly sold pursuant to Rule 144 under the Securities Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean the expenses so described in
Section 8.
2. RESTRICTIVE LEGEND. Each certificate representing Restricted Stock shall, except as otherwise provided in this Section 2 or in Section 3, be stamped or otherwise imprinted with a legend substantially in the following form:
"The securities represented by this certificate have not been registered under the Securities Act of 1933 or applicable state securities laws. These securities have been acquired for investment and not with a view to distribution or resale, and may not be sold mortgaged, pledged, hypothecated or otherwise transferred without an effective registration statement for such securities under the Securities Act of 1933 and compliance with applicable state securities laws, or the availability of an exemption from the registration provisions of the Securities Act of 1933."
A certificate shall not bear such legend if in the opinion of counsel satisfactory to the Company, which may be counsel to the Company, the securities being sold thereby may be publicly sold without registration under the Securities Act, provided, however, that if counsel to the Company disagrees with such opinion, the parties shall seek a no-action letter from the Commission with respect to such matter.
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of
Restricted Stock (other than under the circumstances described in Sections 4, 5
or 6), the holder thereof shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of
the proposed transfer and, if requested by the Company (it being understood that
if such transfer is intended to be in accordance with the provisions of Rule
144, the Company shall generally not require an opinion of counsel), shall be
accompanied by an opinion of counsel satisfactory to the Company (PROVIDED,
HOWEVER, that if counsel to the Company disagrees with such opinion, the parties
shall seek a no-action letter from the Commission with respect to such matter)
to the effect that the proposed transfer may be effected without registration
under the Securities Act, whereupon the holder of such stock shall be entitled
to transfer such stock in accordance with the terms of its notice; PROVIDED,
HOWEVER, that no such opinion of counsel shall be required for a transfer to one
or more partners of the transferor (in the case of a transferor that is a
partnership) or to an affiliated corporation (in the case of a transferor that
is a corporation). Each certificate for Restricted Stock transferred as above
provided shall bear the legend set forth in Section 2, except that such
certificate shall not bear such legend if (i) such transfer is in accordance
with the provisions of Rule 144 (or any other rule permitting public sale
without registration under the Securities Act) or (ii) the opinion of counsel
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act. The restrictions provided for in this Section 3 shall not apply
to securities which are not required to bear the legend prescribed by Section 2
in accordance with the provisions of that Section. If the Company does not
accept an opinion of counsel required hereby signed by the original holder's
general counsel, the Company will pay the reasonable fees and disbursements of
other counsel in connection with all opinions rendered by them pursuant to this
Section 3.
4. REQUIRED REGISTRATION.
(a) At any time beginning the earlier of (i) three months after any registration statement covering the initial public offering of securities of the Company under the Securities Act shall have become effective or (ii) May 19, 2005, the holders of Restricted Stock (excluding the holders of Insider Shares) constituting at least fifty-five percent (55%) of the total shares of Restricted Stock (excluding the shares of Restricted Stock held by holders of Insider Shares) then outstanding may request the Company to register for sale under the Securities Act all or any portion of the shares of Restricted Stock held by such requesting holder or holders for sale in the manner specified in such notice, if the reasonably anticipated aggregate price to the public of such sale would exceed $10,000,000.
(b) Following receipt of any notice under this Section 4, the Company shall immediately notify all holders of Restricted Stock (excluding the holders of Insider Shares) from whom notice has not been received and such holders shall then be entitled within 20 days after receipt of such notice from the Company to request the Company to include in the requested registration all or any portion of their shares of Restricted Stock. The Company shall use its best efforts to register under the Securities Act, for public sale in accordance with the method of
disposition specified in the notice from requesting holders described in paragraph (a) above, the number of shares of Restricted Stock specified in such notice (and in all notices received by the Company from other holders within 20 days after the receipt of such notice by such holders). If such method of disposition shall be an underwritten public offering, the holders of sixty-five percent (65%) of the shares of Restricted Stock to be sold in such offering may designate the managing underwriter of such offering, subject to the approval of the Company, which approval shall not be unreasonably withheld or delayed. The Company shall be obligated to register Restricted Stock pursuant to this Section 4 on three occasions only, PROVIDED, HOWEVER, that such obligation shall be deemed satisfied only when a registration statement covering all shares of Restricted Stock specified in notices received as aforesaid, for sale in accordance with the method of disposition specified by the requesting holders, shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto.
(c) The Company shall be entitled to include in any registration statement referred to in this Section 4, for sale in accordance with the method of disposition specified by the requesting holders, shares of Common Stock to be sold by the Company for its own account, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Restricted Stock to be sold. Except for registration statements on Form S-4, S-8 or any successor thereto or any proposed filing as to which the Company has notified the Investors of their right to participate pursuant to Section 5 hereof, the Company will not file with the Commission any other registration statement with respect to its Common Stock, whether for its own account or that of other stock-holders, from the date of receipt of a notice from requesting holders pursuant to this Section 4 until the completion of the period of distribution of the registration contemplated thereby or 120 days after the effective date of such registration, whichever is later.
(d) If in the opinion of the managing underwriter the
inclusion of all of the Restricted Stock requested to be registered under this
Section would adversely affect the marketing of such shares, after any shares to
be sold by the Company have been excluded, shares to be sold by the holders of
Restricted Stock shall be excluded in such manner that the shares to be sold
shall be allocated among the selling holders pro rata based on their ownership
of Restricted Stock.
5. INCIDENTAL REGISTRATION. If the Company at any time and from time to time (other than pursuant to Section 4 or Section 6) proposes to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Restricted Stock for sale to the public), each such time it will give written notice to all holders of outstanding Restricted Stock of its intention so to do. Upon the written request of any such holder, received by the Company within 30 days after the giving of any such notice by the Company, to register any of its Restricted Stock, the Company will use its best efforts to cause the Restricted Stock as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its written request) of such Restricted Stock so registered. In the event that any registration pursuant to this Section 5
shall be, in whole or in part, an underwritten public offering of Common Stock, the number of shares of Restricted Stock to be included in such an underwriting may be reduced (up to 100% in the case of an initial public offering and to not less than 30% of the total offering in the case of a subsequent public offering) if and to the extent that the managing underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the securities to be sold by the Company therein, PROVIDED, HOWEVER, that such reduction shall be applied first to the Restricted Stock requested to be included by the holders of Insider Shares and then to the Restricted Stock requested to be included by the Investors, in such manner that the shares to be sold shall be allocated among the Selling Investors pro rata based on their ownership of Restricted Stock, and provided further that such number of shares of Restricted Stock shall not be reduced if any shares are to be included in such underwriting for the account of any person other than the Company or requesting holders of Restricted Stock. Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 5 without thereby incurring any liability to the holders of Restricted Stock.
6. REGISTRATION ON FORM S-3. Subject to a limit of two registrations
hereunder in any 12 month period, if at any time (i) a holder or holders of
Restricted Stock (excluding the holders of Insider Shares) constituting at least
twenty-five percent (25%) of the total shares of Restricted Stock then
outstanding (excluding Insider Shares) request that the Company file a
registration statement on Form S-3 or any successor thereto for a public
offering of all or any portion of the shares of Restricted Stock held by such
requesting holder or holders, the reasonably anticipated aggregate price to the
public of which would exceed $500,000, and (ii) the Company is a registrant
entitled to use Form S-3 or any successor thereto to register such shares, then
the Company shall use its best efforts to register under the Securities Act on
Form S-3 or any successor thereto, for public sale in accordance with the method
of disposition specified in such notice, the number of shares of Restricted
Stock specified in such notice. Whenever the Company is required by this Section
6 to use its best efforts to effect the registration of Restricted Stock, each
of the procedures and requirements of Section 4, including but not limited to
the requirement that the Company notify all holders of Restricted Stock from
whom notice has not been received and provide them with the opportunity to
participate in the offering; provided, however that holders shall have no more
than ten (10) days to reply to the Company's notice in order to participate in
the offering), shall apply to such registration, PROVIDED, HOWEVER, that except
as provided above there shall be no limitation on the number of registrations on
Form S-3 which may be requested and obtained under this Section 6, and PROVIDED,
FURTHER, HOWEVER, that the requirements contained in the first sentence of
Section 4(a) shall not apply to any registration on Form S-3 which may be
requested and obtained under this Section 6.
7. REGISTRATION PROCEDURES. If and whenever the Company is required by the provisions of Sections 4, 5 or 6 to use its best efforts to effect the registration of any shares of Restricted Stock under the Securities Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant to
Section 4, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its best efforts to cause such registration
statement to become and
remain effective for the period of the distribution contemplated thereby (determined as provided in the third-to-last paragraph of this Section 7);
(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in paragraph (a) above and comply with the provisions of the Securities Act with respect to the disposition of all Restricted Stock covered by such registration statement in accordance with the sellers, intended method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each underwriter such number of copies of the registration statement and each such amendment and supplement thereto (in each case including all exhibits) and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock covered by such registration statement under the securities or "blue sky" laws of such jurisdictions as the sellers of Restricted Stock or, in the case of an underwritten public offering, the managing underwriter reasonably shall request, PROVIDED, HOWEVER, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare and furnish to such seller a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Restricted Stock, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;
(g) if the offering is underwritten and at the request of any seller of Restricted Stock, use its best efforts to furnish on the date that Restricted Stock is delivered to the underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to such seller, to such effects as reasonably may be requested by counsel for the underwriters or by such seller or its counsel, and (ii) a letter dated such date from the independent public accountants retained by the
Company, addressed to the underwriters and to such seller, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters reasonably may request;
(h) make available for inspection by each seller of Restricted Stock, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, reasonable access to all financial and other records, pertinent corporate documents and properties of the Company, as such parties may reasonably request, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;
(i) cooperate with the selling holders of Restricted Stock and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Restricted Stock to be sold, such certificates to be in such denominations and registered in such names as such holders or the managing underwriters may request at least two business days prior to any sale of Restricted Stock; and
(j) permit any holder of Restricted Stock which holder, in the sole and exclusive judgment, exercised in good faith, of such holder, might be deemed to be a controlling person of the Company, to participate in good faith in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included.
For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of distribution of Restricted Stock in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Restricted Stock in any other registration shall be deemed to extend until the earlier of the sale of all Restricted Stock covered thereby and 120 days after the effective date thereof.
In connection with each registration hereunder, the sellers of Restricted Stock will furnish to the Company in writing such information requested by the Company with respect to themselves and the proposed distribution by them as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws; and such sellers shall provide the Company with appropriate representations with respect to the accuracy of such information.
In connection with each registration pursuant to Sections 4, 5 or 6 covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing
such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company's size and investment stature.
8. EXPENSES. All expenses incurred by the Company in complying with Sections 4, 5 and 6, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of any insurance which might be obtained and fees and disbursements of one counsel selected by a majority in interest of the sellers of Restricted Stock, but excluding any Selling Expenses, are called "Registration Expenses." All underwriting discounts and selling commissions applicable to the sale of Restricted Stock are called "Selling Expenses."
The Company will pay all Registration Expenses in connection with each registration statement under Sections 4, 5 or 6. All Selling Expenses in connection with each registration statement under Sections 4, 5 or 6 shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, the Company will indemnify and hold harmless each holder of Restricted Stock (other than holders of Insider Shares), its officers and directors, each underwriter of such Restricted Stock thereunder and each other person, if any, who controls such holder or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder, officer, director, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Restricted Stock under the securities laws thereof (any such application, document or information herein called a "Blue Sky Application"), (iii) the omission or alleged omission to state in any such registration statement, prospectus, amendment or supplement or in any Blue Sky Applications executed or filed by the Company, a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) any violation by the Company or its agents of any rule or regulation promulgated under the Securities Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration, or (v) any failure to register or qualify the Restricted Stock in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company (the undertaking of any underwriter chosen by the Company
being attributed to the Company) will undertake such registration or qualification (provided that in such instance the Company shall not be so liable if it has used its best efforts to so register or qualify the Restricted Stock) and will reimburse each such seller, and such officer and director, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such holder, any such underwriter or any such controlling person in writing specifically for use in such registration statement or prospectus.
(b) In the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such Restricted Stock thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each other seller of Restricted Stock, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, other seller, underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or any Blue Sky Application or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, other seller, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, PROVIDED, HOWEVER, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement or prospectus. Not in limitation of the foregoing, it is understood and agreed that the indemnification obligations of any seller hereunder pursuant to any underwriting agreement entered into in connection herewith shall be limited to the obligations contained in this subparagraph (b).
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 9 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the
indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 9 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, PROVIDED, HOWEVER, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred.
(d) The indemnities provided in this Section 9 shall survive the transfer of any Restricted Stock by such holder.
10. CHANGES IN COMMON STOCK. If, and as often as, there is any change in the Common Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Stock as so changed.
11. RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Stock to the public without registration, at all times after 90 days after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, the Company agrees to:
(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any Restricted Stock without registration.
12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Charter or By-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any or its properties or assets is bound, conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent the indemnification or contribution provisions herein may be deemed not enforceable.
13. MISCELLANEOUS.
(a) All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of any Restricted Stock), whether so expressed or not. This Agreement is assignable by any Investor or by the holders of Insider Shares to a purchaser of the shares covered hereby.
(b) All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered to the Company at its principal business address and to any holder of Restricted Stock at the last address as may have been furnished to the Company in writing by such holder.
(c) This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware.
(d) This Agreement may not be amended or modified, and no provision hereof may be waived, without the written consent of the Company, the holders of at least sixty-five percent (65%) of the outstanding shares of Restricted Stock, which in every event must include the holders of sixty-five percent (65%) in interest of the outstanding Investor Common Stock.
(e) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Any person who, after the date hereof, acquires Common Stock shall become a party to this Agreement and a holder of"Restricted Stock" for all purposes hereunder, all upon execution by such person and the Company of a counterpart of this Agreement.
(f) The obligations of the Company to register shares of Restricted Stock under Sections 4, 5 or 6 shall terminate (i) one year after the effective date of a registration statement covering the initial underwritten public offering of the Company immediately with respect to any holder who holds less than two percent (2%) of the aggregate Restricted Stock outstanding if all of the shares of Restricted Stock held by such holder may be publicly sold within any one three-month period pursuant to Rule 144 of the Securities Act, and (ii) otherwise on the eighth anniversary of the effective date of the initial underwritten public offering of the Company in which the holder of Restricted Stock was able to and was allowed to participate.
(g) If requested in writing by the underwriters for the initial underwritten public offering of securities of the Company, each holder of Restricted Stock who is a party to this Agreement shall agree not to sell publicly any shares of Restricted Stock or any other shares of Common Stock (other than shares of Restricted Stock or other shares of Common Stock being registered in such offering or in a follow-on offering pursuant to Section 4 hereof), without the consent if such underwriters, for a period of not more than 180 days following the effective date of the registration statement relating to such offering; provided, however, that all persons selling shares of Common Stock in such offering and all executive officers and directors of the Company shall also have agreed not to sell publicly their Common Stock under the circumstances and pursuant to the terms set forth in this Section 13(g).
(h) Notwithstanding the provisions of Section 7(a), the Company's obligation to file a registration statement, or cause such registration statement to become and remain effective, may be suspended for a period not to exceed 90 days in any 24-month period if there exists at the time material non-public information relating to the Company which, in the reasonable opinion of the Company, should not be disclosed.
(i) The Company shall not grant to any third party any registration rights more favorable than, or in any way conflicting with, any of those contained herein, so long as any of the registration rights under this Agreement remain in effect.
(j) If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.
(k) The Company recognizes that the rights of the Investors under this Agreement are unique and, accordingly, the Investors shall, in addition to such other remedies as may be available to them at law or in equity, have the right to enforce their rights hereunder by actions for injunctive relief and specific performance to the extent permitted by law. This Agreement is not intended to limit or abridge any rights of the Investors which may exist apart from this Agreement.
Very truly yours,
DICK'S SPORTING GOODS, INC.
AGREED TO AND ACCEPTED as of the
date first above written.
MANAGEMENT HOLDERS:
Pursuant to Consents solicited pursuant to the Information Statement and Offer to Purchase Shares of the Company dated April 20, 2000, which Consents are on file with the Company.
INVESTORS:
Pursuant to Consents solicited pursuant to the Information Statement and Offer to Purchase Shares of the Company dated April 20, 2000, which Consents are on file with the Company.
Exhibit 10.3
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of July 26, 2000
among
DICK'S SPORTING GOODS, INC.
as Borrower
and
THE LENDERS PARTY HERETO
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
TABLE OF CONTENTS
1. AMOUNT AND TERMS OF CREDIT ...................................... 2
1.1 Revolving Credit Advances .............................. 2 1.2 Repayment; Termination of Commitment ................... 4 1.4 Interest on Revolving Credit Advances .................. 5 1.5 Eligible Inventory ..................................... 7 1.6 Fees ................................................... 7 1.7 Cash Management System ................................. 7 1.8 Receipt of Payments .................................... 7 1.9 Proportionate Shares ................................... 8 1.10 Application and Allocation of Payments ................. 8 1.11 Non-Receipt of Funds by Agent .......................... 8 1.12 Sharing of Payments, Etc ............................... 9 1.13 Settlement Procedures .................................. 10 1.14 Accounting ............................................. 11 1.15 Indemnity .............................................. 12 1.16 Access ................................................. 13 1.17 Taxes .................................................. 14 1.18 Letters of Credit ...................................... 15 1.19 Capital Adequacy ....................................... 15 1.20 Increased Costs ........................................ 16 1.21 Illegality ............................................. 16 1.22 Replacement of Lender in Respect of Increased Costs .... 17 |
2. CONDITIONS PRECEDENT ............................................... 17
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2.1 Conditions to Effectiveness ........................... 17
2.2 Further Conditions to Each Revolving Credit Advance
and Each Letter of Credit Obligation .................. 19
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3. REPRESENTATIONS AND WARRANTIES ................................. 20
3.1 Corporate Existence; Compliance with Law .............. 20
3.2 Executive Offices; Corporate or Other Names ........... 20
3.3 Corporate Power; Authorization; Enforceable
Obligations ........................................... 20
3.4 Financial Statements and Projections .................. 21
3.5 Material Adverse Change ............................... 21
3.6 Ownership of Property; Liens .......................... 21
3.7 Restrictions; No Default .............................. 22
3.8 Labor Matters ......................................... 22
3.9 Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness ................................ 22
3.10 Government Regulation ................................. 23
3.11 Margin Regulations .................................... 23
3.12 Taxes ................................................. 23
3.13 ERISA ................................................. 24
3.14 No Litigation ......................................... 24
3.15 Brokers ............................................... 25
3.16 Intellectual Property ................................. 25
3.17 Full Disclosure ....................................... 25
3.18 Hazardous Materials ................................... 26
3.19 Insurance Policies .................................... 26
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3.20 Deposit and Disbursement Accounts ..................... 26
3.21 Solvency .............................................. 26
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4. FINANCIAL STATEMENTS AND INFORMATION ........................... 26
4.1 Reports and Notices ................................... 26
4.2 Communication with Accountants ........................ 27
5. AFFIRMATIVE COVENANTS .......................................... 27
5.1 Maintenance of Existence and Conduct of Business ...... 27 5.2 Payment of Charges and Claims ......................... 28 5.3 Books and Records ..................................... 28 5.4 Litigation ............................................ 28 5.5 Insurance ............................................. 28 5.6 Compliance with Laws .................................. 29 5.7 Agreements; Leases .................................... 29 5.8 Supplemental Disclosure ............................... 30 5.9 Environmental Matters ................................. 30 5.10 Application of Proceeds ............................... 31 5.11 Fiscal Year ........................................... 31 5.12 Landlord's Waiver and Other Agreements ................ 31 5.13 Certain Obligations Respecting Subsidiaries ........... 31 5.14 Further Assurances .................................... 31 5.15 Appraisals ............................................ 31 |
6. NEGATIVE COVENANTS ............................................. 31
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6.1 Mergers, Subsidiaries, Etc .................................. 32
6.2 Investments ................................................. 32
6.3 Indebtedness ................................................ 33
6.4 Affiliate and Employee Transactions ......................... 33
6.5 Capital Structure and Business .............................. 34
6.6 Guaranteed Indebtedness ..................................... 35
6.7 Liens ....................................................... 35
6.8 Sale of Assets .............................................. 35
6.9 ERISA ....................................................... 36
6.10 Financial Covenant .......................................... 37
6.11 Restricted Payments ......................................... 37
6.12 Hazardous Materials ......................................... 37
6.13 Sale-Leasebacks ............................................. 38
6.14 Cancellation of Indebtedness ................................ 38
6.15 Bank Accounts ............................................... 38
6.16 No Speculative Investments .................................. 38
6.17 Margin Regulations .......................................... 38
6.18 Limitation on Negative Pledge Clauses ....................... 38
6.19 Material Contracts .......................................... 38
6.20 Leases ...................................................... 38
6.21 Limitations on Modifications of Subordinated Note and
Preferred Stock Subordinated Notes .......................... 39
6.22 Limitations on Modifications of E-Commerce Transaction
Documents ................................................... 39
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7. TERM..............................................................39
7.1 Duration.................................................39
7.2 Survival of Obligations..................................39
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES............................40
8.1 Events of Default........................................40
8.2 Remedies.................................................42
8.3 Waivers by Borrower......................................42
9. AGENT.............................................................42
9.1 Appointment, Powers and Immunities.......................42
9.2 Reliance by Agent........................................43
9.3 Defaults.................................................43
9.4 Rights as a Lender.......................................43
9.5 Indemnification..........................................44
9.6 Non-Reliance on Agent and Other Lenders..................44
9.7 Failure to Act...........................................44
9.8 Resignation of Agent.....................................45
9.9 Consents under Loan Documents............................45
9.10 Collateral Matters.......................................45
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10. SUCCESSORS AND ASSIGNS............................................46
10.1 Successors and Assigns...................................46
10.2 Assignments and Participations...........................46
11. MISCELLANEOUS.....................................................49
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11.1 Complete Agreement; Modification of Agreement....................49
11.2 Fees and Expenses................................................50
11.3 No Waiver........................................................51
11.4 Remedies.........................................................51
11.5 Severability.....................................................51
11.6 Conflict of Terms................................................51
11.7 Right of Setoff..................................................51
11.8 Authorized Signature.............................................52
11.9 Notices..........................................................52
11.10 Section Titles...................................................53
11.11 Counterparts.....................................................53
11.12 Time of the Essence..............................................53
11.13 GOVERNING LAW....................................................53
11.14 WAIVER OF JURY TRIAL.............................................54
11.15 Publicity........................................................54
11.16 Collateral Documents.............................................55
11.17 Dating...........................................................55
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INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Appendix 1 - Revolving Credit Commitments and Lender Information Annex A - Definitions; Rules of Construction Annex B - Cash Management System Annex C - Schedule of Closing Documents Annex D - Financial Statements and Notices Annex E - Insurance Requirements Annex F - Letters of Credit Schedule 3.2 - Executive Offices; Trade Names Schedule 3.4 - Financial Statements and Projections Schedule 3.5 - Restricted Payments Schedule 3.6 - Real Estate and Leases Schedule 3.8 - Labor Matters Schedule 3.9 - Ventures, Subsidiaries and Affiliates; Outstanding Stock Schedule 3.12 - Tax Matters Schedule 3.13 - ERISA Plans Schedule 3.14 - Litigation Schedule 3.16 - Patents, Trademarks, Copyrights and Licenses Schedule 3.19 - Insurance Policies Schedule 3.20 - Disbursement and Deposit Accounts Schedule 6.2 - Investments Schedule 6.3 - Indebtedness Schedule 6.4 - Loans to and Transactions with Employees Schedule 6.7 - Liens Schedule 6.19 - Material Contracts Schedule 11.8 - Authorized Signatures Exhibit A-1 - Form of Notice of Revolving Credit Advance Exhibit A-2 - Form of Notice of Conversion/Continuation Exhibit B - Form of Borrowing Base Certificate Exhibit C - Form of Revolving Credit Note Exhibit D - Security Agreement Exhibit E - Form of Intercreditor Agreement Exhibit F - Pledge Agreement Exhibit G - Form of Assignment and Acceptance Exhibit H - Second Amended and Restated Stockholder's Agreement Exhibit I - Second Amended and Restated Registration Rights Agreement |
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 26, 2000, among DICK'S SPORTING GOODS, INC., a Delaware Corporation ("BORROWER"), the lenders listed on the signature pages hereof or which pursuant to SECTION 10.2 shall become a "LENDER" hereunder (each individually a "LENDER" and collectively "LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent hereunder for Lenders (in such capacity, together with its successors in such capacity, "AGENT").
RECITALS
A. The Borrower, the lenders parties thereto (the "EXISTING LENDERS") and General Electric Capital Corporation, as agent for the Existing Lenders, are parties to an Amended and Restated Credit Agreement, dated as of July 15, 1997, as amended by the First Amendment, dated as of July 23, 1997, the Second Amendment, dated as of October 13, 1998, the Third Amendment, dated as of January 27, 1999, the Fourth Amendment, dated as of April 16, 1999, the Fifth Amendment, dated as of October 29, 1999, the Sixth Amendment, dated as of April 26, 2000 and the Seventh Amendment, dated as of May 30, 2000 (as so amended, the "EXISTING CREDIT AGREEMENT").
B. Pursuant to the Existing Credit Agreement, the Existing Lenders agreed to make certain revolving credit loans and/or certain other financial accommodations to Borrower of up to $140,000,000 upon the terms and conditions set forth therein.
C. Each of the parties hereto wishes to and agrees to amend and restate the Existing Credit Agreement on the terms and conditions set forth herein.
D. It is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities existing under the Existing Credit Agreement or evidence payment of all or any of such obligations and liabilities, that this Agreement amend and restate in its entirety the Existing Credit Agreement, and that from and after the date hereof, the Existing Credit Agreement be of no further force and effect except as to evidence the incurrence of the "Obligations" thereunder and the representations and warranties made thereunder.
E. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings ascribed to them in ANNEX A and, for purposes of this Agreement and the other Loan Documents, the rules of construction set forth in ANNEX A shall govern. Unless otherwise indicated, all references in this Agreement to sections, subsections, schedules, exhibits, and attachments shall refer to the corresponding sections, subsections, schedules, exhibits, and attachments of or to this Agreement. All schedules, annexes, exhibits and attachments hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together, shall constitute but a single agreement. Unless otherwise expressly set forth herein, or in a written amendment referring to such schedules and annexes, all schedules and annexes referred to herein shall mean the schedules and annexes as in effect as of the Closing Date. These Recitals shall be construed as part of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree that, effective on the Closing Date, the Existing Credit Agreement shall be and hereby is amended and restated in its entirety to read as follows:
1. AMOUNT AND TERMS OF CREDIT
(a) Upon and subject to the terms and conditions hereof; each Lender severally agrees to make available (and continue outstanding any such advances outstanding pursuant to the terms of the Existing Credit Agreement), from time to time, until the Commitment Termination Date, for Borrower's use and upon the request of Borrower therefor to Agent, advances (each, including any such advances outstanding pursuant to the terms of the Existing Credit Agreement, together with any payments made in respect of any Letter of Credit Obligations which are automatically deemed to constitute Revolving Credit Advances pursuant to paragraph 2 of ANNEX F, a "REVOLVING CREDIT ADVANCE") in an aggregate principal amount at any time outstanding up to but not exceeding the Revolving Credit Commitment of such Lender, provided that in no event shall the principal amount of the Revolving Credit Loan exceed the Availability. Borrower may from time to time borrow, repay and reborrow Revolving Credit Advances under this SECTION 1.1; provided that Borrower shall give Agent notice of each such borrowing as provided in SECTION 1.1(b).
(b) Each Revolving Credit Advance shall be made on notice by Borrower to Agent at its address at 800 Connecticut Avenue, Two North, Norwalk, CT 06854, Attention: Dick's Account Manager, Telephone No. (203) 852-3600, Telecopy No. (203) 852-3640. Those notices must be given no later than (I) 12:00 noon (New York time) on the Business Day of the proposed Revolving Credit Advance, in the case of an Index Rate Loan, or (2)12:00 noon (New York time) on the date which is three (3) Business Days prior to the proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice (a "NOTICE OF REVOLVING CREDIT ADVANCE") must be given in writing (by telecopy or overnight courier) substantially in the form of EXHIBIT A-1, and shall include the information required in such Exhibit and such other information as may be required by Agent. Subject to SECTION 1.13, Agent shall promptly (and in any event prior to 2:00 p.m. (New York City time) on any day it receives a Notice of Revolving Credit Advance if the applicable borrowing is to occur on such day or prior to 5:00 p.m. (New York City time) on such day otherwise) notify each Lender thereof and on or prior to 3:00 p.m. on the date specified for such borrowing each Lender shall make available the amount of the Revolving Credit Advance(s) to be made by it on such date to Agent to such account of Agent as Agent may designate, in immediately available funds, for the account of Borrower. Notwithstanding anything to the contrary contained herein, if Borrower desires to have the Revolving Credit Advances bear interest by reference to a LIBOR Rate, it must comply with SECTION 1.1(c).
(c) So long as no Default or Event of Default shall have occurred and be continuing, and subject to the additional conditions precedent set forth in SECTION 2.2, Borrower shall have the option to (i) request that any Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding Loans from Index Rate
Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in accordance with SECTION 1.15(c) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all or any portion of any Loan as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on the last day of the LIBOR Period of the Loan to be continued. Any Loan to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of $1,500,000 and integral multiples of $500,000 in excess of such amount. Any such election must be made by 12:00 noon (New York time) on the third Business Day prior to (1) the date of any proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in such election. If no election is received with respect to a LIBOR Loan by 12:00 noon (New York time) on the third Business Day prior to the end of the LIBOR Period with respect thereto (or if a Default or an Event of Default shall have occurred and be continuing or the additional conditions precedent set forth in SECTION 2.2 shall not have been satisfied), that LIBOR Loan shall be converted to an Index Rate Loan at the end of its LIBOR Period. Borrower must make such election by notice to Agent in writing, by telecopy or overnight courier. In the case of any conversion or continuation, such election must be made pursuant to a written notice (a "NOTICE OF CONVERSION/CONTINUATION") in the form of EXHIBIT A-2. Agent and Lenders shall be entitled to rely upon and shall be fully protected under this Agreement in relying upon any Notice of Revolving Credit Advance or Notice of Conversion/Continuation reasonably believed by Agent to be genuine and to assume that the persons executing and delivering the same were duly authorized unless the responsible individual acting thereon for Agent shall have actual knowledge to the contrary.
(d) The Revolving Credit Advances made by each Lender (including any such advances made pursuant to the terms of the Existing Credit Agreement) shall be evidenced by a single promissory note of Borrower for each Lender substantially in the form of EXHIBIT C, dated the Closing Date, payable to such Lender in a principal amount equal to the amount of its Revolving Credit Commitment as in effect on the Closing Date and otherwise duly completed. The date and amount of each Revolving Credit Advance made by such Lender to Borrower and the date and amount of each payment or prepayment of principal thereof shall be recorded on the books and records of such Lender, which books and records shall constitute PRIMA FACIE evidence of the accuracy of the information therein recorded, provided that the failure of such Lender to make any such recordation or endorsement shall not affect the obligations of Borrower to make a payment when due of any amount owing hereunder or under such Lender's Revolving Credit Note. Subject to the terms and conditions hereof, each Lender agrees on the Closing Date to exchange its Revolving Credit Note (as defined in the Existing Credit Agreement) for such Lender's Revolving Credit Note issued pursuant to the terms hereof.
(e) Borrower shall furnish to Agent and each Lender a Borrowing Base Certificate completed and signed by an Executive Officer of Borrower, which sets forth a calculation of the Borrowing Base at the times and for the periods set forth in ANNEX D. Upon request of Agent, Borrower shall furnish to Agent and each Lender a more frequent Borrowing Base Certificate including on a daily basis prepared as of the end of each Business Day before the end of the next Business Day. Agent shall provide Borrower with no less than two Business Days' prior notice of a request for a more frequent Borrowing Base
Certificate. Borrower agrees that in making any Revolving Credit Advance hereunder Agent and each Lender shall be entitled to rely upon the most recent Borrowing Base Certificate delivered to Agent by Borrower. Borrower further agrees that if Borrower shall have failed to deliver a Borrowing Base Certificate to Agent within the specified period Lenders shall be under no obligation to make any further Revolving Credit Advances or incur Letter of Credit Obligations until such time as such Certificate is delivered to Agent and Lenders.
(f) The failure of any Lender (such Lender until such failure has been cured by such Lender, a "NON-FUNDING LENDER") to make any Revolving Credit Advance to be made by it on the date specified therefor shall not relieve any other Lender (each such other Lender, an "OTHER LENDER") of its obligation to make its Revolving Credit Advance on such date, but neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make a Revolving Credit Advance to be made by such Non-Funding Lender, and no Non-Funding Lender shall have any obligation to Agent or any Other Lender for the failure by such Non-Funding Lender. Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a "Lender" (or be included in the calculation of "Required Lenders" hereunder) for any voting or consent rights under or with respect to any Loan Document. Anything in this Agreement to the contrary notwithstanding, each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or enforce its rights arising out of this Agreement or the Revolving Credit Notes (including exercising any rights of off-set) without first obtaining the prior written consent of Agent or Required Lenders, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Revolving Credit Notes shall be taken in concert and at the direction or with the consent of Agent or Required Lenders and not individually by a single Lender.
(g) To the extent any amounts are due and owing from Borrower on account of the Obligations, Agent may make Revolving Credit Advances for Borrower's account pursuant to SECTION 1.10.
(a) Borrower hereby promises to pay to Agent for account of each Lender the entire outstanding principal amount of the Revolving Credit Loan and all other outstanding Obligations (including any Revolving Credit Advances made pursuant to the terms of the Existing Credit Agreement), and the Revolving Credit Loan and all other outstanding Obligations shall mature, on the Commitment Termination Date.
(b) In the event that the outstanding principal amount of the Revolving Credit Loan shall, at any time, exceed the Borrowing Availability, Borrower shall immediately repay the Revolving Credit Loan in the amount of such excess. In the event that, at any time, no Revolving Credit Advances are outstanding and the Letter of Credit Obligations exceed the Borrowing Base then in effect, Borrower shall make arrangements, as provided in paragraph 5 of ANNEX F, for satisfaction of Letter of Credit Obligations in the amount of such excess.
(e) Borrower shall have the right at any time upon ten (10) days' prior written notice to Agent to voluntarily terminate the Aggregate Revolving Credit Commitment
(in whole but not in part) without premium or penalty. Upon such termination, Borrower's right to receive Revolving Credit Advances and the benefit of Letter of Credit Obligations and Borrower's obligation to pay the Non-use Fee shall simultaneously terminate, and, notwithstanding anything to the contrary contained herein or in any Loan Document, the entire outstanding balance of the Revolving Credit Loan and all other Obligations shall be immediately due and payable. On the date of such termination, Borrower shall pay to Agent in immediately available funds all of the Obligations, and any accrued and unpaid interest thereon, and make arrangements, in accordance with paragraph 5 of ANNEX F, for satisfaction of any outstanding Letter of Credit Obligations.
1.3 USE OF PROCEEDS. Borrower shall use the proceeds of the Revolving Credit Loan only (a) for payment of Fees, expenses and other costs incurred in connection with this Agreement, (b) for the financing of Borrower's ordinary working capital needs and Capital Expenditures permitted by the terms of this Agreement and the other Loan Documents, (c) for a preferred equity investment in DSG Holdings in an amount not in excess of $ 10,000,000 less the non-cash investment by Borrower in the preferred equity capital of DSG Holdings contemplated by Section 6.2(g), PROVIDED that such non-cash investment shall not be less than $5,000,000, (d) to repurchase up to 59.8% of the common stock of Borrower issued upon the conversion of the Preferred Stock as contemplated by the Information Statement; PROVIDED, that (i) such conversion and repurchase shall be consummated on substantially the terms set forth in the Information Statement and, in any event, on or prior to June 29, 2000 and (ii) without limiting the foregoing, the aggregate consideration paid in cash by Borrower in connection with such repurchase shall not exceed $45,000,000, and (e) for payments due under the Preferred Stock Subordinated Notes in accordance with the terms thereof and SECTION 6.11.
1.4 INTEREST ON REVOLVING CREDIT ADVANCES.
(a) Borrower shall pay interest on the Revolving Credit Loan to Agent for the account of each Lender, (i) in the case of Index Rate Loans, in arrears for the preceding calendar month, on the second Business Day of each calendar month commencing on July 5, 2000, (ii) in the case of LIBOR Loans, in arrears, on the last day of each LIBOR Period therefor, (iii) on the Commitment Termination Date, and (iv) if any interest accrues or remains payable after the Commitment Termination Date, upon demand. If any interest or other payment under this Agreement becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.
(b) Borrower shall be obligated to pay interest to Agent for the
account of each Lender on the outstanding balance of the Revolving Credit Loan
(i) with respect to Index Rate Loans at a floating rate equal to the Index Rate
(as in effect from time to time) plus the Applicable Margin, and (ii) with
respect to LIBOR Loans, for each LIBOR Period relating thereto, the LIBOR Rate
for such Loan for such LIBOR Period plus the Applicable Margin. All computations
of interest shall be made by Agent and on the basis of a three hundred and sixty
(360) day year, in each case for the actual number of days occurring in the
period for which such interest is payable. Each determination by Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error or bad faith.
(c) Upon the occurrence and during the continuance of any Default, (i) any outstanding LIBOR Loan may be converted by the Agent (in its discretion) to an Index Rate Loan, and (ii) the Required Lenders may in their discretion, by giving notice to Borrower of their intention to do so, increase as of the date of such notice the interest rate applicable to all of the Obligations, including the Revolving Credit Loan, to the Default Rate and increase the rate for calculation of Letter of Credit Fees by two percent (2%) per annum above the rate otherwise applicable; provided, however, that upon the occurrence of an Event of Default specified in SECTION 8.1(f), (g) OR (h), the interest rate applicable to all of the Obligations and the rate for calculation of Letter of Credit Fees shall be increased automatically as provided above without the necessity of any action on the part of Required Lenders.
(d) Notwithstanding anything to the contrary set forth in this
SECTION 1.4, if, at any time until the Termination Date, the rate of interest
payable to any Lender hereunder exceeds the highest rate of interest permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto(the "Maximum Lawful Rate"), then in such
event and so long as the MAXIMUM LAWFUL RATE would be so exceeded, the rate of
interest payable hereunder to such Lender shall be equal to the Maximum Lawful
Rate; PROVIDED, however, that if at any time thereafter the rate of interest
payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue
to pay interest hereunder to such Lender at the Maximum Lawful Rate until such
time as the total interest received by such Lender from the making of Revolving
Credit Advances hereunder is equal to the total interest which such Lender would
have received had the interest rate payable hereunder been (but for the
operation of this paragraph) the interest rate payable since the Closing Date as
otherwise provided in this Agreement. Thereafter, the interest rate payable to
such Lender hereunder shall be the rate of interest provided in SECTIONS 1.4
(b) THROUGH (c) of this Agreement, unless and until the rate of interest again
exceeds the Maximum Lawful Rate, in which event this paragraph shall again
apply. In no event shall the total interest received by any Lender pursuant to
the terms hereof exceed the amount which such Lender could lawfully have
received had the interest due hereunder been calculated for the full term hereof
at the Maximum Lawful Rate. In the event the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made. In the event that a court of competent
jurisdiction, notwithstanding the provisions of this SECTION 1.4(d), shall make
a final determination that a Lender has received interest hereunder or under any
of the Loan Documents in excess of the Maximum Lawful Rate, such Lender shall,
to the extent permitted by applicable law, promptly apply such excess first to
any lawful interest due and not yet paid hereunder, then to the outstanding
principal of the Obligations, then to Fees and any other unpaid Obligations and
thereafter shall refund any excess to Borrower or as a court of competent
jurisdiction may otherwise order.
1.5 ELIGIBLE INVENTORY. Based on the most recent Borrowing Base Certificate delivered by Borrower to Agent and on other information available to Agent, Agent shall determine which Inventory shall be deemed Eligible Inventory for purposes of determining the amounts, if any, to be advanced to Borrower under the Revolving Credit Loan.
1.6 FEES.
(a) Borrower agrees to pay to Agent for the account of Lenders an unused facility fee (the "NON-USE FEE") equal to one quarter of one percent (0.25%) per annum on the average unused daily balance of the Lenders' Revolving Credit Commitments, payable in arrears (a) for the preceding calendar month, on the second Business Day of the succeeding calendar month commencing on the second Business Day of the calendar month immediately succeeding the Closing Date, and (b) on the Commitment Termination Date. All computations of the foregoing fee shall be made by Agent on the basis of a three hundred sixty (360) day year, and for the actual number of days occurring in the period for which such fee is payable.
(b) (Intentionally Omitted.)
(c) Borrower agrees to pay to Agent for the account of Lenders
a Letter of Credit fee (the "LETTER OF CREDIT FEE") equal to one and one quarter
of one percent (1.25%) of the face amount of outstanding Letters of Credit,
payable in arrears for the preceding calendar month, on the second Business Day
of the succeeding calendar month commencing on the second Business Day of the
calendar month immediately succeeding the Closing Date. All computations of the
foregoing fee shall be made by Agent and on the basis of a three hundred sixty
(360) day year, in each case for the actual number of days occurring in the
period for which such fee is payable.
(d) Borrower agrees to pay to Agent for its own account and the Lenders' account, as the case may be, such other fees and charges as are set forth in the separate fee letters between Borrower and Agent.
1.7 CASH MANAGEMENT SYSTEM. On or prior to the Closing Date, Borrower will establish and maintain until the Termination Date the cash management system described in Annex B.
1.8 RECEIPT OF PAYMENTS. Borrower shall make each payment under this
Agreement not later than 2:00 p.m. (New York City time) on the day when due in
Dollars in immediately available funds to the Collection Account. For purposes
of computing interest and Fees and receipt of payments (a) all payments
(including cash sweeps) consisting of cash, wire, or electronic transfers in
immediately available funds shall be deemed received by Agent upon deposit no
later than 2:00 p.m. (New York City time) in the Collection Account in
accordance with the Concentration Account Agreement and (b) all payments
consisting of checks, drafts, or similar non-cash items shall be deemed received
two (2) Business Days following deposit in the Collection Account (together with
notice to Agent of such deposit). For purposes of determining the Borrowing
Availability: (a) all payments (including cash sweeps) consisting of cash, wire,
or electronic transfers in immediately available funds shall be deemed received
by Agent upon deposit in the Collection Account in accordance with the
Concentration Account Agreement; and (b) all payments consisting of checks,
drafts, or similar non-cash items shall be deemed received upon deposit in the
Collection Account (together with notice to Agent of such deposit). Subject to
SECTION 1.13, each payment received by Agent under this Agreement or any
Revolving Credit Note or any other Loan Documents for the account of the Lenders
shall be paid by Agent promptly to the Lenders, in the same funds received, for
application to the Revolving Credit Advances or other Obligations in respect of
which such payment is made.
1.9 PROPORTIONATE SHARES. Except to the extent otherwise provided herein and subject to Section 1.13: (i) each borrowing of the Revolving Credit Loan from Lenders shall be incurred and made by the Lenders according to their respective Proportionate Shares; and (ii) each payment or prepayment of principal of the Revolving Credit Loan by Borrower shall be made for the account of the relevant Lenders in accordance with their respective Proportionate Shares; and (iii) each payment of interest on the Revolving Credit Loan, Non- use Fees and Letter of Credit Fees by Borrower shall be made for the account of the Lenders in accordance with their Proportionate Shares.
1.10 APPLICATION AND ALLOCATION OF PAYMENTS. Borrower irrevocably waives the right to direct the application of any and all payments at any time or times hereafter received from or on behalf of Borrower, and Borrower irrevocably agrees that Agent shall have the continuing exclusive right to apply any and all such payments against the then due and payable Obligations and in repayment of the Revolving Credit Loan, Letter of Credit Obligations and other Obligations as Agent may deem advisable. Notwithstanding the foregoing, in the absence of a specific determination by Agent with respect thereto or if an Event of Default shall have occurred and be continuing, the same shall be applied in the following order: (a) the principal of any Revolving Credit Advances made by Agent under SECTION 1.13(a); (b) then due and payable Fees, expenses and other Obligations owing to Agent; (c) then due and payable Fees and expenses of Lenders; (d) then due and payable interest payments on the Revolving Credit Loan in accordance with SECTION 1.13(d); (e) Obligations to Lenders other than Fees, expenses and interest and principal payments; (f) principal of the Revolving Credit Loan; and (g) to the extent there are no other Obligations then due and payable, to Borrower or its successors or assigns or as a court of competent jurisdiction may direct. Agent on behalf of Lenders is authorized to, and at its option may, make or cause to be made Revolving Credit Advances by Lenders on behalf of Borrower for payment of all Fees, expenses, charges, costs, principal, interest or other Obligations then due and payable by Borrower under this Agreement or any of the Loan Documents (including any payments made by Agent under SECTION 5.5(a) or any costs or expenses payable by Borrower under SECTION 11.2), even if the conditions precedent in SECTION 2.2 have not been satisfied with respect to such Revolving Credit Advance, including if the making of such Revolving Credit Advances causes the outstanding balance of the Revolving Credit Loan to exceed the Borrowing Availability.
1.11 NON-RECEIPT OF FUNDS BY AGENT. Unless Agent shall have been notified by a Lender or Borrower ("PAYOR") prior to the date on which (i) such Lender is to make payment to Agent of the proceeds of a Revolving Credit Advance to be made by such Lender hereunder or (ii) Borrower is to make payment to Agent for account of one or more of Lenders hereunder (such payment being herein called the "REQUIRED PAYMENT"), which notice shall be effective upon receipt, that Payor does not intend to make the Required Payment to Agent, Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient(s) on such date; and, if Payor has not in fact made the Required Payment to Agent, the recipient(s) of such payment shall, on demand, repay to Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by Agent until the date Agent recovers such amount at a rate per annum equal to the Index Rate for such period. Nothing in this SECTION 1.11 or elsewhere in this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any
Lender from its obligation to fulfill its Revolving Credit Commitment hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by such Lender hereunder.
1.12 SHARING OF PAYMENTS, ETC.
(a) Borrower agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as between Lenders, to the provisions of the last sentence of SECTION 1.1(f)), to offset balances held by it for the account of Borrower at any of its offices, in Dollars or in any other Currency, against any principal of or interest on any of such Lender's Revolving Credit Advances or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to Borrower), in which case it shall promptly notify Borrower and Agent thereof, provided that such Lender's failure to give such notice shall not affect the validity thereof.
(b) If any Lender (including Agent) shall obtain from Borrower payment of any principal of or interest on any Revolving Credit Advance owing to it or payment of any other amount under this Agreement or any Revolving Credit Note held by it or any other Loan Document through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a result of such payment, such Lender shall have received more than its Proportionate Share of the principal of or interest on the Revolving Credit Advances or such other amounts then due hereunder or thereunder by Borrower to such Lender than the percentage received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in (or, if and to the extent specified by such Lender, direct interests in) the Revolving Credit Advances or such other amounts, respectively, owing to such other Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance with their respective Proportionate Shares. Amounts received by Agent under this paragraph shall be treated as a payment received by Borrower under SECTION 1.10. To such end all Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored.
(c) Borrower agrees that any Lender so purchasing such a
participation (or direct interest) may exercise, in a manner consistent with
SECTION 1.12(a), all rights of set-off, banker's lien, counterclaim or similar
rights with respect to such participation as fully as if such Lender were a
direct holder of Revolving Credit Advances or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this SECTION 1.12 applies, such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in any event, exercise
its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section 1.12 to share in the benefits of any recovery on such secured claim.
1.13 SETTLEMENT PROCEDURES.
(a) In order to administer the Revolving Credit Loan in an
efficient manner and to minimize the transfer of funds between Agent and
Lenders, so long as the conditions precedent set forth in SECTION 2.1 and
SECTION 2.2, as the case may be, remain satisfied, Agent may, in its discretion,
subject to the following paragraphs (b), (c) and (d), make available, on behalf
of Lenders, the full amount of the Revolving Credit Advances in an amount of up
to $10,000,000 outstanding on any day (after application of payments received on
such day) requested or deemed requested by Borrower pursuant to SECTION 1.1(b)
and SECTION 1.1(g), without notice to Lenders of the proposed Revolving Credit
Advance pursuant to SECTION 1.1(b).
(b) If Agent shall have made one or more Revolving Credit
Advances on behalf of Lenders as provided in this SECTION 1.13(b), the amount of
each Lender's Proportionate Share of the outstanding Revolving Credit Advances
(for purposes of this SECTION 1.1 3(b)) shall be computed weekly rather than
daily and shall be adjusted upward or downward on the basis of the amount of the
outstanding Revolving Credit Advances as of 5:00 P.M. (New York City time) on
the Business Day immediately preceding the date of each computation; PROVIDED,
that Agent retains the absolute right at any time or from time to time to make
the above described adjustments at intervals more frequent than weekly. Agent
shall deliver to each of the Lenders after the end of each week, or such lesser
period or periods as Agent shall determine, a summary statement of the amount of
outstanding Revolving Credit Advances for such period (such week or lesser
period or periods being hereafter referred to as a "SETTLEMENT PERIOD"). If the
summary statement is sent by Agent and received by a Lender prior to 12:00 Noon
(New York City time) then such Lender shall make the transfers described in the
next succeeding sentence no later than 2:00 P.M. (New York City time) on the day
such summary statement was sent, and if such summary statement is sent by Agent
and received by a Lender after 12:00 Noon (New York City time), such Lender
shall make such transfers no later than 2:00 P.M. (New York City time) on the
next succeeding Business Day. If, in any Settlement Period, the amount of a
Lender's Proportionate Share of the outstanding Revolving Credit Advances is
more than such Lender's Proportionate Share of the outstanding Revolving Credit
Advances for the previous Settlement Period, then such Lender shall forthwith
(but in no event later than the time set forth in the next preceding sentence)
transfer to Agent by wire transfer in immediately available funds the amount of
the increase; and on the other hand, if the amount of a Lender's Proportionate
Share of the outstanding Revolving Credit Advances in any Settlement Period is
less than the amount of such Lender's Proportionate Share of the outstanding
Revolving Credit Advances for the previous Settlement Period, Agent shall
forthwith transfer to such Lender by wire transfer in immediately available
funds the amount of the decrease. The obligation of each of the Lenders to
transfer such funds shall be irrevocable and unconditional and without recourse
to or warranty by Agent. Each of Agent and Lenders agrees to mark its books and
records at the end of each Settlement Period to show at all times the Dollar
amount of its Proportionate Share of the outstanding Revolving Credit Advances.
(c) To the extent that Agent has made any such amounts
available and the settlement described above shall not yet have occurred, upon
repayment of any Revolving Credit Advances by Borrower, Agent may apply such
amounts repaid directly to any amounts made available by Agent pursuant to
SECTION 1.13(a).
(d) Because Agent, on behalf of Lenders, may be advancing or may be repaid Revolving Credit Advances prior to the time when Lenders will actually advance or be repaid Revolving Credit Advances, interest, Non-use Fees and Letter of Credit Fees with respect to the outstanding Revolving Credit Advances shall be allocated by Agent to each Lender (including Agent), and the amount of each Lender's (including Agent's) Proportionate Share shall be computed daily, in accordance with the amount of the outstanding Revolving Credit Advances actually advanced by and repaid to each Lender (including Agent) on each day during each Settlement Period and shall accrue from and including the date such Revolving Credit Advances are advanced by Agent to but excluding the date such Revolving Credit Advances are repaid by Borrower in accordance with SECTION 1.2 or actually settled by the applicable Lender as described in this SECTION 1.13. On the second Business Day of each calendar month (an "INTEREST SETTLEMENT DATE"), Agent will advise each Lender by telephone, telex or telecopy of the amount of such Lender's Proportionate Share of interest paid and Non-use Fees and Letter of Credit Fees paid for the benefit of Lenders on the Revolving Credit Loan as of such Interest Settlement Date. Provided that such Lender has made all payments required to be made by it under this Agreement and the other Loan Documents, Agent will pay to such Lender, by wire transfer to such Lender not later than 12:00 noon (New York time) on the next Business Day following the Interest Settlement Date, such Lender's Proportionate Share of interest paid and Non-use Fees and Letter of Credit Fees paid for the benefit of Lenders on the Revolving Credit Loan.
1.14 ACCOUNTING. Agent will provide a monthly accounting of transactions under the Revolving Credit Loan to Borrower. Each and every such accounting shall (absent manifest error) be deemed final, binding and conclusive upon Borrower in all respects as to all matters reflected therein, unless Borrower, within thirty (30) days after the date any such accounting is rendered, shall notify Agent in writing of any objection which Borrower may have to any such accounting, describing the basis for such objection with specificity. In that event, only those items expressly objected to in such notice shall be deemed to be disputed by Borrower. Agent's determination, based upon the facts available, of any disputed item shall (absent manifest error) be final, binding and conclusive on Borrower.
1.15 INDEMNITY.
(a) Borrower shall indemnify and hold Agent, each Lender and their respective Affiliates, and each of their respective officers, directors, employees and their respective attorneys and agents (each, an "INDEMNIFIED PERSON"), harmless from and against any and all suits, actions, costs, fines, deficiencies, penalties, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other costs of investigations or defense, including those incurred upon any appeal) (each, a "Claim") which may be instituted or asserted against or incurred by such Indemnified Person as the result of credit having been extended under this Agreement or any other Loan Document or otherwise arising in connection with the transactions contemplated hereunder and thereunder, including any and all Environmental Liabilities and Costs and regardless of whether the Indemnified Person is a party to such Claim, PROVIDED, that Borrower shall not
be liable for any indemnification to such Indemnified Person with respect to any portion of any such Claim which results solely from such Indemnified Person's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. The foregoing indemnity obligations of Borrower shall be in addition to, and not in limitation of, any other liability or obligations that Borrower or any other Person may have to any Indemnified Person, by contract, at common law or otherwise, included but not limited to any right of contribution. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED THEREBY.
In any suit proceeding or action brought by Agent or Lenders relating to any Collateral for any sum owing in respect thereof or to enforce any provision of any Collateral, Borrower shall save, indemnify and keep Agent and Lenders harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder arising out of a breach by Borrower of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from Borrower, all such obligations of Borrower shall be and remain enforceable against, and only against, Borrower and shall not be enforceable against Agent or Lenders.
(b) Borrower hereby acknowledges and agrees that neither Agent nor any Lender (as of the date hereof) is now or has ever been in control of any of the Subject Property or the affairs of any Loan Party.
(c) To induce Lenders to provide the LIBOR Rate option on the terms provided herein, if(i) any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or is the result of acceleration, by operation of law or otherwise); (ii) Borrower shall default in payment when due of the principal amount of or interest on any LIBOR Loan; (iii) Borrower shall default in making any borrowing of, conversion into or continuation of LIBOR Loans after Borrower has given notice requesting the same in accordance herewith; or (iv) Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower has given a notice thereof in accordance herewith, Borrower shall indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing. Such indemnification shall include any loss (including loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained. For the purpose of calculating amounts payable to a Lender under this Section, each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a maturity comparable to the relevant Interest Period; PROVIDED, HOWEVER, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section. This covenant shall survive the termination of this Agreement
and the payment of the Revolving Credit Notes and all other amounts payable hereunder. As promptly as practicable under the circumstances, each Lender shall provide Borrower with its written calculation of all amounts payable pursuant to this SECTION 1.15(c), and such calculation shall be binding on the parties hereto unless Borrower shall object in writing within thirty (30) Business Days of receipt thereof, specifying the basis for such objection in detail.
1.16 ACCESS. Borrower shall: (a) provide access during normal business
hours to Agent and any of its officers, employees and agents as frequently as
Agent determines to be appropriate upon reasonable advance notice to Borrower
(unless a Default shall have occurred and be continuing, in which event no such
notice shall be required and such access shall be at any and all times) to the
properties and facilities of Borrower or any of its Subsidiaries; (b) permit
Agent and any of its officers, employees and agents, as frequently as Agent
determines to be appropriate, to inspect, audit and make extracts from all of
Borrower's records, files and books of account; and (c) permit Agent and any of
its officers, employees and agents, as frequently as Agent determines to be
appropriate, upon reasonable advance notice to Borrower (unless a Default shall
have occurred and be continuing, in which event no such notice shall be required
and such access shall be at any and all times) to conduct audits to inspect,
review and evaluate the Collateral, and Borrower agrees to render to Agent at
Borrower's cost and expense such clerical and other assistance as may be
reasonably requested with regard thereto. Borrower shall make available to Agent
and each Lender and their respective counsel, as quickly as practicable under
the circumstances, originals or copies of all books, records, board minutes,
contracts, insurance policies, environmental audits, business plans, files,
financial statements (actual and pro forma), filings with federal, state and
local regulatory agencies, and other instruments and documents in Borrower's
custody or control or otherwise belonging to or property of Borrower which Agent
or any Lender may reasonably request. Borrower shall deliver any document or
instrument reasonably necessary for Agent, as it may from time to time request,
to obtain records from any service bureau or other Person which maintains
records for Borrower, and shall maintain duplicate records or supporting
documentation on media, including computer tapes and discs owned by Borrower.
Borrower shall make available to Agent upon its reasonable request information
and records prepared by its certified public accountants and its banking and
other financial institutions. Notwithstanding the foregoing, nothing in this
SECTION 1.16 or otherwise in any Loan Document shall require Borrower to
disclose to Agent, any Lender, or any of their respective officers, employees or
agents, any documents, instruments or other information protected by the
attorney-client privilege if (i) in the opinion of counsel reasonably acceptable
to Agent such privilege has not previously been waived or lost, (ii) in the
opinion of counsel reasonably acceptable to Agent such disclosure could
reasonably be expected to cause Borrower to waive the benefit of such privilege
and (iii) losing the benefit of such privilege would be materially detrimental
to Borrower.
1.17 TAXES.
(a) Any and all payments by or on behalf of Borrower hereunder or under the Revolving Credit Note, or any other Loan Document, shall be made, in accordance with this SECTION 1.17, free and clear of and without deduction for any and all present or future Taxes. If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Revolving Credit Note or any other Loan Document to Agent or any Lender, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional sums payable under this SECTION 1.17) Agent or such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Notwithstanding the foregoing, Borrower shall not be required to increase any such sum payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (f) of this Section.
(b) In addition, Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement excluding taxes, charges or similar levies that are imposed on or measured by the net income of any Lender by the United States of America, the jurisdiction under the laws of which such Lender is organized or the jurisdiction in which such Lender's applicable lending office is located or, in each case any political subdivision thereof (hereinafter referred to as "OTHER TAXES").
(c) Borrower shall indemnify and pay, within ten (10) days of demand therefor, Agent and each Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this SECTION 1.17) paid by Agent or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted.
(d) Within thirty (30) days after the date of any such payment of Taxes or Other Taxes described in SECTION 1.1 7(a), (b) OR (c), Borrower shall furnish to Agent or such Lender, the original or a certified copy of a receipt evidencing payment thereof.
(e) If any Lender subsequently receives from a taxing authority a refund of any Tax or Other Tax previously paid by Borrower and for which Borrower has indemnified Lender pursuant to this SECTION 1.17, such Lender shall within thirty (30) days after receipt of such refund, and to the extent permitted by applicable law, pay to Borrower the net amount of any such refund after deducting taxes and expenses attributable thereto and any taxes which such Lender is required to withhold from the payment to Borrower.
(f) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall:
(i) deliver to Borrower and Agent two duly completed copies of United States Internal Revenue Service Form W-8ECI or Form W-8BEN, or successor applicable form, as the case may be;
(ii) deliver to Borrower and Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to Borrower; and
(iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by Borrower or Agent;
PROVIDED that no event (including any change in treaty, law or regulation or the official interpretation thereof) has occurred prior to the date on which any such delivery would otherwise be required which renders a form inapplicable or which prevents such Lender from duly completing and delivering any such form with respect to it and such Lender so advises Borrower and Agent. Subject to the foregoing proviso, such Lender shall certify that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. Each Person that shall become a Lender or a Participant pursuant to SECTION 10.2 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this Section, provided that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased.
1.18 LETTERS OF CREDIT. Subject to the terms and conditions of this Agreement including Annex F, Borrower shall have the right to request, and each Lender agrees to incur, the Letter of Credit Obligations (and Revolving Credit Advances and other obligations in respect thereof) in accordance with the terms and conditions set forth in ANNEX F.
1.19 CAPITAL ADEQUACY. Borrower shall pay directly to each Lender from
time to time on request such amounts as such Lender may reasonably determine to
be necessary to compensate such Lender for any costs that it reasonably
determines are attributable to the maintenance by such Lender, pursuant to any
law or regulation or any interpretation, directive or request (whether or not
having the force of law and whether or not failure to comply therewith would be
unlawful) of any Governmental Authority (a) following any Regulatory Change or
(b) implementing after the date hereof any risk-based capital guideline or other
capital requirement (whether or not having the force of law and whether or not
the failure to comply therewith would be unlawful) heretofore or hereafter
issued by any Governmental Authority, of capital in respect of such Lender's
Revolving Credit Commitment, Revolving Credit Advances and/or Letter of Credit
Obligations hereunder (such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity of such
Lender to a level below that which such Lender could have achieved but for such
law, regulation, interpretation, directive or request). Each Lender shall notify
Borrower of any event occurring after the date of this Agreement entitling such
Lender to compensation under this SECTION 1.19 as promptly as practicable, but
in any event within 90 days, after such Lender obtains actual knowledge thereof;
PROVIDED that if any Lender fails to give such notice within 90 days after it
obtains actual knowledge of such an event, such Lender shall, with respect to
compensation payable pursuant to this SECTION 1.19 in respect of any costs
resulting from such event, only be entitled to payment under this SECTION 1.19
for costs incurred from and after the date 90 days prior to the date that such
Lender does give such notice. Each Lender will furnish to Borrower a certificate
setting forth the basis and amount of each request by such Lender for
compensation under this SECTION 1.19. Determinations and allocations by any
Lender for purposes of this SECTION 1.19 of the effect of any Regulatory Change
pursuant to or of capital maintained pursuant to this SECTION 1.19, on its costs
or rate of return of maintaining Revolving Credit Advances or its Revolving
Credit Commitment and of the amounts required to compensate such Lender under
this SECTION 1.19, shall be conclusive absent manifest error.
1.20 INCREASED COSTS.
If, due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loan, then Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to Agent), pay to Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower and to Agent by such Lender, shall be conclusive and binding on Borrower for all purposes, absent manifest error. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender's internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrower pursuant to this SECTION 1.20.
1.21 ILLEGALITY.
Notwithstanding anything to the contrary contained herein, if
the introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained therefrom,
on notice thereof and demand therefor by such Lender to Borrower through Agent,
(i) the obligation of such Lender to agree to make or to make or to continue to
fund or maintain LIBOR Loans shall terminate and (ii) Borrower shall forthwith
prepay in full all outstanding LIBOR Loans owing to such Lender, together with
interest accrued thereon, unless Borrower, within five (5) Business Days after
the delivery of such notice and demand, converts all such Loans into a Loan
bearing interest based on the Index Rate.
1.22 REPLACEMENT OF LENDER IN RESPECT OF INCREASED COSTS. Within fifteen (15) days after receipt by Borrower of written notice and demand from any Lender (an "AFFECTED LENDER") for payment of additional amounts or increased costs as provided in SECTION 1.17(a), 1.19 or 1.20 Borrower may, at its option, notify Agent and such Affected Lender of its intention to replace the Affected Lender. So long as no Default or Event of Default shall have occurred and be continuing, Borrower, with the consent of Agent, may obtain, at Borrower's expense, a replacement Lender ("REPLACEMENT LENDER") for the Affected Lender, which Replacement Lender must be satisfactory to Agent. If Borrower obtains a Replacement Lender within ninety (90) days following notice of its intention to do so, the Affected Lender must sell and assign its Loans and Commitments to such Replacement Lender for an amount equal to the principal balance of all Loans held by the Affected Lender and all accrued interest and Fees with respect thereto through the date of such sale, PROVIDED that Borrower shall have reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment.
Notwithstanding the foregoing, Borrower shall not have the right to obtain a
Replacement Lender if the Affected Lender rescinds its demand for increased
costs or additional amounts within fifteen (15) days following its receipt of
Borrower's notice of intention to replace such Affected Lender. Furthermore, if
Borrower gives a notice of intention to replace and does not so replace such
Affected Lender within ninety (90) days thereafter, Borrower's rights under this
SECTION 1.22 shall terminate and Borrower shall promptly pay all increased costs
or additional amounts demanded by such Affected Lender pursuant to SECTIONS
1.17(a), 1.19 AND 1.20.
2. CONDITIONS PRECEDENT
2.1 Conditions to Effectiveness.
Notwithstanding any other provision of this Agreement and without affecting in any manner the rights of Agent or any Lender hereunder, the effectiveness of this Agreement and the obligation of Agent and Lenders to make and/or continue any Revolving Credit Advances hereunder, to incur any Letter of Credit Obligations, or to take, fulfill, or perform any other action hereunder, are subject to the fulfillment of the following conditions to the satisfaction of Agent (and to the extent specified below, of Lenders):
(a) This Agreement or counterparts thereof shall have been duly executed by Borrower and delivered to Agent and each Lender.
(b) Agent and Lenders shall have received such documents, instruments, certificates, opinions and agreements as Agent shall reasonably request in connection with the transactions contemplated by this Agreement, including all documents, instruments, agreements and other materials listed in the Schedule of Documents each in form and substance satisfactory to Agent and each Lender.
(c) Evidence satisfactory to Agent that Borrower has obtained consents and acknowledgments of all Persons whose consents and acknowledgments may be required, including, but not limited to, all requisite Governmental Authorities, to the terms and to the execution and delivery, of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby.
(d) Evidence satisfactory to Agent that the insurance policies provided for in SECTION 3.19 and ANNEX E are in full force and effect, together with appropriate evidence showing a loss payable and/or additional insured clauses or endorsements, as appropriate, in favor of Agent and Lenders and in form and substance satisfactory to Agent.
(e) Payment by Borrower to Agent (i) for its account and the account of Lenders, as the case may be, of all Fees, costs, and expenses of closing (including fees and expenses of consultants and counsel to Agent presented as of the Closing Date), and (ii) for the account of the Existing Lenders, all interest, letter of credit fees and unused line fees under the Existing Credit Agreement accrued through, but not including, the Closing Date, plus any and all reimbursable expenses or other charges payable by Borrower under the Existing Credit Agreement accrued through the Closing Date, whether or not then due and payable.
(f) No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain or prohibit, or to obtain damages in respect of, or which is related to or arises out of this Agreement or any of the other Loan Documents or the consummation of the transactions contemplated hereby and thereby and which, in Agent's sole judgment, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents.
(g) Borrower will have no Subsidiaries, other than DAMC (provided DAMC owns no Inventory and its condition (financial and other), operations, business, liabilities, assets, properties and other activities are satisfactory to Agent).
(h) Since January 29, 2000, other than as disclosed in the Borrower's internally prepared unaudited financial statements for the three-month period ended approximately April 29, 2000 delivered to Agent by Borrower, none of the following shall have occurred and be continuing: (i) a Material Adverse Effect; (ii) a material increase in liabilities, liquidated or contingent, or a material decrease in assets of Borrower; (iii) any litigation or other proceeding is pending or threatened which if successful could, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect; or (iv) any material adverse change in the leveraged finance bank market.
(i) Each Lender shall be satisfied, in its reasonable judgment, with (i) the corporate, capital, tax, legal and management structure of each Loan Party; (ii) the nature and status of all contractual obligations, securities, labor, tax, ERISA, employee benefit, environmental, health and safety matters, in each case, involving or affecting any Loan Party; and (iii) the terms of Borrower's Subordinated Note and other Indebtedness and Borrower's Preferred Stock, stockholders' agreements (including the Preferred Stock Agreements), voting trust agreements, stock redemption agreements, and other agreements with shareholders (including payments, covenants, defaults and remedies thereunder) and any earnout or deferred compensation arrangements with management of Borrower).
(j) Agent and Lenders shall have received for the three-month period ended April 29, 2000 a balance sheet and statements of operations and cash flows of Borrower and its Subsidiaries certified by the Chief Financial Officer of Borrower and in form and substance satisfactory to Agent.
(k) Agent and Lenders shall have received as of the Closing Date the Projections in form and substance satisfactory to Agent.
(l) Agent and Lenders shall have received as of the Closing Date the acknowledgment and agreement of DAMC that from and after the Closing Date (i) each Collateral Document to which it is a party shall continue without any diminution thereof and shall remain in full force and effect and (ii) each reference in such Collateral Documents to the "Agent", "Lenders", "Credit Agreement", and "Obligations" shall be references to, respectively, the Agent, the Lenders, this Agreement, and the Obligations defined in this Agreement.
The execution of this Agreement by each Lender shall be an acknowledgment by such Lender that the conditions set forth in this SECTION 2.1 have been satisfied or provided for in a manner satisfactory to such Lender.
2.2 FURTHER CONDITIONS TO EACH REVOLVING CREDIT ADVANCE AND EACH LETTER OF CREDIT OBLIGATION.
No Lender shall be obligated to fund any Loan, convert or continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation unless the following conditions have been fulfilled:
(a) Each Loan Party's representations and warranties contained herein or in any of the Loan Documents shall be true and correct on and as of the Closing Date and the date on which such Revolving Credit Advance is made or such Letter of Credit Obligations are incurred, as the case may be, as though made on or incurred on and as of such date, except to the extent that any such representation or warranty expressly relates solely to an earlier date and except for changes therein permitted or contemplated by this Agreement.
(b) No event shall have occurred and be continuing, or would result from the making of such Revolving Credit Advance or the incurrence of such Letter of Credit Obligation, as the case may be, which constitutes or would constitute a Default.
(c) After giving effect to such Revolving Credit Advance or the incurrence of such Letter of Credit Obligation, the aggregate principal amount of the Revolving Credit Loan shall not exceed the Borrowing Availability.
The request and acceptance by Borrower of the proceeds of any Revolving Credit Advance, the incurrence of any Letter of Credit Obligation or the conversion or continuation of any Loan into, or as, a LIBOR Loan, as the case may be, shall be deemed to constitute, as of the date of such request or acceptance, (i) a representation and warranty by Borrower that the conditions in SECTION 2.1 and this SECTION 2.2 have been satisfied and (ii) a confirmation by Borrower of the granting and continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement, make the Revolving Credit Loans and incur the Letter of Credit Obligations, Borrower represents and warrants to Agent and Lenders that:
3.1 CORPORATE EXISTENCE: COMPLIANCE WITH LAW. Each Loan Party: (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified to do business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification and the failure to so qualify, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect; (b) has the requisite corporate power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates
under lease, and to conduct its business as now, heretofore and proposed to be conducted; (c) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all material notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct, except to the extent any failure to obtain any such license, permit, consent or approval or make any such filing or give any such notice, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect; (d) is in compliance with its certificate or articles of incorporation and by-laws; and (e) is in compliance in all respects with all applicable provisions of law except to the extent that such non-compliance, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect.
3.2 EXECUTIVE OFFICES; CORPORATE OR OTHER NAMES. The current locations of
each Loan Party's executive offices, principal place of business, corporate
offices, all warehouses and premises within which any Collateral is stored or
located, and the locations of all Borrower's records concerning the Collateral
are set forth in SCHEDULE 3.2 and, except as set forth in SCHEDULE 3.2, such
locations have not changed during the preceding 12 months. During the prior five
(5) years, except as set forth in SCHEDULE 3.2, no Loan Party has been known as
or used any corporate, fictitious or trade name.
3.3 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution,
delivery and performance by each Loan Party of the Loan Documents to which it is
a party and all other instruments and documents to be delivered by such Loan
Party hereunder and thereunder to the extent it is a party thereto and the
creation of all Liens provided for herein and therein: (a) are within such Loan
Party's corporate power; (b) have been duly authorized by all necessary
corporate and, if any, shareholder action; (c) are not in contravention of any
provision of such Loan Party's certificates or articles of incorporation or
by-laws or other organizational documents; (d) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality;
(e) will not conflict with or result in the breach or termination of, constitute
a default under or accelerate any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which any Loan
Party is a party or by which any Loan Party or any of its property is bound; (f)
will not result in the creation or imposition of any Lien upon any of the
property of any Loan Party other than those in favor of Agent or Lenders, all
pursuant to the Loan Documents; and (g) do not require the consent or approval
of any Governmental Authority or any other Person, except those referred to in
SECTION 2.1(c), all of which will have been duly obtained, made or complied with
prior to the Closing Date and which are in full force and effect. At or prior to
the Closing Date, each of the Loan Documents shall have been duly executed and
delivered for the benefit of or on behalf of each Loan Party which is a party
thereto and each shall then constitute a legal, valid and binding obligation of
such Loan Party to the extent it is a party thereto, enforceable against such
Loan Party in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights and to equitable principles of general applicability.
3.4 FINANCIAL STATEMENTS AND PROJECTIONS. Borrower has delivered the Financial Statements and Projections identified in SCHEDULE 3.4, and each of such Financial Statements and Projections complies with the description thereof contained in SCHEDULE 3.4.
3.5 MATERIAL ADVERSE CHANGE. Except as set forth in SCHEDULE 3.5, neither Borrower nor any of its Subsidiaries has any material obligations, contingent liabilities, or
liabilities for Charges, long-term leases or unusual forward or long-term commitments which are not reflected in the audited January 29, 2000 consolidated balance sheet of Borrower, which, individually or in the aggregate could reasonably be expected to have or result in a Material Adverse Effect. As of the date hereof, there has been no material deviation from the Projections provided to Agent and Lenders. Except as otherwise permitted hereunder or as set forth in SCHEDULE 3.5, no Restricted Payment has been made since February 25, 1995, and no shares of Stock of Borrower have been, or are now required to be, redeemed, retired, purchased or otherwise acquired for value by Borrower. Other than as disclosed in Borrower's internally prepared unaudited financial statements for the three-month period ended approximately April 29, 2000 delivered to Agent by Borrower, since January 29,2000, no event or events have occurred or are continuing which, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect.
3.6 OWNERSHIP OF PROPERTY; LIENS. Except as described in SCHEDULE 3.6, the real estate listed in SCHEDULE 3.6 constitutes all of the real property owned, leased, or used in its business by each Loan Party. Each Loan Party holds (a) good and marketable fee simple title to all of its owned real estate, (b) valid and marketable leasehold interests in all of such Loan Party's Leases and (c) good and marketable title to all of its other properties and assets. None of the properties and assets of any Loan Party are subject to any Liens, except (x) Permitted Encumbrances and (y) from and after the Closing Date, the Lien in favor of Agent and Lenders pursuant to the Collateral Documents. Each Loan Party has received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Loan Party's right, title and interest in and to all such real estate and other assets or property. Except as described in SCHEDULE 3.6, (i) no Loan Party and, to Borrower's knowledge, no other party to any Lease is in default of its obligations thereunder or has delivered or received any notice of default under any such Lease, and no event has occurred which, to Borrower's knowledge, with the giving of notice, the passage of time, or both, would constitute a default under any such Lease, (ii) no Loan Party owns or holds, or is obligated under or a party to, any option, right of first refusal or any other contractual right to purchase, acquire, sell, assign or dispose of any real property owned or leased by such Loan Party except as set forth in SCHEDULE 3.6, and (iii) no material portion of any real property owned or leased by any Loan Party has suffered any material damage by fire or other casualty loss which has not heretofore been completely repaired and restored to its original condition. All permits required to have been issued or appropriate to enable the real property owned or leased by any Loan Party to be lawfully occupied and used for all of the purposes for which they are currently occupied and used, have been lawfully issued and are, as of the date hereof, in full force and effect, except to the extent that the failure to have any such permit or permits, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect.
3.7 RESTRICTIONS; NO DEFAULT. No Contract, lease, agreement, instrument or other document to which any Loan Party is a party or by which it or any of its properties or assets is bound or affected and no provision of any charter, corporate restriction, applicable law or governmental regulation, individually or in the aggregate, has had or resulted in or could reasonably be expected to have or result in a Material Adverse Effect. No Loan Party is in default and, to Borrower's knowledge, no third party is in default, under or with respect to any Contract, lease, agreement, instrument or other documents to which any Loan Party is a party, which default or defaults, individually or in the aggregate, could reasonably be
expected to have or result in a Material Adverse Effect. No Default has occurred and is continuing.
3.8 LABOR MATTERS. There are no strikes or other material labor disputes against any Loan Party that are pending or, to Borrower's knowledge, threatened. Hours worked by and payment made to employees of each Loan Party have not been in violation of the Fair Labor Standards Act or any other applicable laws dealing with such matters which individually, or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect. All material payments due from any Loan Party on account of employee health and welfare insurance have been paid or accrued as a liability on the books of such Loan Party. Except as set forth in SCHEDULE 3.8, no Loan Party has any obligation under any collective bargaining agreement, management agreement, or any employment agreement, and a correct and complete copy of each agreement listed in SCHEDULE 3.8 has been provided to Agent. There is no organizing activity involving any Loan Party pending or, to Borrower's knowledge, threatened by any labor union or group of employees. Except as set forth in SCHEDULE 3.14, there are no representation proceedings pending or, to Borrower's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Loan Party has made a pending demand for recognition, and, there are no complaints or charges against any Loan Party pending or threatened to be filed with any federal, state, local or foreign court, governmental agency or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Loan Party of any individual.
3.9 VENTURES; SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND
INDEBTEDNESS. Except for DAMC, Borrower has no Subsidiaries. DAMC engages in no
business, operations or other activities and owns no property or assets and has
no liabilities other than to the extent contemplated and permitted by SECTION
6.5. Borrower is not engaged in any joint venture or partnership with, or,
except as set forth in SCHEDULE 3.9 an Affiliate of, another Person. Except as
set forth in SCHEDULE 3.9, there are no outstanding rights to purchase options,
warrants or similar rights or agreements pursuant to which any Loan Party may be
required to issue, sell or purchase any Stock or other equity security. SCHEDULE
3.9 lists all outstanding Stock of each Loan Party and the percentage of
ownership and voting interests of the owners thereof as of the Closing Date.
SCHEDULE 6.3 lists all Indebtedness of each Loan Party as of the Closing Date.
3.10 GOVERNMENT REGULATION. No Loan Party is (a) an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940 as amended; or (b) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or any other federal or state statute that restricts or limits such Loan Party's ability to incur Indebtedness, pledge its assets, or to perform its obligations hereunder, or under any other Loan Document; and the making of the Revolving Credit Advances and the incurrence of the Letter of Credit Obligations, in each case by Lenders, the application of the proceeds and repayment thereof by Borrower, and the consummation of the transactions contemplated by this Agreement and the other Loan Documents, will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission.
3.11 MARGIN REGULATIONS. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock and no proceeds of any Revolving Credit Advance will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. Borrower will not take any action which might cause any Loan Document or any document or instrument delivered pursuant hereto or thereto to violate any regulation of the Board of Governors of the Federal Reserve Board.
3.12 TAXES. Except as set forth in SCHEDULE 3.12, all federal, state, local and foreign tax returns, reports and statements, including information returns required to be filed by each Loan Party, have been filed with the appropriate Governmental Authority and all Charges and other impositions shown thereon to be due and payable have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof, or any such fine, penalty, interest, late charge or loss has been paid. Except as set forth in SCHEDULE 3.12, each Loan Party has paid when due and payable all material Charges required to be paid by it. Proper and accurate amounts have been withheld by each Loan Party from its employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities. SCHEDULE 3.12 sets forth those taxable years for which any of the tax returns of each Loan Party are currently being audited by the IRS or any other applicable Governmental Authority; and any assessments or threatened assessments in connection with such audit or otherwise currently outstanding. Except as described in SCHEDULE 3.12, no Loan Party has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. None of the property owned by any Loan Party is property which it is required to treat as being owned by any other Person pursuant to the provisions of IRC Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, and in effect immediately prior to the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property" within the meaning of IRC Section 168(h). No Loan Party has agreed or been requested to make any adjustment under IRC Section 481(a) by reason of a change in accounting method or otherwise. No Loan Party has any obligation under any tax sharing agreement or arrangement except as described in SCHEDULE 3.12.
3.13 ERISA. SCHEDULE 3.13 lists all Plans maintained or contributed to by any Loan Party and all Qualified Plans, unfunded Pension Plans, or Welfare Plans maintained or contributed to by any ERISA Affiliate. Neither any Loan Party nor any current or former ERISA Affiliate sponsors (or has sponsored), contributes to (or has contributed to), or is (or was) required to contribute to any Title IV Plan, any Plan subject to IRC Section 412 or ERISA Section 302, or any Retiree Welfare Plan. IRS determination letters regarding the qualified status under IRC Section 401 of each Qualified Plan have been received as of the dates listed in SCHEDULE 3.13. Each of the Qualified Plans has been amended to comply with the Tax Reform Act of 1986 and to make other changes required under the IRC or ERISA, and if such required amendments are not subject to the determination letters described in the previous sentence, each Qualified Plan so amended will be submitted to the IRS for a determination letter as to the ongoing qualified status of the Plan under the IRC within the applicable IRC Section 401(b) remedial amendment period; and each such Plan shall be amended, including retroactive amendments, as required during such determination letter process to maintain the qualified status of such Plans. To the knowledge of Borrower, the
Qualified Plans as amended continue to qualify under Section 401 of the IRC, the trusts created thereunder continue to be exempt from tax under the provisions of IRC Section 501(a), and nothing has occurred which would cause the loss of such qualification or tax-exempt status. To the knowledge of Borrower, each Plan is in compliance in all material respects with the applicable provisions of ERISA and the IRC, including the filing of all reports required under the IRC or ERISA which are true and correct as of the date filed, and all required contributions and benefits have been paid in accordance with the provisions of each such Plan. No Loan Party has engaged in a prohibited transaction, as defined in IRC Section 4975 or Section 406 of ERISA, in connection with any Plan which would subject any such Person (after giving effect to any exemption) to a material tax on prohibited transactions imposed by IRC Section 4975 or any other material liability. Except as set forth in SCHEDULE 3.13: (i) there are no pending, or to the knowledge of Borrower, threatened claims, actions or lawsuits (other than claims for benefits in the normal course), asserted or instituted against (x) any Plan or its assets, (y) any fiduciary with respect to any Plan or (z) any Loan Party or any ERISA Affiliate with respect to any Plan; (ii) each Loan Party and each ERISA Affiliate has complied with the notice and continuation coverage requirements of IRC Section 4980B and the proposed or final regulations thereunder; and (iii) no liability under any Plan has been funded, nor has such obligation been satisfied with, the purchase of a contract from an insurance company that is not rated AAA by Standard & Poor's Corporation and the equivalent by each other nationally recognized rating agency.
3.14 NO LITIGATION. Except as set forth in SCHEDULE 3.14, no litigation, action, suit, claim, arbitration, investigation or other proceeding is now pending or, to the knowledge of Borrower, threatened against any Loan Party, at law, in equity or otherwise, (a) which challenges any such Person's right, power, or competence to enter into or perform any of its obligations under the Loan Documents, or the validity or enforceability of any Loan Document or any action taken thereunder or any Liens granted to Agent, on behalf of itself and each of Lenders, or (b) which if determined adversely, individually or in the aggregate, could have or result in a Material Adverse Effect. To the knowledge of Borrower, there does not exist a state of facts which could reasonably be expected to give rise to any such litigation, action, suit, claim, arbitration, investigation or other proceeding.
3.15 BROKERS. No broker or finder acting on behalf of Borrower brought about the obtaining, making or closing of the credit extended pursuant to this Agreement or the transactions contemplated by the Loan Documents and Borrower has no obligation to any Person in respect of any finder's or brokerage fees in connection therewith.
3.16 INTELLECTUAL PROPERTY. Except where the failure to own any such Intellectual Property right, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect, each Loan Party owns all Intellectual Property which is necessary to continue to conduct its business as heretofore conducted by it, now conducted by it and, to Borrower's knowledge, proposed to be conducted by it, each of which is listed, together with United States Patent and Trademark Office application or registration numbers, where applicable, in SCHEDULE 3.16. Each Loan Party conducts business without infringement or claim of infringement of any Intellectual Property right of others, except where such infringement or claim of infringement, individually or in the aggregate, could not reasonably be expected have or result in a Material Adverse Effect. Except as set forth in SCHEDULE 3.16, to Borrower's knowledge, there is no infringement or claim of infringement by others of any Intellectual Property of any Loan Party, except where such infringement or
claim of infringement, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect.
3.17 FULL DISCLOSURE. No information contained in this Agreement, the other
Loan Documents, the Financial Statements or any written statement furnished by
or on behalf of Borrower or any Affiliate thereof pursuant to the terms of this
Agreement or any other Loan Document, which has previously been delivered to
Agent or any Lender, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made;
PROVIDED, that except as provided in the next two sentences, Borrower makes no
representation or warranty regarding business plans, forecasts or projections,
including without limitation, the Projections. With respect to such Projections
referred to in paragraph 2 of SCHEDULE 3.4 (a) all facts that formed the basis
of such Projections were (and are as of the Closing Date) true and complete in
all material respects and no material fact was omitted from such Projections at
the time such Projections were prepared and as of the Closing Date, (b) all
assumptions of facts and opinions as to future events on which such Projections
were based were reasonable under the circumstances at the time such Projections
were prepared and as of the Closing Date and are disclosed therein, and (c) such
Projections are reasonably based on those facts and assumptions. With respect to
any business plans, forecasts or projections (including the Projections other
than the Projections referred to in paragraph 2 of SCHEDULE 3.4) made available
to Agent or any Lender after the Closing Date, the foregoing clauses (a) through
(c) shall be true and correct in all respects as of the date of such business
plans, projections or forecasts and as of the date delivered to Agent or any
Lender. Notwithstanding anything to the contrary contained herein, Borrower does
not assure or guarantee the attainment of any Projections.
3.18 HAZARDOUS MATERIALS. Except for routine operations in the ordinary course of business in compliance with applicable permits issued by a Governmental Authority, the Subject Property is free of any Hazardous Material and no Loan Party has caused or suffered to occur any Release at, under, above or within any Subject Property. There are no existing or potential Environmental Liabilities and Costs of each Loan Party of which Borrower, after due inquiry, has knowledge, which, individually or in the aggregate, could have or result in a Material Adverse Effect. No Loan Party is involved in operations which could lead to the imposition of any material Environmental Liabilities and Costs on it, or any owner of any premises which it occupies, or any Lien securing the same under any Environmental Law.
3.19 INSURANCE POLICIES. SCHEDULE 3.19 lists all insurance of any nature maintained for current occurrences by each Loan Party, as well as a summary of the terms of such insurance. Such insurance complies with and shall at all times comply with the standards set forth in ANNEX E.
3.20 DEPOSIT AND DISBURSEMENT ACCOUNTS. SCHEDULE 3.20 lists all banks and other financial institutions at which each Loan Party maintains deposits and/or other accounts and/or post office lock boxes, including the Disbursement Accounts, the Concentration Account and the Blocked Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number. Borrower has delivered to Agent true, correct and complete copies of all agreements, instruments and other
documents relating to any credit card programs, arrangements or agreements to which it is a party.
3.21 SOLVENCY. After giving effect to (a) any Revolving Credit Advances, if any, to be made on the Closing Date or on such other date as Revolving Credit Advances requested hereunder are to be made and/or Letter of Credit Obligations to be incurred on the Closing Date or on such other date as Letter of Credit Obligations requested hereunder are to be incurred, (b) the disbursement of the proceeds of any such Revolving Credit Advances and/or Letter of Credit Obligations pursuant to Borrower's instructions, and (c) the payment and accrual of all transaction costs in connection with the foregoing, Borrower is Solvent and Borrower and its Subsidiaries taken as a whole are Solvent.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 REPORTS AND NOTICES. Borrower covenants and agrees that from and after the Closing Date and until the Termination Date, it shall deliver to each Lender the Financial Statements, Projections and notices at the times and in the manner set forth in ANNEX D. Concurrently with the delivery of such annual audited financial statements, Borrower shall cause to be delivered to each Lender a certificate of Borrower's independent certified public accountants certifying that during the course of performing their audit of Borrower they did not become aware of any Default under the Loan Documents or specifying each Default of which they became aware.
4.2 COMMUNICATION WITH ACCOUNTANTS. Borrower authorizes Agent to communicate directly with its independent certified public accountants and tax advisors and authorizes those accountants and advisors to disclose to Agent any and all work papers and financial statements and other supporting financial documents and schedules, including copies of any management letter with respect to the business, financial condition and other affairs of Borrower and its Subsidiaries; PROVIDED, that Agent shall give Borrower prior notice of any such communications and Borrower shall be invited to be present during any such communications(but such presence shall not be a prerequisite of such communications). At or before the Closing Date and on each anniversary of the Closing Date, Borrower shall send a letter to such accountants and tax advisors, and deliver a copy thereof to Agent, instructing them to make available to Agent such information and records as Agent may reasonably request and to otherwise comply with the provisions of this SECTION 4. In addition, at or before the Closing Date and on each date the annual audited consolidated financial statements are delivered to Agent as required by ANNEX D such accountants and tax advisors shall deliver a letter to Agent stating that (a) Agent and Lenders are entitled to rely upon any such accountant's certification of Borrower's audited financial statements delivered after the Closing Date and (b) such accountants and tax advisors shall otherwise comply with this SECTION 4 (including making available such information and records as Agent may reasonably request).
5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless Required Lenders shall otherwise consent in writing, from and after the date hereof and until the Termination Date, Borrower shall, and shall cause each other Loan Party to, comply with the following affirmative covenants:
5.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Loan Party shall: (a) except as permitted by SECTION 6.1, do or cause to be done all things necessary to preserve and keep in full force and effect its statutory existence and partnership or corporate, as the case may be, franchises; (b) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; (c) at all times maintain, preserve and protect all of its material Intellectual Property, and preserve all the remainder of its material property, in use or useful in the conduct of its business and keep the same in good repair, working order and condition (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices, so that the business carried on in connection therewith may be properly and advantageously conducted at all times, PROVIDED that nothing in this SECTION 5.1(c) shall prevent any Loan Party from discontinuing the use or operation of any property if such discontinuance, in the judgment of Borrower's Board of Directors, is desirable in the conduct of its business but in no event shall more than two of Borrower's stores cease operations in any Fiscal Year; and (d) transact business only under the names set forth in SCHEDULE 3.2.
5.2 PAYMENT OF CHARGES AND CLAIMS. Each Loan Party shall pay and discharge,
or cause to be paid and discharged in accordance with the terms thereof, (a) all
Charges imposed upon it or its income and profits, or any of its property (real,
personal or mixed) prior to the date on which penalties attach thereto, and (b)
all lawful claims for labor, materials, supplies and services or otherwise,
which if unpaid might or could become a Lien on its property; PROVIDED, that
such Loan Party shall not be required to pay any such Charge or claim which is
being contested in good faith by proper legal actions or proceedings, so long as
at the time of commencement of any such action or proceeding and during the
pendency thereof(i) adequate reserves with respect thereto are established and
are maintained in accordance with GAAP, (ii) such contest operates to suspend
collection of the contested Charges or claims and is maintained and prosecuted
continuously with diligence, (iii) none of the Collateral would be subject to
forfeiture or loss by reason of the institution or prosecution of such contest,
(iv) no Liens securing an aggregate amount in excess of $100,000 shall exist for
such Charges or claims during such action or proceeding (excluding Liens
securing obligations fully covered by insurance or otherwise bonded to the
satisfaction of Agent), (v) if such contest is terminated or discontinued
adversely to such Loan Party, such Loan Party shall promptly pay or discharge
such contested Charges and all additional charges, interest penalties and
expenses, if any, and shall deliver to Agent evidence reasonably acceptable to
Agent of such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Loan Party, and (vi) Agent has not advised
Borrower in writing that Agent believes that nonpayment or nondischarge thereof,
individually or in the aggregate, could reasonably be expected to have or result
in a Material Adverse Effect.
5.3 BOOKS AND RECORDS. Each Loan Party shall keep adequate records and books of account with respect to its business activities, in which proper entries, reflecting all of its consolidated and consolidating financial transactions, are made in accordance with GAAP and on a basis consistent with the Financial Statements.
5.4 LITIGATION. Borrower shall notify Agent in writing, promptly upon learning thereof, of any litigation, action, suit, claim, investigation, arbitration or other proceeding commenced or threatened, at law, in equity or otherwise against any Loan Party, and of the institution against any Loan Party of any suit or administrative proceeding which (a) may involve an amount in excess of $150,000 individually or $300,000 in the aggregate or (b) if adversely determined, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect.
5.5 INSURANCE.
(a) Each Loan Party shall, at its sole cost and expense, maintain or cause to be maintained, the policies of insurance in such amounts and as otherwise described in ANNEX E and with insurers recognized as adequate by Agent. Borrower shall notify Agent promptly of any occurrence causing a material loss or decline in value of any real or personal property and the estimated (or actual, if available) amount of such loss or decline, except as specified otherwise in ANNEX E. Each Loan Party hereby directs all present and future insurers under its "All Risk" policies of insurance to pay all proceeds payable thereunder directly to Agent, other than proceeds relating to the loss or damage to property which secures Indebtedness permitted under clause (c) of SECTION 6.3 which is required by the terms of such Indebtedness to be paid to the holder thereof ("EXCLUDED PROCEEDS"). Each Loan Party irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent) as its true and lawful agent and attorney in-fact for the purpose of, upon the occurrence and during the continuance of a Default, making, settling and adjusting claims under the "All Risk" policies of insurance, endorsing the name of such Person on any check, draft, instrument or other item of payment for the proceeds of such "All Risk" policies of insurance (other than excluded proceeds), and for making all determinations and decisions with respect to such "All Risk" policies of insurance. In the event any Loan Party at any time or times hereafter shall fail to obtain or maintain (or fail to cause to be obtained or maintained) any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, Agent, without waiving or releasing any Obligations or Default hereunder, may at any time or times thereafter (but shall not be obligated to) obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto which Agent deems advisable. All sums so disbursed, including reasonable attorneys' fees, court costs and other charges related thereto, shall be payable, on demand, by Borrower to Agent and shall be additional Obligations hereunder secured by the Collateral.
(b) Agent reserves the right at any time, upon review of any Loan Party's risk profile, to reasonably require additional forms and limits of insurance to adequately protect Agent's and Lenders' interests. Each Loan Party shall, if so requested by Agent, deliver to Agent and each Lender, as often as Agent may reasonably request, a report of a reputable insurance broker reasonably satisfactory to Agent with respect to its insurance policies.
(c) Each Loan Party shall deliver to Agent endorsements to all of its
(i) "All Risk" and business interruption insurance naming Agent as loss payee to
the extent provided in SECTION 5.5(a), and (ii) general liability and other
liability policies naming Agent and each Lender as an additional insured.
5.6 COMPLIANCE WITH LAWS. Each Loan Party shall comply with all federal, state and local laws, permits and regulations applicable to it, including those relating to licensing, environmental, ERISA and labor matters, except to the extent any failure or failures to so comply, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect.
5.7 AGREEMENTS; LEASES.
(a) Each Loan Party shall perform, within all required time periods (after giving effect to any applicable grace periods), all of its obligations and enforce all of its rights under each Contract or other document or instrument to which it is a party, except where such failure or failures to so perform and enforce, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect. Each Loan Party shall perform and comply in all material respects with all obligations in respect of Chattel Paper, Instruments, Contracts, Licenses, and Documents and all other agreements constituting or giving rise to Collateral.
(b) Without limiting the foregoing paragraph (a), each Loan Party shall pay within five days of the due date thereof (without giving effect to any grace periods) any amount in excess of $250,000 in the aggregate owing under the Leases.
5.8 SUPPLEMENTAL DISCLOSURE. Within thirty (30) days after the end of each
Fiscal Quarter (or, if a Default has occurred and is continuing, at such other
times as Agent may require upon no less than ten (10) days prior notice) and,
with respect to SCHEDULES 3.6 and 3.20 only, promptly and in any event within
five (5) Business Days of any change in the information set forth in such
Schedules, Borrower will supplement (or cause to be supplemented) each Schedule
hereto, (or SCHEDULE 3.6 and 3.20, as applicable) or representation herein or in
any other Loan Document with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Schedule or as an exception to such
representation or which is necessary to correct any information in such Schedule
or representation which has been rendered inaccurate thereby; PROVIDED, that
such supplement to such Schedules or representations (except for any supplement
to SCHEDULE 3.2, SCHEDULE 3.6 (solely relating to such Schedule's identification
of real property owned, leased or used in each Loan Party's business), SCHEDULE
3.9 (solely relating to such Schedule's identification of Affiliates of Borrower
and, without limiting SECTION 8.1(1), the Stock ownership of Borrower and the
voting interests of the owners thereof), SCHEDULE 3.12 (solely relating to the
audits and extensions referred to in the fourth and fifth sentences of SECTION
3.12) or SCHEDULE 3.19, in each case solely to the extent such supplement
reflects actions in conformity with and not otherwise prohibited by the terms of
the Loan Documents) shall not be deemed an amendment thereof unless expressly
consented to in writing by Agent and Required Lenders, and no such amendments,
except as the same may be consented to in a writing which expressly includes a
waiver, shall be or be deemed a waiver by Agent or Lenders of any Default
disclosed therein. Borrower shall, if so requested by Agent or Required Lenders,
finish to Agent and each Lender as often as it reasonably requests, statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent or Required Lenders may
reasonably request, all in reasonable detail, and, Borrower shall advise Agent
and each Lender promptly,
in reasonable detail, of(a) any Lien, other than as permitted pursuant to
SECTION 6.7, attaching to or asserted against any of the Collateral, (b) any
material change in the composition of the Collateral, and (c) the occurrence of
any other event or events which, individually or in the aggregate, could have or
result in a Material Adverse Effect upon the Collateral and/or Agent's Lien
thereon.
5.9 ENVIRONMENTAL MATTERS. Each Loan Party shall (a) comply with all Environmental Laws and permits applicable to it where the failure to so comply, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect, (b) notify Agent and each Lender promptly after such Loan Party becomes aware of any Release upon any Subject Property which, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect, and (c) promptly forward to Agent and each Lender a copy of any order, notice, permit, application, or any communication or report received by such Loan Party in connection with any such Release or any other matter relating to the Environmental Laws that may affect any Subject Property or any Loan Party. The provisions of this SECTION 5.9 shall apply whether or not the Environmental Protection Agency, any other federal agency or any state or local environmental agency has taken or threatened any action in connection with any Release or the presence of any Hazardous Materials.
5.10 APPLICATION OF PROCEEDS. Borrower shall use the proceeds of the Revolving Credit Loan as provided in SECTION 1.3.
5.11 FISCAL YEAR. Each Loan Party shall maintain as its Fiscal Year the 52 or 53-week period ending on the Saturday closest to the end of January of each year.
5.12 LANDLORD'S WAIVER AND OTHER AGREEMENTS. Except as otherwise agreed to in writing by Agent, each Loan Party shall obtain (a) a Landlord's Waiver in form and substance acceptable to Agent from the landlord of any present or future leased premises of any Loan Party where Inventory is located; and (b) a waiver and license agreement in form and substance acceptable to Agent from any Person (other than Borrower) which owns, operates or manages a warehouse or other location not owned by Borrower where Inventory is located.
5.13 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES. Borrower will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that each of its Subsidiaries is a wholly-owned Subsidiary. Borrower will not permit any of its Subsidiaries to enter into, after the Closing Date, any indenture, agreement (other than this Agreement and the other Loan Documents), instrument or other arrangement that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the incurrence or payment of Indebtedness, the granting of Liens, the declaration or payment of dividends or other Restricted Payments, the making of loans, advances or Investments or the sale, assignment, transfer or other disposition of any property or assets.
5.14 FURTHER ASSURANCES. Each Loan Party shall at its cost and expense, upon request of Agent, duly execute and deliver, or cause to be duly executed and delivered, to Agent such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Agent to carry out more effectually the provisions and purposes of this Agreement or any other Loan Document.
5.15 APPRAISALS. Borrower shall allow Agent and its designees from time to time as Agent shall direct, to perform, and shall assist Agent and its designees in performing, appraisals of the Borrower's Inventory. So long as no Default has occurred and is continuing, Agent agrees to provide to Borrower upon the request of Borrower any such appraisal prepared by a third party unaffiliated with Agent which has consented to Agent so providing such appraisal. In furtherance of the foregoing, Agent agrees to use reasonable efforts to obtain any such consent. Borrower shall pay all out-of-pocket costs and expenses incurred by Agent in connection with such appraisals, provided that unless a Default shall be continuing only one such appraisal in any Fiscal Year shall be at the expense of Borrower.
6. NEGATIVE COVENANTS
Borrower covenants and agrees that, unless Required Lenders shall otherwise consent in writing, from and after the date hereof and until the Termination Date, Borrower shall, and shall cause each other Loan Party to, comply with the following negative covenants:
6.1 MERGERS, SUBSIDIARIES, ETC. No Loan Party shall, directly or
indirectly, by operation of law or otherwise, merge, consolidate or otherwise
combine with any Person or acquire or hold all or substantially all of the
assets or capital stock of any Person or form, acquire or hold any Subsidiary,
except that (a) Borrower may hold any portion of the stock of DSG Holdings
and/or all of the Stock of DAMC and so long as no Default has occurred and is
continuing DAMC may merge with and into Borrower so long as Borrower is the
surviving entity of such merger and (b) Borrower (so long as no Default has
occurred and is continuing or would occur as a result of such merger) may merge
with and into a wholly-owned Subsidiary of Borrower with such Subsidiary as the
surviving corporation; provided that (i) such Subsidiary is a Delaware
corporation which is organized immediately prior to such merger and prior to
such merger does not engage in any business, transactions or other activities or
incur or assume any obligations or liabilities (except in connection with its
organization), (ii) the sole purpose and result of such merger is Borrower or
its successor in interest becoming a Delaware corporation, (iii) upon such
merger, such Subsidiary by operation of law shall assume all Borrower's assets,
rights, obligations, liabilities and duties and such Subsidiary shall be the
Borrower for all purposes hereof and the other Loan Documents and shall assume
pursuant to documentation satisfactory to Agent all the Obligations, (iv) the
certificate of incorporation and by-laws of such surviving Person shall be
identical to Borrower's before giving effect to such merger except for such
changes thereto required by Delaware corporate law, provided that in any event
the provisions of such certificate of incorporation and by-laws relating to the
Stock of such surviving Person shall be identical to Borrower's before giving
effect to such merger, (v) such merger shall not violate any agreements,
contracts, instruments, leases or other documents to which Borrower is a party
or by which its property is bound, except any violation which has been disclosed
to Agent and which Agent has determined in its discretion to be non material,
(vi) the surviving Person of such merger shall be named Dick's Sporting Goods,
Inc., (vii) in connection with any such merger, Agent shall have received an
opinion in form and substance satisfactory to Agent from counsel satisfactory to
Agent, and (viii) such merger shall otherwise be satisfactory to Agent.
6.2 INVESTMENTS. No Loan Party shall, directly or indirectly, make or
maintain any Investment except: (a) Investments permitted by SECTION 6.3 or 6.4
(b) Investments outstanding on the date hereof and listed in SCHEDULE 6.2;(c)
Investments in Cash Equivalents at any time during which no Revolving Credit
Advances are outstanding and which are subject to a first priority perfected
Lien of Agent for the benefit of Lenders; (d) Investments representing stock or
obligations issued to any Loan Party in settlement of claims against any other
Person by reason of a composition or readjustment of debt or reorganization of
any debtor of any Loan Party; (e) Investments represented by deposits into the
Concentration Account, the Blocked Accounts, the Disbursement Accounts and other
bank accounts of such Loan Party to the extent permitted hereunder; (f) the
Investment by Borrower in DSG Holdings contemplated by Section 1.2 of the DSG
Holdings Contribution Agreement; (g) a non-cash investment by Borrower in the
preferred equity capital of DSG Holdings, the consideration for which shall be
the exchange of outstanding trade Accounts owed from DSG Holdings to Borrower in
an amount not to exceed $6,000,000 and otherwise on terms and conditions
satisfactory to Agent, PROVIDED, that such exchange of debt to equity has been
completed no later than May 31, 2000; (h) an intercompany loan or advance made
by Borrower to DSG Holdings at any one time after October 29, 1999 in a
principal amount not to exceed $5,000,000, PROVIDED that (i) DSG Holdings shall
have received a capital contribution commitment, in form and substance
satisfactory to Agent, in an amount (net of expenses) sufficient (without giving
consideration to any other sources of funds available to DSG Holdings) to enable
DSG Holdings to repay such intercompany loan or advance by the time required
hereunder, (ii) such intercompany loan or advance shall be payable no later than
the earlier of (A) 90 days after the making thereof and (B) an initial public
offering of the Stock of dsports.com and shall be evidenced by a promissory note
in form and substance satisfactory to Agent, (iii) such promissory note shall be
pledged and delivered to Agent pursuant to the Security Agreement, (iv) if DSG
Holdings shall issue any Stock on or after the date on which the intercompany
loan or advance referred to in clause (h) above is made, no later than the
Business Day following the date of receipt of the proceeds thereof, DSG Holdings
shall repay to the extent outstanding such intercompany loan or advance in an
amount equal to all such proceeds (net of underwriting discounts and commissions
and other reasonable costs paid to non-Affiliates in connection therewith) and
(v) Borrower shall have Net Borrowing Availability (with trade payables being
paid currently, and expenses and liabilities being paid in the ordinary course
of business and without acceleration of sale) of not less than $15,000,000 after
giving effect to such intercompany loan or advance and (i) the Investment by
Borrower in DSG Holdings contemplated by SECTION 1.3(c) hereof.
6.3 INDEBTEDNESS. No Loan Party shall create, incur, assume or permit to
exist any Indebtedness, except: (a) the Obligations; (b) Deferred Taxes; (c)
Capital Lease Obligations and Indebtedness secured by purchase money Liens
permitted under clause (c) of SECTION 6.7 (including any such Capital Lease
Obligations and Indebtedness set forth in SCHEDULE 6.3 or any extensions,
renewals, replacements or modifications thereof) in a maximum outstanding
aggregate amount at any time not to exceed $5,000,000; (d) Indebtedness
evidenced by the Subordinated Note; (e) Guaranteed Indebtedness permitted under
SECTION 6.6 (f) Indebtedness evidenced by the Preferred Stock Subordinated
Notes; (g) all loans and advances made by DAMC to Borrower which are evidenced
by a subordinated demand promissory note, in form and substance satisfactory to
Agent, and do not exceed in the aggregate an amount equal to the amount of all
royalty fees previously paid by Borrower to DAMC pursuant to the Licensing
Agreement, dated as of March 1, 1998, between Borrower and DAMC, plus interest
thereon at a rate per annum not to exceed the Index Rate; and (h)
Indebtedness existing on the Closing Date and set forth in SCHEDULE 6.3 and all extensions, renewals, replacements and modifications of such Indebtedness (other than the Subordinated Note and the Preferred Stock Subordinated Notes) on terms and conditions which shall in any event be on terms no less favorable to Borrower, Agent or any Lender, as determined by Agent than the terms of the Indebtedness being extended, renewed, replaced or modified, including, without limitation, with respect to amount, maturity, amortization, interest rate, premiums, fees, indemnities, covenants, events of default and remedies.
6.4 AFFILIATE AND EMPLOYEE TRANSACTIONS. Except as set forth in SCHEDULE 6.4 or as otherwise expressly permitted hereunder, no Loan Party shall enter into or be party to any lending, borrowing or other commercial transaction or arrangement with any of its Subsidiaries, Affiliates, officers, directors or employees, including payment of any management, consulting, advisory, service or similar fee or any deferred compensation (excluding salaries, bonuses and other compensation to its officers, directors and employees in the ordinary course of business consistent with past practices); PROVIDED, that (a) Borrower may extend loans to its officers, directors and employees in a maximum aggregate principal amount outstanding at any time for all officers, directors and employees of $500,000; (b) [Borrower may pay $4,000 per month to Martin Stack under an Agreement dated August 28, 1990 as in effect on the date hereof;] (c) Borrower and DAMC may enter into the transactions contemplated by the E-commerce Transaction Documents (other than the exercise of the subscription rights set forth in Section 3.2 of the DSG Holdings Limited Liability Company Agreement), PROVIDED, that (i) Accounts owing by DSG Holdings and dsports.com to Borrower and DAMC in connection therewith shall in no event exceed in the aggregate more than $3,000,000 at any time and (ii) DSG Holdings and/or dsports.com, as applicable, shall pay Borrower or DAMC, as applicable, for the full amount of such Accounts within 31 days of the creation thereof; (d) Borrower may enter into transactions with its Affiliates in the ordinary course of business consistent with past practices upon fair and reasonable terms no less favorable to Borrower than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate provided that Borrower shall have informed Agent of any such transaction involving aggregate payments or consideration in excess of $250,000 and provided Agent with such information and documentation with respect thereto as Agent may request. Set forth in SCHEDULE 6.4 is a list of all such lending, borrowing or other commercial transactions and arrangements existing or outstanding as of the Closing Date.
6.5 CAPITAL STRUCTURE AND BUSINESS. No Loan Party shall: (a) make any changes in its business objectives, purposes or operations which, individually or in the aggregate, could in any way adversely affect the repayment of the Obligations or reasonably be expected to have or result in a Material Adverse Effect; (b) make any change in its capital structure or issue any Stock (other than a Permitted Stock Issuance or any Stock issued in accordance with the terms of the Preferred Stock Subordinated Notes) or make any revision of the terms of its outstanding Stock or amend or modify any partners, shareholders, voting or similar agreement to which it is a party or enter into any such agreement, except that Borrower may (i) enter into the DSG Holdings Limited Liability Company Agreement, (ii) form a wholly-owned Subsidiary ("NEWCO") for the sole purpose of acquiring any Stock held by Borrower in DSG Holdings, (iii) repurchase the common stock of Borrower to the extent contemplated by SECTION 1.3(c), (iv) enter into that certain Second Amended and Restated Stockholders' Agreement in substantially the form of EXHIBIT H attached hereto, (v) enter into that certain Second Amended and Restated Registration Rights Agreement in substantially the form of EXHIBIT I attached hereto, (vi) relinquish the October 2000 Warrants as described in the
Information Statement and (vii) terminate the purchase agreements under which the Preferred Stock was issued; (c) amend its articles or certificate of incorporation, charter, by-laws or other organizational documents; or (d) engage in any business other than the retail sale of clothing and sporting goods.
Borrower shall not permit Newco to, directly or indirectly, engage in any business or activities other than acquiring and holding Borrower's Stock in DSG Holdings. Prior to giving effect to any such acquisition, Borrower will give Agent fifteen (15) days' advance notice of such acquisition and copies of all the acquisition and related documents and all such documents shall be in form and substance satisfactory to Agent. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, Newco shall not incur or suffer to exist any Indebtedness, liabilities or other obligations or enter into any contract, document or instrument other than the acquisition agreements and other documents referred to in the preceding sentence.
Borrower shall not permit DAMC to, directly or indirectly, engage in any
business or activities other than (i) subject to the next succeeding sentence,
acquiring Borrower's Intellectual Property and (ii) licensing the right to use
such Intellectual Property to (A) Borrower pursuant to the Licensing Agreement,
dated as of March 1, 1998, between DAMC and Borrower and (B) dsports.com
pursuant to the dsports.com Trademark Agreement. Notwithstanding anything to the
contrary contained in this Agreement or the other Loan Documents, DAMC shall not
incur or suffer to exist any Indebtedness, liabilities or other obligations
(other than operating expenses incurred in the ordinary course of business) or
enter into any contract, document or instrument other than (i) the acquisition
agreements, royalty and licensing agreements, guarantee and security documents
referred to in the preceding sentence,(ii) the dsports.com Trademark Agreement,
(iii) any agreements for accounting, legal or other professional services
(including,without limitation, agreements for appraisals of the Trademarks held
by DAMC) and (iv) the lease for the premises located at 300 Delaware Avenue,
Suite 548, Wilmington. Delaware; PROVIDED that the aggregate amount of operating
expenses and other obligations incurred by DAMC shall not exceed $50,000 in any
Fiscal Year.
6.6 GUARANTEED INDEBTEDNESS. No Loan Party shall create, incur, assume or permit to exist any Guaranteed Indebtedness except for: (a) endorsements of instruments or items of payment for deposit to a bank account of such Loan Party; (b) performance bonds, indemnities entered into in the ordinary course of business consistent with past practices and indemnities provided under the E-commerce Transaction Documents; and (c) Guaranteed Indebtedness outstanding on the Closing Date and listed in SCHEDULE 6.3 and all extensions, renewals, replacements and modifications of such Guaranteed Indebtedness on terms and conditions which shall in any event be on terms no less favorable to Borrower, Agent or any Lender, as determined by Agent than the terms of the Guaranteed Indebtedness being extended, renewed, replaced or modified, including, without limitation, with respect to amount, premiums, fees, indemnities, covenants, events of default and remedies.
6.7 LIENS. No Loan Party shall create or permit to exist any Lien on any of its properties or assets except for: (a) presently existing or hereafter created Liens in favor of Agent or Lenders to secure the Obligations; (b) Permitted Encumbrances; (c) purchase money Liens or purchase money security interests upon or in Equipment acquired by any Loan Party in the ordinary course of business to secure the purchase price of such Equipment
or to secure Capital Lease Obligations, in each case, permitted under clause (c) of SECTION 6.3 incurred solely for the purpose of financing the acquisition of such Equipment; and (d) extensions, renewals and replacements of Liens referred to in clause (c) above, provided that any such extension, renewal or replacement Lien is limited to the property or assets covered by the Lien extended, renewed or replaced and does not secure Indebtedness in an amount greater than the amount of the outstanding Indebtedness secured thereby immediately prior to such extension, renewal or replacement; PROVIDED that Borrower shall not create or permit any Lien to exist on any Collateral (other than Liens described in clauses (a) and (b) above).
6.8 SALE OF ASSETS. No Loan Party shall sell, transfer, convey, assign or otherwise dispose of any of its assets or properties, including any Collateral; PROVIDED, that the foregoing shall not prohibit (a) the sale of Inventory in the ordinary course of business, (b) the sale or disposition for fair consideration in any Fiscal Year of any assets in the ordinary course of business which have become obsolete or surplus to the business of such Loan Party having a fair market value of not greater than $250,000 in the aggregate for the Loan Parties during such Fiscal Year, (c) the contribution by Borrower to the capital of DSG Holdings of the "Contributed Assets" (as defined in the DSG Holdings Contribution Agreement), (d) the contribution by Borrower of any of its Stock in DSG Holdings to the capital of Newco in accordance with SECTION 6.5 and (e) the sale or disposition by Borrower of any Stock in DSG Holdings for fair consideration. In addition, Agent and each Lender agree that Borrower may sell and leaseback or enter into a Deemed Sale/Leaseback Transaction related to Fixtures and Equipment related to Borrower's stores in a transaction or series of transactions in which Borrower receives fair consideration for each such sale (or Deemed Sale/Leaseback Transaction); PROVIDED, that (a) Borrower gives Agent no less than ten (10) Business Days prior notice of any such sale (or Deemed Sale/Leaseback Transaction) together with copies of all documents and instruments relating thereto and such documents and instruments (without limiting any other provision hereof, including the definition of "Deemed Sale/Leaseback Transaction") are reasonably satisfactory in form and substance to Agent; (b) no Default has occurred and is continuing or would occur as a result of such transfer; (c) such Net Proceeds (including such fair consideration) are immediately deposited into the Collection Account for application to the Obligations; (d) with respect to a sale and leaseback of such Fixtures and Equipment (including a Deemed Sale/Leaseback Transaction), the purchaser(s) thereof (or the "lessor" in a Deemed Sale Leaseback Transaction) executes and delivers to Agent an Intercreditor Agreement, (e) with respect to all sales and leasebacks of such Fixtures and Equipment (including Deemed Sale Leaseback Transactions), the aggregate fair market value of such Fixtures and Equipment does not exceed $12,000,000, and (f) with respect to a sale and leaseback (including a Deemed Sale/Leaseback Transaction) of such Fixtures and Equipment, the lease pertaining to such Fixtures and Equipment shall be an Operating Lease.
6.9 ERISA. No Loan Party or any ERISA Affiliate shall acquire any new ERISA
Affiliate that maintains or has an obligation to contribute to a Pension Plan
that has either an "accumulated funding deficiency," as defined in Section 302
of ERISA, or any "unfunded vested benefits," as defined in Section
4006(a)(3)(E)(iii) of ERISA in the case of any Pension Plan other than a
Multiemployer Plan and in Section 4211 of ERISA in the case of a Multiemployer
Plan. Additionally, no Loan Party or any ERISA Affiliate shall: (a) permit or
suffer any condition set forth in SECTION 3.13 to cease to be met and satisfied
at any time, other than permitting an ERISA Affiliate acquired after the Closing
Date to sponsor a Title IV Plan, a Plan subject to IRC Section 412 or ERISA
Section 302, or a Retiree Welfare
Plan; (b) terminate any Title IV Plan where such termination could reasonably be
anticipated to result in liability to such Loan Party; (c) permit any
accumulated funding deficiency, as defined in Section 302(a)(2) of ERISA, to be
incurred with respect to any Pension Plan; (d) fail to make any contributions or
fail to pay any amounts due and owing as required by the terms of any Plan
before such contributions or amounts become delinquent; (e) make a complete or
partial withdrawal (within the meaning of Section 4201 of ERISA) from any
Multiemployer Plan; (f) fail to provide Lender with copies of any Plan documents
or governmental reports or filings, if reasonably requested by Lender; (g) fail
to make any contribution or pay any amount due as required by IRC Section 412 or
Section 302 of ERISA; (h) allow any ERISA Event or event described in Section
4062(e) of ERISA to occur with respect to any Title IV Plan; and (i) with
respect to all Retiree Welfare Plans, allow the present value of future
anticipated expenses to exceed $100,000 or fail to provide copies of such
projections to Agent and each Lender.
6.10 FINANCIAL COVENANT. Borrower shall not breach or fail to comply with the following financial covenant, which shall be calculated in accordance with GAAP consistently applied (and based upon the financial statements delivered hereunder):
FIXED CHARGE COVERAGE RATIO. Borrower shall maintain a Fixed Charge Coverage Ratio for each four Fiscal Quarter period, commencing with the four Fiscal Quarter period ending April 2000, of not less than 1.0 to 1.0.
6.11 RESTRICTED PAYMENTS. No Loan Party shall make any Restricted Payment
to any Person except that: (a) any Subsidiary of Borrower may make Restricted
Payments to Borrower; (b) subject to the terms of the Subordination Agreement,
Borrower may make regularly scheduled payments of principal and interest on the
Subordinated Note; (c) Borrower may make regularly scheduled payments of
principal and interest on the Richard T. Stack Notes, as in effect on the date
hereof; (d) Borrower may make the payments to Martin Stack contemplated by
SECTION 6.4(b); (e) Borrower may make payments to Stack Associates, L.P. and EWS
Development Corp. in accordance with the terms of those two leases as in effect
on the date hereof referred to in items 6 and 7 of SCHEDULE 6.4; (f) Borrower
may make capital contributions to DSG Holdings in accordance with Section 1.2 of
the DSG Holdings Contribution Agreement and as contemplated by SECTION 1.3(c)
hereof; (g) Borrower may repurchase its common stock as contemplated by SECTION
1.3(d) hereof and the Information Memorandum; and (h) Borrower may make payments
on or after September 9, 2001 of the Indebtedness evidenced by the Preferred
Stock Subordinated Notes, together with interest thereon, in accordance with the
terms thereof, to the extent that (1) both before and after giving effect to any
such payment no actual or pro-forma Default or Event of Default shall have
occurred and be continuing, including without limitation under SECTION 6.10
hereof, and assuming for purposes of this clause (1) that any such payment had
occurred on the first day of the most recently ended four Fiscal Quarter period,
(2) after giving effect to such payment, Borrower, based on the pro-forma
Projections acceptable to Agent, previously provided to Agent and assuming for
purposes of this clause (2) that such payment was made on the first day of the
first four Fiscal Quarter period to be tested under SECTION 6.10 after the
proposed date of such payment, shall be in compliance with SECTION 6.10, (3) all
accounts payable of Borrower are current, or being paid according to historical
practice and with normal trade terms, and (4) after giving effect to such
payment Excess Borrowing Availability shall not be less than $15,000,000 for a
minimum of thirty (30) days following such payment as determined by
Agent based on the pro-forma Projections referred to in clause (2) above, provided that Borrower prior to making any such payment shall have delivered to Agent a certificate from a financial officer of Borrower and in form and substance satisfactory to Agent demonstrating compliance with the foregoing.
6.12 HAZARDOUS MATERIALS. No Loan Party shall, nor shall it permit any Person within its control: (a) to cause or permit a Release of Hazardous Material on, under, in or about any Subject Property which, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect; (b) to use, store, generate, treat or dispose of Hazardous Materials, except in compliance in all material respects with the Environmental Laws; or (c) to transport any Hazardous Materials to or from any Subject Property, except in compliance in all material respects with the Environmental Laws.
6.13 SALE-LEASEBACKS. No Loan Party shall engage in any sale-leaseback (including any Deemed Sale/Leaseback Transaction), synthetic lease or similar transaction involving any of its property or assets except with respect to certain Fixtures and Equipment in each case as provided in SECTION 6.8.
6.14 CANCELLATION OF INDEBTEDNESS. No Loan Party shall cancel any claim or Indebtedness owing to it, except for adequate consideration negotiated in an arms length transaction and in the ordinary course of its business consistent with past practices.
6.15 BANK ACCOUNTS. No Loan Party shall maintain any deposit, operating or other bank accounts except for those accounts identified in SCHEDULE 3.20.
6.16 NO SPECULATIVE INVESTMENTS. No Loan Party shall engage in any speculative investment or any investment involving commodity options or futures contracts.
6.17 MARGIN REGULATIONS. Borrower shall not, directly or indirectly, use the proceeds of any Revolving Credit Advance or Letter of Credit Obligation to purchase or carry any Margin Stock or any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934.
6.18 LIMITATION ON NEGATIVE PLEDGE CLAUSES. No Loan Party shall directly or indirectly, enter into any agreement (other than the Loan Documents), with any Person which prohibits or limits the ability of any Loan Party to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than in connection with any Indebtedness permitted under clause (c) of SECTION 6.3 secured by a Lien permitted hereunder on assets of the Loan Parties so long as such prohibition or limitation in any documentation governing or relating to such Indebtedness extends only to such assets securing such Indebtedness.
6.19 MATERIAL CONTRACTS. No Loan Party shall cancel or terminate any Material Contract. No Loan Party shall waive any default or breach any Material Contract, or amend or otherwise modify any Material Contract or take (or omit to take) any other action in connection with any Material Contract that, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect.
6.20 LEASES. No Loan Party shall (a) renew (by amendment, modification or otherwise) any lease of real property or similar agreements other than renewals of existing leases of real property upon substantially the same terms as are in effect on the Closing Date, or (b) enter into any new lease of real property or similar agreements unless the owner of such real property has (to the extent Inventory is located or to be located at such property) entered into a Landlord's Waiver and other documentation deemed appropriate by Agent in each case in form and substance satisfactory to Agent. No Loan Party shall without the prior written consent of Agent amend, supplement or otherwise modify any provision of any Lease pursuant to which the landlord has waived or subordinated any landlord's lien, right of distraint or other lien or encumbrance upon such Loan Party's property securing the performance of such Loan Party's obligations under such Lease.
6.21 LIMITATIONS ON MODIFICATIONS OF SUBORDINATED NOTE AND PREFERRED STOCK SUBORDINATED NOTES. Borrower shall not amend, modify or change, or consent or agree to any amendment, modification or change to, any of the terms or provisions of the Subordinated Note or any Preferred Stock Subordinated Note or any documents relating thereto (other than any such amendment, modification or change which would only extend the maturity or reduce the amount of any payment of principal thereof or premium thereon or which would reduce the rate or extend the date for payment of interest thereon).
6.22 LIMITATIONS ON MODIFICATIONS OF E-COMMERCE TRANSACTION DOCUMENTS. No Loan Party shall amend, modify or change, or consent or agree to any amendment, modification or change to, any of the terms or provisions of the E-commerce Transaction Documents if such amendment, modification or change (a) could reasonably be expected to adversely affect the interests of the Lenders or any Loan Party or (b) imposes additional obligations on a Loan Party for which such Loan Party receives compensation in an amount less than its cost therefor. Notwithstanding the foregoing but not in limitation thereof, in no event will any such amendment, modification or change fundamentally alter Borrower's role as a provider of services to, and procurer of Inventory on behalf of, DSG Holdings and dsports.com; PROVIDED, HOWEVER, that the foregoing shall in no way restrict the ability of any Loan Party to terminate any E-commerce Transaction Document to which it is a party. Promptly following any amendment, modification or change to any E-Commerce Transaction Document, Borrower shall provide Agent with a copy thereof.
7. TERM
7.1 DURATION. The financing arrangement contemplated hereby shall be in effect until the Commitment Termination Date. On the Commitment Termination Date, the Aggregate Revolving Credit Commitment shall terminate and the Revolving Credit Loan and all other Obligations shall immediately become due and payable in full, in cash and Borrower shall make arrangements, as provided in paragraph 5 of ANNEX F, for satisfaction of any outstanding Letter of Credit Obligations.
7.2 SURVIVAL OF OBLIGATIONS. Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the Obligations, duties, indemnities, and liabilities of any Loan Party, or the rights of Agent or any Lender relating to any Obligations, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination, or any transaction or event,
the performance of which is not required until after the Commitment Termination Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and representations of or binding upon any Loan Party, and all rights of Agent and each Lender, all as contained in the Loan Documents shall not terminate or expire, but rather shall survive such termination or cancellation and shall continue in full force and effect until the Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an "EVENT OF DEFAULT" hereunder:
(a) Borrower shall fail to make any payment in respect of any Obligations hereunder or under any of the other Loan Documents when due and payable or declared due and payable, including any payment of principal of, or interest on, the Revolving Credit Loan.
(b) Borrower shall fail or neglect to perform, keep or observe any of the
provisions of SECTION 1.7, SECTION 4.1, SECTION 5.2 (solely insofar as such
Section requires and the Loan Parties fail to pay Claims for sales and use taxes
and payroll withholding taxes in accordance with the terms of such Section in an
aggregate amount in excess of $250,000), SECTION 5.5, SECTION 5.7(b), SECTION
5.11 or SECTION 6, including any of the provisions set forth in ANNEX B or ANNEX
E.
(c) Any Loan Party shall fail or neglect to perform, keep or observe any term or provision of this Agreement (other than any such term or provision referred to in paragraph (a) or (b) above) or of any of the other Loan Documents, and the same shall remain unremedied for a period ending on the first to occur of twenty (20) days after Borrower shall receive written notice of any such failure from Agent or any Lender or twenty (20) days after any Loan Party shall become aware thereof.
(d) A default shall occur under any other agreement, document or instrument to which any Loan Party is a party or by which any such Loan Party or its property is bound, and such default (i) involves the failure to make any payment (after expiration of any applicable grace period), whether of principal, interest or otherwise, due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) in respect of any Indebtedness of such Loan Party in an aggregate amount exceeding $500,000 or (ii) causes (or permits any holder of such Indebtedness or a trustee to cause) such Indebtedness, or a portion thereof in an aggregate amount exceeding $500,000, to become due prior to its stated maturity or prior to its regularly scheduled dates of payment.
(e) Any representation or warranty herein or in any Loan Document or in any written statement pursuant thereto or hereto, any report, financial statement or certificate made or delivered to Agent or any Lender by any Loan Party shall be untrue or incorrect in any respect as of the date when made or deemed made (including those made or deemed made pursuant to SECTION 2.2).
(f) Any of the assets of any Loan Party having a value of greater than $250,000 in the aggregate shall be attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of such Loan Party and shall remain unstayed or undismissed for thirty (30) consecutive days; or any Person other than a Loan Party shall apply for the appointment of a receiver, trustee or custodian for any Loan Party's assets and shall remain unstayed or undismissed for thirty (30) consecutive days; or any Loan Party shall have concealed, removed or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of its property or the incurring of an obligation which may be fraudulent under any bankruptcy, fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against any Loan Party
in a court having competent jurisdiction seeking a decree or order (i) under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of such Loan Party or of any substantial part
of its properties, or (iii) ordering the winding up or liquidation of the
affairs of such Loan Party and such case or proceeding shall remain undismissed
or unstayed for thirty (30) consecutive days or such court shall enter a decree
or order granting the relief sought in such case or proceeding.
(h) Any Loan Party shall (i) file a petition seeking relief under Title 11
of the United States Code, as now constituted or hereafter amended, or any other
applicable federal, state or foreign bankruptcy or other similar law, (ii)
consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
such Loan Party or of any substantial part of such Loan Party's properties,
(iii) fail generally to pay its debts as such debts become due, or (iv) take any
corporate action in furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all times to appeal therefrom) for the payment of money in excess of $250,000 in the aggregate shall be rendered against any Loan Party, unless the same shall be vacated, stayed, bonded, paid or discharged within a period of twenty (20) days from the date of such judgment.
(j) There shall occur any Material Adverse Effect since January 29,2000.
(k) Any material provision of any Loan Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms or any Loan Party or other Person shall so state in writing; or any Lien created under any Collateral Document shall cease to be a valid and perfected Lien on any Collateral having the priority in such Collateral contemplated hereby.
(l) There shall occur a Change of Control.
(m) There shall occur any default or event of default under the Subordinated Note or any Preferred Stock Subordinated Note.
(n) An event or condition specified in SECTION 6.9 hereof shall occur or exist with respect to any Plan or Multiemployer Plan and, as a result of such event or condition, together with all other such events or conditions, Borrower, any Subsidiary thereof or any ERISA Affiliate shall incur or in the opinion of Required Lenders shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing) in excess of $250,000 in the aggregate.
8.2. REMEDIES. If any Event of Default shall have occurred and be
continuing, the rate of interest applicable to the Revolving Credit Loan and the
other Obligations and the rate used in the calculation of Letter of Credit Fees
may, in the Required Lenders' discretion, by giving notice to Borrower of their
intention to do so, be increased as of the date of such notice as provided in
SECTION 1.4(c). If any Event of Default shall have occurred and be continuing
Agent shall upon request of Required Lenders, or may with the consent of
Required Lenders, without notice, take any one or more of the following actions:
(a) terminate the Aggregate Revolving Credit Commitment whereupon Lenders'
obligation to make further Revolving Credit Advances and to incur additional
Letter of Credit Obligations shall terminate; or (b) require that all Letter of
Credit Obligations be satisfied as provided in paragraph 5 of ANNEX F and
declare all or any portion of the Obligations to be forthwith due and payable
whereupon such Obligations shall become and be due and payable; or (c) exercise
any rights and remedies provided to Agent or Lenders under the Loan Documents
and/or at law or equity, including all remedies provided under the Code;
PROVIDED, HOWEVER, that upon the occurrence of an Event of Default specified in
SECTION 8.1 (f) (g) or (h), the Aggregate Revolving Credit Commitment shall
immediately terminate, the Obligations shall become immediately due and payable,
all Letter of Credit Obligations shall be fully satisfied as provided in
paragraph 5 of ANNEX F, and the rate of interest applicable to all Obligations
and the rate used in the calculation of Letter of Credit Fees shall be increased
as provided in SECTION 1.4(c), in each case, automatically without declaration,
notice or demand by any Person.
8.3 WAIVERS BY BORROWER. Except as otherwise provided for in this Agreement
and applicable law to the full extent permitted by applicable law Borrower
waives (a) presentment, demand and protest and notice of presentment, dishonor,
notice of intent to accelerate, notice of acceleration, protest, default,
nonpayment, maturity, release, compromise, settlement, extension or renewal of
any or all Loan Documents, notes, commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time held by Agent
or any Lender on which Borrower may in any way be liable, and Borrower hereby
ratifies and confirms whatever Agent or any Lender may do in this regard, (b)
all rights to notice and a hearing prior to Agent's or Lenders' taking
possession or control of, or to Agent's or Lenders' replevy, attachment or levy
upon, the Collateral or any bond or security which might be required by any
court prior to allowing Agent or Lenders to exercise any of their remedies, and
(c) the benefit of any right of redemption and all valuation, appraisal and
exemption laws. Borrower acknowledges that it has been advised by counsel of its
choice with respect to this Agreement, the other Loan Documents and the
transactions contemplated by this Agreement and the other Loan Documents.
9. AGENT
9.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby irrevocably appoints and authorizes GE Capital to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Loan Documents, together with such other powers as are reasonably incidental thereto. Agent (which term as used in this sentence and in SECTION 9.5 and the first sentence of SECTION 9.6 hereof shall include reference to its affiliates (including GECMG) and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee or fiduciary for any Lender; (b) shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Loan Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by any Loan Party or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Lenders for any action taken or omitted to be taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Agent may deem and treat the payee of any Revolving Credit Note as the holder thereof for all purposes hereof unless and until a notice of the assignment or transfer thereof shall have been filed with Agent.
9.2 RELIANCE BY AGENT. Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by Required Lenders or all of Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all Lenders.
9.3 DEFAULTS. Agent shall not be deemed to have knowledge or notice of the occurrence of a Default (other than the non-payment of principal of or interest on Revolving Credit Advances or of Fees) unless Agent has received notice from a Lender or Borrower specifying such Default and stating that such notice is a "Notice of Default". In the event that Agent receives such a notice of the occurrence of a Default, Agent shall give prompt notice thereof to Lenders (and shall give each Lender prompt notice of each such non-payment). Agent shall (subject to SECTION 9.7) take such action with respect to such Default as shall be directed by Required Lenders or, PROVIDED that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of Lenders except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of Required Lenders or all Lenders as is required in such circumstance.
9.4 RIGHTS AS A LENDER. With respect to its Revolving Credit Commitment and the Revolving Credit Advances made by it, GE Capital (and any successor acting as Agent) in the event it shall become a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Agent in its individual capacity. GE Capital (and any successor acting as Agent) and its affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with the Loan Parties (and any of their Subsidiaries or Affiliates) as if it were not acting as Agent, and GE Capital and its affiliates may accept fees and other consideration from the Loan Parties for services in connection with this Agreement or otherwise without having to account for the same to Lenders.
9.5 INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent not reimbursed by Borrower hereunder and without limiting the obligations of Borrower hereunder) ratably in accordance with their Proportionate Shares, for any and all Claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Borrower is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, PROVIDED that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified as determined by a final judgment of a court of competent jurisdiction.
9.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it has, independently and without reliance on Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Loan Parties and decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. Agent shall not be required to keep itself informed as to the performance or observance by any Loan Party of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of any Loan Party. Agent will use reasonable efforts to provide Lenders with any information received by Agent from Borrower which is required to be provided to Lenders hereunder, with any notice of a Default received by Agent from Borrower and with any notice of a Default delivered by Agent to Borrower; PROVIDED, HOWEVER, that Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of Borrower or any of its
Subsidiaries (or any of their affiliates) that may come into the possession of Agent or any of its affiliates.
9.7 FAILURE TO ACT. Except for action expressly required of Agent hereunder and under the other Loan Documents, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders of their indemnification obligations under SECTION 9.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.
9.8 RESIGNATION OF AGENT. Subject to the appointment and acceptance of a successor Agent as provided below, Agent may resign at any time by giving notice thereof to Lenders and Borrower. Upon any such resignation Required Lenders shall have the right to appoint a successor Agent with the consent of Borrower, which consent shall not be unreasonably withheld. If no successor Agent shall have been so appointed by Required Lenders, so consented to by Borrower and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of Lenders, appoint (without the consent of Borrower) a successor Agent, that shall be a financial institution with a combined capital and surplus or net worth of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent in accordance with the terms hereof, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this SECTION 9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent.
9.9 CONSENTS UNDER LOAN DOCUMENTS. Except as otherwise provided in SECTION
11.1 with respect to this Agreement, Agent may, with the prior consent of
Required Lenders (but not otherwise), consent to any modification, supplement or
waiver under any of the Loan Documents, PROVIDED that, without the prior consent
of each Lender, Agent shall not (except as provided herein or in the Collateral
Documents) release any Collateral or otherwise terminate any Lien under any
Collateral Document, or agree to additional obligations being secured by such
Collateral, except that no such consent shall be required, and Agent is hereby
authorized and instructed, to release any Lien covering Collateral (i) which is
the subject of a disposition permitted hereunder, (ii) which is subject to a
Lien permitted under SECTION 6.7 which secures Indebtedness permitted under
SECTION 6.3, (iii) to which Required Lenders have consented (except as otherwise
provided in SECTION 11.1) or (iv) the value of which does not exceed $1,000,000
in any Fiscal Year.
9.10 COLLATERAL MATTERS.
(a) Except as otherwise expressly provided for in this Agreement, Agent shall have no obligation whatsoever to any Lender or any other Person to investigate, confirm or assure that the Collateral exists or is owned by any Loan Party (provided Agent agrees with Lenders to conduct at least one collateral audit in each Fiscal Year) or is cared for, protected or insured or has been encumbered, or that any particular items of Collateral meet the eligibility criteria applicable in respect of the Borrowing Base, or whether any particular reserves are appropriate, or that the Liens granted to Agent herein or pursuant hereto have
been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent's own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any other Lender, other than liability for its own gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction.
(b) Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Lenders' security interest in assets which, in accordance with Article 9 of the Code can be perfected only by possession. Should any Lender (other than Agent) obtain possession of any such Collateral, such Lender shall notify Agent thereof and, promptly upon Agent's request therefor, shall deliver such Collateral to Agent or in accordance with Agent's instructions.
10. SUCCESSORS AND ASSIGNS
10.1 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of Borrower, Agent, Lenders, and their respective successors and assigns, except as otherwise provided herein or therein. Borrower may not assign, delegate, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the Loan Documents without the prior express written consent of Agent and all Lenders. Any such purported assignment, transfer, hypothecation or other conveyance by Borrower without such prior express written consent shall be void. The terms and provisions of this Agreement and the other Loan Documents are for the purpose of defining the relative rights and obligations of Borrower, Agent and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Loan Documents.
10.2 ASSIGNMENTS AND PARTICIPATIONS. (a) Any Lender may, in the ordinary course of its commercial banking or finance business and in accordance with applicable law, at any time sell to one or more banks or other financial institutions ("PARTICIPANTS") participating interests in all or a portion of its rights and obligations under this Agreement or any other Loan Document (including all or a part of its Revolving Credit Advances, its Letter of Credit Obligations, its Revolving Credit Commitment and its Revolving Credit Note). In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such obligations for all purposes under this Agreement and the other Loan Documents, and Borrower and Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect
of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, PROVIDED that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in SECTION 1.12(b) as fully as if it were a Lender hereunder. Borrower also agrees that each Participant shall be entitled to the benefits of SECTIONS 1.17, 1.19 and 1.20 with respect to its participation in the Revolving Credit Commitments and the Revolving Credit Loan outstanding from time to time as if it was a Lender; PROVIDED that, in the case of SECTION 1.17, such Participant shall have complied with the requirements of said Section; and PROVIDED, FURTHER, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. Notwithstanding anything to the contrary contained herein, no Lender shall grant any participation under which the Participant shall have rights to approve any amendment to or waiver of this Agreement or the other Loan Documents, except to the extent such amendment or waiver would (i) extend the final maturity date for payment of any of the Obligations in which such Participant is participating; (ii) reduce the interest rate or the amount of principal or Fees applicable to the Revolving Credit Advances in which such Participant is participating; or (iii) release all or substantially all of the Collateral, except as expressly provided herein. In those cases in which a Lender grants rights to its Participants to approve any amendment to or waiver of this Agreement or the other Loan Documents respecting the matters described in the foregoing clauses (i) through (iii), the relevant participation agreements shall provide for a voting mechanism whereby a majority of the amount of the participating Lender's portion of the Obligations (irrespective of whether held by such Lender or such Participant) shall control the vote for all of such Lender's portion of the Revolving Credit Loan.
(b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof or, with the consent of Agent (which shall not be unreasonably withheld), to an additional bank or financial institution ("an ASSIGNEE") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of EXHIBIT G, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an Affiliate thereof, by Agent) and delivered to Agent for its acceptance and recording in the Register, PROVIDED that (i) in the case of any such assignment to an additional bank or financial institution, any such partial assignment shall be in multiples of at least $5,000,000; (ii) the assigning Lender shall either have assigned all of its rights and obligations under this Agreement or retained at least $5,000,000 of the Revolving Credit Commitment; (iii) each such assignment shall be of a constant, and not a varying, percentage of the assigning Lender's rights and obligations under this Agreement and the assignment shall cover the same percentage of the assigning Lender's Revolving Credit Advances, Revolving Credit Commitment and Letter of Credit Obligations; and (iv) the Assignee shall be a financial institution (including a finance Subsidiary of a Person that is not a financial institution) or an institutional investor including any insurance company, pension fund or mutual fund which has an investment grade long term unsecured debt rating. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (A) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Revolving Credit Commitment as set forth therein, and (B) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto).
(c) Agent, on behalf of the Borrower, shall maintain at the address of Agent referred to in SECTION 11.9 a copy of each Assignment and Acceptance delivered to it and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Revolving Credit Commitments of, and principal amounts of the Revolving Credit Advances owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and Borrower, Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of a Revolving Credit Advance or other Obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by Agent) together with payment to Agent of a registration and processing fee of $3,500, Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and Borrower. On or prior to such effective date, Borrower, at its own expense, shall execute and deliver to Agent (in exchange for the Revolving Credit Note of the assigning Lender) a new Revolving Credit Note to the order of such Assignee in an amount equal to the Revolving Credit Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Revolving Credit Commitment hereunder, a new Revolving Credit Note to the order of the assigning Lender in an amount equal to the Revolving Credit Commitment retained by it hereunder. Such new Revolving Credit Notes shall be dated the Closing Date and shall otherwise be in the form of the Revolving Credit Note replaced thereby. The Revolving Credit Notes surrendered to Agent shall be returned by Agent to Borrower marked "cancelled".
(e) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Revolving Credit Advances and Revolving Credit Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including any pledge or assignment by a Lender of any Revolving Credit Advance or Revolving Credit Note to any Federal Reserve Bank in accordance with applicable law.
(f) Except as otherwise provided in this SECTION 10.2 no Lender shall, as between Borrower and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of Revolving Credit Advances or other Obligations owed to such Lender. Any Lender permitted to sell assignments and participations under this SECTION 10.2 may furnish any information concerning Borrower and its Subsidiaries and Affiliates in the possession of that
Lender from time to time to Assignees and Participants (including, subject to
SECTION 10.2(g), prospective Assignees and Participants).
(g) Borrower shall assist any Lender permitted to sell assignments or participations under this SECTION 10.2 in whatever manner reasonably necessary in order to enable or effect any such assignment or participation, including (but not limited to) the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and the delivery of informational materials, appraisals or other documents for, and the participation of relevant management in meetings and conference calls with, potential Assignees or Participants. Borrower shall certify the correctness, completeness and accuracy of all descriptions of Borrower and its affairs provided, prepared or reviewed by Borrower that are contained in any selling materials and all other information provided by it and included in such materials. No information shall be provided to any potential Assignee or Participant unless such potential Assignee or Participant has agreed in writing to use reasonable good faith efforts to maintain such information as confidential on the same basis as such Person maintains its own proprietary information which it desires not to disseminate.
11. MISCELLANEOUS
11.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. This Agreement and the other Loan Documents constitute the complete agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, commitments, understandings or inducements (oral or written, expressed or implied). Neither this Agreement nor any other Loan Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by Required Lenders; PROVIDED that no such change, waiver, discharge or termination shall, without the consent of each affected Lender and Agent, (a) extend the scheduled final maturity of any Revolving Credit Advance, or any portion thereof, or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereon or fees or reduce the principal amount thereof, or increase the Revolving Credit Commitment of such Lender over the amount thereof then in effect (it being understood that a waiver of any Default shall not constitute a change in the terms of any Revolving Credit Commitment of any Lender), (b) release all or substantially all of the Collateral (except as expressly permitted by the Loan Documents), (c) amend, modify or waive any provision of this SECTION 11.1, or SECTION 1.9. 1.12 or 9.5, (d) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders, (e) consent to the assignment or transfer by Borrower of any of its rights and obligations under this Agreement or (f) increase the advance rate above 65% for Eligible Inventory set forth in the definition of Borrowing Base. Any Lender which does not consent to an increase in the Aggregate Revolving Credit Commitment as contemplated by clause (a) above, agrees that any other Lender or Lenders shall have the right to purchase in accordance with SECTION 10.2(b) all of such non-consenting Lender's Revolving Credit Commitment, Revolving Credit Advances and Letter of Credit Obligations at their par value. No provision of SECTION 9 may be amended without the prior written consent of Agent. For avoidance of doubt, it is understood and agreed that no Lender will be required to participate in a debtor-in-possession financing without such Lender's consent. The foregoing is in no way meant to limit any Lender's obligation to make extensions of credit to Borrower (or its debtor-in-
possession successor) pursuant to a cash collateral order or stipulation to the extent otherwise required by the terms of this Agreement.
11.2 FEES AND EXPENSES.
(a) Borrower shall pay on demand all out-of-pocket costs and expenses (including reasonable fees and expenses of counsel) of Agent in connection with the preparation, negotiation, approval, execution, delivery, administration, modification, amendment, waiver and enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents, and commitments relating thereto, and the other documents to be delivered hereunder or thereunder and the transactions contemplated hereby and thereby and the fulfillment or attempted fulfillment of conditions precedent hereunder, including: (i) any amendment, modification or waiver of, or consent with respect to, any of the Loan Documents or advice in connection with the administration of the advances made pursuant hereto or its rights hereunder or thereunder; (ii) any litigation, arbitration, contest, dispute, suit, proceeding or action (whether instituted by Agent, any Lender, Borrower or any other Person) in any way relating to the Collateral, any of the Loan Documents or any other agreements to be executed or delivered in connection therewith or herewith, whether as party, witness, or otherwise, including any litigation, arbitration, contest, dispute, suit, case proceeding or action, and any appeal or review thereof, in connection with a case commenced (A) in good faith by or against Borrower or any other Person that may be obligated to Agent and Lenders by virtue of the Loan Documents, or (B) under title 7 or 11 of the United States Code, as now constituted or hereafter amended, or any other applicable Federal, state or foreign bankruptcy or similar insolvency law, PROVIDED, that Borrower shall not be required to pay any out-of-pocket costs and expenses of Agent in any litigation, contest, dispute, suit, proceeding or action resulting solely from Agent's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction; (iii) any attempt to enforce any rights of Agent or Lenders against any Loan Party or any other Person that may be obligated to Agent or Lenders by virtue of any of the Loan Documents; (iv) any Default; or (v) subject to SECTION 5.15, any effort to (A) monitor the Revolving Credit Loan and the Loan Documents, (B) evaluate, observe, assess Borrower or its affairs, or (C) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the Collateral.
(b) In addition, Borrower shall pay on demand all out-of-pocket costs and expenses (including reasonable fees and expenses of counsel) of Agent and each Lender in connection with any Event of Default and any enforcement or collection proceedings resulting therefrom or any amendment, modification or waiver of, or consent with respect to, any of the Loan Documents in connection with any Event of Default; PROVIDED that fees and expenses of counsel for Lenders shall be limited to counsel for all Lenders as a class and not separate counsel for each Lender.
(c) Without limiting the generality of clauses (a) and (b) above (but subject to the proviso to clause (b) above), Borrower's obligation to reimburse Agent and/or any Lender for out-of-pocket costs and expenses shall include the reasonable fees and expenses of counsel (and local, foreign or special counsel, advisors, consultants and auditors retained by such counsel), as well as the reasonable fees and expenses of accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplicating expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges;
telegram charges; secretarial overtime charges; expenses for travel, lodging and food; and all other reasonable out-of-pocket costs and expenses of every type and nature paid or incurred in connection with the performance of such legal or other advisory services.
11.3 NO WAIVER. No failure on the part of Agent or Lenders, at any time or times, to require strict performance by any Loan Party, of any provision of this Agreement and any of the other Loan Documents shall waive, affect or diminish any right of Agent or Lenders thereafter to demand strict compliance and performance therewith. Any suspension or waiver of a Default shall not suspend, waive or affect any other Default whether the same is prior or subsequent thereto and whether of the same or of a different type. None of the undertakings, agreements, warranties, covenants and representations of any Loan Party contained in this Agreement or any of the other Loan Documents and no Default by any Loan Party shall be deemed to have been suspended or waived by Lenders, unless such waiver or suspension is by an instrument in writing signed by an officer of or other authorized employee of Agent and Required Lenders or all of Lenders if required hereunder and directed to Borrower specifying such suspension or waiver.
11.4 REMEDIES. The rights and remedies of Agent and Lenders under this Agreement shall be cumulative and nonexclusive of any other rights and remedies which Agent or any Lender may have under any other agreement, including the Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required.
11.5 SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.
11.6 CONFLICT OF TERMS. Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in any of the other Loan Documents, the provisions contained in this Agreement shall govern and control.
11.7 RIGHT OF SETOFF. Subject to SECTION 1.1 (f), upon the occurrence and during the continuance of any Event of Default, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of Borrower against any and all of the Obligations now or hereafter existing irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such Obligations may be unmatured. Each Lender agrees promptly to notify Agent and Borrower after any such setoff and application made by such Lender; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to the other rights and remedies (including other rights of setoff) which such Lender may have.
11.8 AUTHORIZED SIGNATURE. Until Agent shall be notified by Borrower to the contrary, the signature upon any document or instrument delivered pursuant hereto and reasonably believed by Agent or any of Agent's officers, agents, or employees to be that of an officer or duly authorized representative of Borrower listed in SCHEDULE 11.8 shall bind Borrower and be deemed to be the act of Borrower affixed pursuant to and in accordance with resolutions duly adopted by Borrower's Board of Directors, and Agent and each Lender shall be entitled to assume the authority of each signature and authority of the Person whose signature it is or reasonably appears to be unless the Person acting in reliance on such signature shall have actual knowledge of the fact that such signature is false or the Person whose signature or purported signature is presented is without authority.
11.9 NOTICES. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon either of the parties by the other party, or whenever either of the parties desires to give or serve upon the other party any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three (3) days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this SECTION 11.9, (c) one Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated below (or with respect to Lenders as indicated on Appendix I hereto) or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower, Agent or any Lender) designated below to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication.
(e) If to Agent, as a Lender or as Agent, at:
General Electric Capital Corporation 800 Connecticut Avenue- Two North Norwalk, Connecticut 06854
Attention: Dick's Sporting Goods
Account Manager - Commercial Finance
Telecopy No.: (203) 852-3640
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With copies to:
General Electric Capital Corporation 800 Connecticut Avenue- Two North Norwalk, Connecticut 06854 Attention: Commercial Finance- Legal Department Telecopy No.: (203) 852-3670
and
Paul, Hastings, Janofsky & Walker LLP 1055 Washington Boulevard- 10th Floor Stamford, Connecticut 06901 Attention: Christopher H. Craig, Esq.
Telecopy No.: (203) 359-3031
(f) If to Borrower, at:
Dick's Sporting Goods, Inc.
200 Industry Drive
RIDC Park West
Pittsburgh, Pennsylvania 15275
Attention: Michael F. Hines
Chief Financial Officer
Telecopy No.: (412) 809-0724
With a copy to:
Beveridge & Diamond, P.C.
1350 I Street, N.W., Suite 700
Washington, DC 20005
Attention: Dean H. Cannon, Esq.
Telecopy No.: (202) 789-6190
11.10 SECTION TITLES. The Section titles and Table of Contents contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which shall, collectively and separately, constitute one agreement.
11.12 TIME OF THE ESSENCE. Time is of the essence of this Agreement and each of the other Loan Documents.
11.13 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK CITY SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT
LENDER AND BORROWER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK CITY AND, PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT OR ANY LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT OR ANY LENDER. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 11.9 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID AND RETURN RECEIPT REQUESTED.
11.14 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
11.15 PUBLICITY. Borrower will not, and will not permit any of its Affiliates to, disclose the name of Agent or any Lender or any of their respective Affiliates or refer to this Agreement or the other Loan Documents in any press release or other public disclosure or in any prospectus, proxy statement or other materials filed with any Governmental Authority without Agent's or such Lender's prior written consent unless Borrower or any of its Affiliates is required to do so under applicable law, and then, in any event, Borrower or such Affiliate will consult with Agent or such Lender prior to such disclosure. Borrower and each Lender consent to Agent publishing a tombstone or similar advertising material relating to the financing transaction contemplated by this Agreement. Agent and each Lender consent to Borrower's orally disclosing to its vendors, landlords and prospective landlords only the name of Agent and each Lender, the amount of the Aggregate Revolving Credit Commitment and the Commitment Termination Date. Any written materials of any type disclosing any
information of the type referred to herein shall require the written approval of Agent prior to being disseminated to any Person.
11.16 COLLATERAL DOCUMENTS. Borrower acknowledges and agrees that from
and after the Closing Date that (i) each Collateral Document shall continue
without any diminution thereof and shall remain in full force and effect, and
(ii) each reference in the Collateral Documents to the "Agent", "Lenders",
"Credit Agreement" and "Obligations" shall be references to, respectively, the
Agent, the Lenders, this Agreement and the Obligations as defined in this
Agreement.
11.17 DATING. Although this Agreement is dated as of the date first written above for convenience, the actual dates of execution hereof by the parties hereto are respectively the dates set forth under the signatures hereto, and this Agreement shall be effective on the latest of such dates.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.
DICK'S SPORTING GOODS, INC.
By /s/ Jeffrey R. Hennion ----------------------------------- Name: Title: Date: July 26, 2000 |
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By /s/ Charles Chiodo ----------------------------------- Name: Charles Chiodo Title: Authorized Signatory Date: July 26, 2000 |
GENERAL ELECTRIC CAPITAL
CORPORATION
By /s/ Charles Chiodo ----------------------------------- Name: Charles Chiodo Title: Authorized Signatory Date: July 26, 2000 |
BSB BANK & TRUST COMPANY
By /s/ Edward P. Michalek ----------------------------------- Name: Edward P. Michalek Title: Vice President Date: July 26, 2000 |
NATIONAL BANK OF CANADA
By /s/ Donald P. Haddad ------------------------------ Name: Donald P. Haddad Title: Vice President Date: July 26, 2000 By /s/ G. B. Knell ------------------------------ Name: G. B. Knell Title: Vice President Date: July 26, 2000 |
FLEET RETAIL FINANCE INC.
By /s/ Robert DeAngelo ------------------------------ Name: Robert DeAngelo Title: Senior Vice President Date: July 26, 2000 |
CIT GROUP/BUSINESS CREDIT
By /s/ Evelyn Kusold ------------------------------ Name: Evelyn Kusold Title: Assistant Vice President Date: July 26, 2000 |
NATIONAL CITY BANK OF PENNSYLVANIA
By /s/ John L. Hayes IV ------------------------------ Name: John L. Hayes IV Title: Assistant Vice President Date: July 26, 2000 |
FIRST UNION NATIONAL BANK
By: /s/ Irene Rosen Marks -------------------------------- Name: Irene Rosen Marks Title: Vice President Date: July 26, 2000 |
APPENDIX 1
REVOLVING CREDIT COMMITMENTS
AND LENDER INFORMATION
--------------------------------------------------------------------------------
REVOLVING CREDIT REVOLVING CREDIT
LENDER COMMITMENT COMMITMENT PERCENTAGES
--------------------------------------------------------------------------------
GENERAL ELECTRIC $ 55,000,000.00 32.352941%
CAPITAL CORPORATION
800 Connecticut Avenue,
Two North
Norwalk, CT 06854
Attn: Charles Chiodo
Telephone: (203)852-3600
Telecopy: (203)852-3640
NATIONAL BANK OF $ 25,000,000.00 14.705882%
CANADA
One Oxford Centre
301 Grant Street
Suite 3440
Pittsburgh, PA 15219
Attn: Donald P. Haddad
Telephone: (412)281-4890
Telecopy: (412)281-4603
TYCO $ 17,500,000.00 10.294118%
1211 Avenue of the Americas
New York, NY 10036
Attn: Evelyn Kusold
Telephone: (212)536-1208
Telecopy: (212)536-1293
BSB BANK & TRUST $ 7,500,00.00 4.411765%
COMPANY
68 Exchange Street
Binghamton, NY 13902
Attn: Glenn Small
Telephone: (607)779-2590
Telecopy: (607)772-6287
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REVOLVING CREDIT REVOLVING CREDIT
LENDER COMMITMENT COMMITMENT PERCENTAGES
--------------------------------------------------------------------------------
FLEET RETAIL FINANCE $ 30,000,000.00 17.647059%
INC.
40 Broad Street, 10th Floor
Boston, MA 02109
Attn: Jim Dore
Telephone: (617)434-4184
Telecopy: (617)434-4312
NATIONAL CITY BANK OF $ 15,000,000.00 8.823529%
PENNSYLVANIA
20 Stanwix Street, 19th Floor
Pittsburgh, PA 15222
Attn: Vince Delie
Telephone: (412)644-6056
Telecopy: (412)471-4883
FIRST UNION NATIONAL $ 20,000,000.00 11.764706%
BANK
One South Penn Square, 12th
Floor
Philadelphia, PA 19107
Attn: Susan Schwartz
Telephone: (215)786-4369
Telecopy: (215)786-2877
=============== ===========
$170,000,000.00 100.0%
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ANNEX A
to
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of July 26, 2000
DEFINITIONS: RULES OF CONSTRUCTION
1. DEFINITIONS. Capitalized terms used in this Agreement shall have (unless otherwise provided elsewhere in this Agreement) the following respective meanings when used in this Agreement.
"ACCOUNT DEBTOR" shall mean any Person who may become obligated to any Loan Party under, with respect to, or on account of, an Account, Chattel Paper or General Intangibles.
"ACCOUNTS" shall mean, with respect to any Person, all "accounts" as such term is defined in the Code, now owned or hereafter acquired by such Person and, in any event, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by chattel paper, documents or instruments) now owned or hereafter received or acquired by or belonging or owing to such Loan Party, whether arising out of goods sold or services rendered by it or from any other transaction (including any such obligations which may be characterized as an account or contract right under the Code), (b) all of such Person's rights in, to and under all purchase orders or receipts now owned or hereafter acquired by it for goods or services, (c) all of such Person's rights to any goods represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all monies due or to become due to such Person under all purchase orders and contracts for the sale or lease of goods or the performance of services or both by such Person or in connection with any other transaction (whether or not yet earned by performance on the part of such Person) now or hereafter in existence, including the right to receive the proceeds of said purchase orders and contracts, and (e) all collateral security and guarantees of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing.
"ADJUSTMENT DATE" shall mean, with respect to any four Fiscal Quarter period of Borrower, the date which is the 60th day after the end of such period.
"ADJUSTMENT PERIOD" shall mean any period commencing on an Adjustment Date and ending on the next succeeding Adjustment Date.
"AFFILIATE" shall mean, with respect to any Person, (a) each Person that, directly or indirectly, owns or Controls, whether beneficially, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that Controls, is Controlled by or is under common Control with such Person or (c) each of such Person's officers, directors,joint venturers and partners.
"AGENT" shall have the meaning assigned to it in the first paragraph of this Agreement.
"AGGREGATE REVOLVING CREDIT COMMITMENT" shall mean $140,000,000.
"AGREEMENT" shall mean this Amended and Restated Credit Agreement to which this ANNEX A is attached and of which it forms a part including all Annexes, Schedules, and Exhibits attached or otherwise identified thereto, restatements and modifications and supplements hereto and any appendices, attachments, exhibits or schedules to any of the foregoing, and shall refer to this Agreement as the same may be in effect at the time such reference becomes operative, provided, however that any reference to the Schedules to this Agreement shall be deemed a reference to the Schedules as in effect on the Closing Date or in a written amendment thereto executed by Borrower, Agent and the Required Lenders.
"APPLICABLE MARGIN" shall mean the rate per annum set forth below opposite the Interest Coverage Ratio for the four Fiscal Quarter period immediately preceding the applicable Adjustment Period, commencing with the four Fiscal Quarter period ending April 30, 2000. The Applicable Margin shall be determined on each Adjustment Date for the Adjustment Period commencing on such Adjustment Date and shall (subject to the proviso contained in this definition) be effective for such Adjustment Period.
---------------------------------------------------------------------------
INTEREST COVERAGE RATIO FOR INDEX RATE
PREVIOUS FOUR FISCAL QUARTERS LIBOR LOANS LOANS
---------------------------------------------------------------------------
Less than 3.00 2.25% .25%
Greater than or equal to 3.00 2.00% 0.00%
and
less than 4.00
Greater than or equal to 4.00 1.75% 0.00%
and
less than 5.00
Greater than or equal to 5.00 1.50% 0.00%
and
less than 6.00
Greater than or equal to 6.00 1.25% 0.00%
|
For purposes of this definition, the Interest Coverage Ratio shall be determined by the financial information delivered by Borrower to Agent under PARAGRAPHS 3 AND 4 of ANNEX D and if Borrower shall fail to deliver to Agent such financial information for any four Fiscal Quarter period by the Adjustment Date for such period, the Interest Coverage Ratio for such period shall be deemed to be less than 3.00 to 1.00 regardless of the actual Interest Coverage Ratio for such period; PROVIDED, that once Borrower delivers to Agent such financial information the Interest Coverage Ratio for such period will be the actual Interest Coverage Ratio determined by such financial information and the Applicable Margin for the remaining portion of the applicable Adjustment Period shall be based on
such actual Interest Coverage Ratio. Notwithstanding anything to the contrary herein, (i) if Excess Borrowing Availability is less than $20,000,000 for three consecutive Business Days during any Fiscal Month, then the Applicable Margin shall be 0.25% higher during that Fiscal Month than what is otherwise provided for above or in the following clause (ii), except, absent a Default having occurred, in no event shall the Applicable Margin be greater than 2.25% for LIBOR Loans and .25% for Index Rate Loans and (ii) in no event during the period from and including May 30, 2000 to and including May 31, 2001 shall the Applicable Margin with respect to LIBOR Loans and Index Rate Loans be less than 1.50% and 0.00%, respectively.
"ASSIGNEE" shall have the meaning assigned to it in SECTION 10.2(b). "BLOCKED ACCOUNT" shall have the meaning assigned to it in ANNEX B.
"BLOCKED ACCOUNT AGREEMENTS" shall have the meaning assigned to it in Annex B.
"BORROWER" shall mean Dick's Sporting Goods, Inc., a Delaware corporation.
"BORROWING AVAILABILITY" shall mean, at any time, the lesser at such time of (a) the Aggregate Revolving Credit Commitment and (b) the Borrowing Base, in each case, less the Letter of Credit Obligations.
"BORROWING BASE" shall mean, at any time, an amount determined by Agent to be equal to the lesser of (i) seventy percent (70%) of Eligible Inventory on a cost basis, or (ii) eighty-five percent (85%) of inventory net realizable liquidation valuation, as determined by an appraisal acceptable to Agent, MINUS in either case (a) the Lease Payment Reserve and (b) the amount of any other reserves (including reserves for sales and use taxes and payroll withholding taxes) as Agent may deem necessary or appropriate from time to time in its discretion.
"BORROWING BASE CERTIFICATE" shall mean the inventory borrowing base certificate in the form attached hereto as EXHIBIT B.
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in New York City and in reference to LIBOR Loans shall mean any such day that is also a LIBOR Business Day.
"CAPITAL EXPENDITURES" shall mean, with respect to any Person, all payments or accruals (including Capital Lease Obligations) of such Person for any assets or improvements or for replacements, substitutions or additions thereto, that are required to be capitalized under GAAP.
"CAPITAL LEASE" shall mean, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, either would be required to be classified and accounted for as a capital lease on a balance sheet of such Person or otherwise be disclosed as such in a note to such balance sheet.
"CAPITAL LEASE OBLIGATION" shall mean, with respect to any Person, the amount of the obligation of such Person as lessee under any Capital Lease that, in accordance with GAAP, would appear on a balance sheet of such Person in respect of such Capital Lease or otherwise be disclosed in a note to such balance sheet.
"CASH COLLATERAL ACCOUNT" shall have the meaning assigned to it in
ANNEX F.
"CASH EQUIVALENTS" shall mean, (a) securities with maturities of 180 days or less from the date of acquisition issued or fully guaranteed or insured by the United States government or any agency thereof and backed by the full faith and credit of the United States, (b) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers acceptances of any domestic commercial bank having capital and surplus in excess of $500,000,000 having maturities of one year or less from the date of acquisition, and (c) commercial paper of an issuer rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Services, Inc., or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments, in each case, with maturities of not greater than sixty (60) days from the date acquired.
"CHANGE OF CONTROL" shall mean (a) the failure of the Permitted Holders to directly own Stock of Borrower representing 51% or more of the voting capital stock of Borrower or to Control Borrower; or (b) the Permitted Holders shall cease to have the power to designate or elect a majority of Borrower's board of directors or a majority of Borrower's board of directors at any time in office are no longer designated or elected by the Permitted Holders.
"CHARGES" shall mean, for each Loan Party, all federal, state, county,
city, municipal, local, foreign or other governmental taxes (including taxes
owed to PBGC at the time due and payable), levies, imposts, assessments,
charges, Liens, claims or encumbrances upon or relating to (a) the Collateral,
(b) the Obligations, (c) the employees, payroll, income or gross receipts of
such Loan Party, (d) such Loan Party's ownership or use of any of its assets, or
(e) any other aspect of such Loan Party's business.
"CHATTEL PAPER" shall mean all "chattel paper" as such term is defined in the Code.
"CLAIM" shall have the meaning assigned to it in SECTION 1.15.
"CLOSING DATE" shall mean the Business Day on which the conditions precedent set forth in SECTION 2 have been satisfied or waived in writing by Agent or Lenders, as applicable.
"CODE" shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided in the event that, by reason of mandatory provisions of law, any or all of the attachment, or remedies with respect to, Agent's security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "Code" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.
"COLLATERAL" shall mean the property covered by the Collateral Documents and any other property, real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of Agent or Lenders to secure the Obligations.
"COLLATERAL DOCUMENTS" shall mean the Security Agreement, the DAMC Security Agreement, the DAMC Guaranty, the DAMC Trademark Security Agreement, the Pledge Agreement, the Blocked Account Agreements, the Concentration Account Agreement, the Disbursement Account Agreements, if any, the Landlord Waivers and all other instruments, waivers and agreements now or hereinafter securing in whole or in part the Obligations.
"COLLECTION ACCOUNT" shall mean that certain account of Agent, account number 502-328-54 in the name of GECC/CAF Depository at Bankers Trust Company, 17 Wall Street, New York, New York, ABA number 021-001-033.
"COMMITMENT TERMINATION DATE" shall mean the earliest of (a) May 30, 2003, (b) the date of termination of the Aggregate Revolving Credit Commitment pursuant to SECTION 8.2, and (c) the date of termination of the Aggregate Revolving Credit Commitment in accordance with the provisions of SECTION 1.2(d).
"CONCENTRATION ACCOUNT" shall have the meaning assigned to it in
ANNEX B.
"CONCENTRATION ACCOUNT AGREEMENT" shall have the meaning assigned to it in ANNEX B.
"CONTRACTS" shall mean, with respect to any Person, all the contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which such Person may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account.
"CONTROL" shall mean, with respect to a Person, the possession, directly or indirectly, of the power to direct or cause the direction of such Person's management or policies, whether through the ownership of voting securities, by contract or otherwise, and "CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto.
"COPYRIGHTS" shall mean, with respect to any Person, any United States copyright to which such Person now or hereafter has title, as well as any application for a United States copyright hereafter made by such Person.
"DAMC" shall mean Dick's Asset Management Corp., a Delaware corporation and a wholly-owned Subsidiary of Borrower.
"DAMC GUARANTY" shall mean a Guaranty, in form and substance satisfactory to Agent, made between DAMC and Agent.
"DAMC SECURITY AGREEMENT" shall mean a Security Agreement, in form and substance satisfactory to Agent, made between DAMC and Agent.
"DAMC TRADEMARK SECURITY AGREEMENT" shall mean a Trademark Security Agreement, in form and substance satisfactory to Agent, made by DAMC in favor of Agent.
"DATA SHARING AGREEMENT" shall mean that certain Data Sharing/License Agreement, dated as of October 29, 1999, among Borrower, dsports.com and ONRP Services, LLC.
"DEEMED SALE/LEASEBACK TRANSACTION" shall mean any transaction (a) as to which Borrower's independent certified public accountants have determined in a manner satisfactory to Agent constitutes an Operating Lease for purposes of GAAP, (b) related to Borrower's Equipment and/or Fixtures as to which Borrower has not transferred title to the "lessor" under, or in connection with, any such Operating Lease and (c) subject to documentation, and having terms and conditions, substantially similar to that certain Master Lease Purchase Agreement, dated July 16, 1997, between Borrower and MetLife Capital Corporation, or as otherwise acceptable to Agent in its sole discretion.
"DEFAULT" shall mean any Event of Default or any event which, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default.
"DEFAULT RATE" shall mean a rate per annum equal to 2% PLUS the Index Rate as in effect from time to time PLUS the Applicable Margin (provided that with respect to a LIBOR Loan, the "Default Rate" for such Loan shall be 2% plus the LIBOR Rate for such LIBOR Loan plus the Applicable Margin during the LIBOR Period relating thereto and, after such LIBOR Period or any earlier conversion of such LIBOR Loan to an Index Rate Loan pursuant to this Agreement, the rate provided for above in this definition).
"DEFERRED TAXES" shall mean, with respect to any Person at any date, the amount of deferred taxes of such Person as shown on the balance sheet of such Person prepared in accordance with GAAP as of such date.
"DISBURSEMENT ACCOUNT" shall have the meaning assigned to it in ANNEX B.
"DISBURSEMENT ACCOUNT AGREEMENTS" shall have the meaning assigned to it in ANNEX B.
"DMSI" shall mean Distribution & Marking Services, Inc., a Delaware corporation.
"DMSI AGREEMENTS" shall mean that certain Merchandise Servicing Agreement dated January 11, 1995 between DMSI and Borrower and any other agreements entered into in connection therewith between Borrower and DMSI.
"DOCUMENTS" shall mean any "documents" as such term is defined in the Code and, in any event, any bills of lading, dock warrants, dock receipts, warehouse receipts, or other documents of title.
"DOLLARS" and "$" shall mean lawful money of the United States of America.
"DOL" shall mean the United States Department of Labor or any successor thereto.
"DSG HOLDINGS" shall mean DSG Holdings LLC, a Delaware limited liability company.
"DSG HOLDINGS CONTRIBUTION AGREEMENT" shall mean that certain Contribution and Interest Purchase Agreement, dated as of October 29, 1999, among Borrower, ONRP, Oak Investment Partners VII Limited Partnership and DSG Holdings.
"DSG HOLDINGS LIMITED LIABILITY COMPANY AGREEMENT" shall mean that certain Limited Liability Company Agreement of DSG Holdings, dated as of October 29, 1999, among Borrower, ONRP and Oak Investment Partners VII Limited Partnership.
"dsports.com" shall mean dsports.com LLC, a Delaware limited liability company and wholly-owned subsidiary of DSG Holdings.
"dsports.com SERVICES AGREEMENT" shall mean that certain Services Agreement, dated as of October 29, 1999, between Borrower and dsports.com.
"dsports.com SUPPLY AGREEMENT" shall mean that certain Supply Agreement, dated as of October 29, 1999, between Borrower and dsports.com.
"dsports.com TRADEMARK AGREEMENT" shall mean that certain Trademark License Agreement, dated as of October 29, 1999, between DAMC and dsports.com.
"E-COMMERCE TRANSACTION DOCUMENTS" shall mean, collectively, the DSG Holdings Limited Liability Company Agreement, the DSG Holdings Contribution Agreement, the Web Site Agreement, the Data Sharing Agreement, the dsports.com Trademark Agreement, the dsports.com Supply Agreement and the dsports.com Services Agreement.
"EBITDA" shall mean, for any period, the Net Income (Loss) for such period, PLUS Interest Expense, tax expense, depreciation expense, amortization expense, and extraordinary losses and other non-cash items, MINUS extraordinary gains, in each case, of Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP to the extent included in the determination of such Net Income (Loss).
"ELIGIBLE INVENTORY" shall mean such Inventory of Borrower that is not ineligible as the basis for Revolving Credit Advances or Letter of Credit Obligations
based on the criteria set forth below. In determining whether Inventory constitutes Eligible Inventory, Agent does not intend to include Inventory which:
(a) is not owned by Borrower free and clear of all Liens and rights of others, except the Liens in favor of Agent and Lenders pursuant to the Collateral Documents;
(b) is not located on premises owned or operated by Borrower referenced on SCHEDULE 3.6;
(c) is Inventory in transit (other than Inventory in transit from one of Borrower's distribution centers, including the DMSI distribution center, to one of Borrower's stores provided that such Inventory is being shipped in the normal course of business and consistent with Borrower's past practice and Agent continues to maintain a first priority perfected security interest in such Inventory);
(d) is Inventory held on or at leased premises where the landlord thereof has either not executed a Landlord Waiver in form and substance satisfactory to Agent or reserves (including, without limitation, a Lease Payment Reserve) related thereto satisfactory to Agent in its discretion have not been established against Borrowing Availability;
(e) is in the possession or control of a bailee, warehouseman, processor, converter or other Person other than Borrower, unless Agent is in possession of such agreements, instruments and documents as Agent may require (each in form and content acceptable to Agent and duly executed, as appropriate by the bailee, warehouseman, processor, converter or other Person in possession or control of such Inventory, as applicable) including but not limited to warehouse receipts in Agent's name covering such Inventory;
(f) is covered by a negotiable document of title unless such document has been delivered to Agent;
(g) is not covered by insurance required by the terms of SECTION 5.5 and ANNEX E;
(h) is obsolete, unsalable, shopworn, damaged, unfit for further processing, or is of substandard quality;
(i) consists of display items or packing and shipping materials;
(j) consists of discontinued or slow-moving items;
(k) does not meet all standards imposed by any Governmental Authority;
(l) is placed by Borrower on consignment or held by Borrower on consignment from another Person;
(m) is not a type held for sale in the ordinary course of Borrower's business;
(n) is Inventory produced in violation of the Fair Labor Standards Act and subject to the "hot goods" provisions contained in Title 29 U.S.C. Section 215 or any successor statute or section;
(o) is Inventory which in any way fails to meet or violates any warranty, representation or covenant contained in this Agreement or any other Loan Document; or
(p) is not otherwise acceptable in the discretion of Agent, based upon such credit and collateral considerations as Agent may deem appropriate from time to time.
"ENVIRONMENTAL LAWS" shall mean all federal, state and local laws, statutes, ordinances, orders and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any applicable judicial or administrative interpretation thereof relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 ET SEQ.) ("CERCLA"); the Hazardous Material Transportation Act, as amended (49 U.S.C. Sections 1801 ET SEQ.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. Sections 136 ET SEQ.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901 ET SEQ.) ("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C. Sections 2601 ET SEQ.); the Clean Air Act, as amended (42 U.S.C. Sections 740 ET SEQ.); the Federal Water Pollution Control Act, as amended (33 U.S.C. Sections 1251 ET SEQ.); the Occupational Safety and Health Act, as amended (29 U.S.C. Sections 651 ET SEQ.) ("OSHA"); and the Safe Drinking Water Act, as amended (42 U.S.C. Sections 300(f) ET SEQ.), and any and all regulations promulgated thereunder, and all analogous state and local counterparts or equivalents and any transfer of ownership notification or approval statutes.
"ENVIRONMENTAL LIABILITIES AND COSTS" shall mean all liabilities, obligations, responsibilities, remedial actions, removal costs, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim, suit, action or demand by any person or entity, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law (including any thereof arising under any Environmental Law, permit, order or agreement with any Governmental Authority) and which relate to any health or safety condition regulated under any Environmental Law or in connection with any other environmental matter or Release, threatened Release, or the presence of a Hazardous Material.
"EQUIPMENT" shall mean any "equipment" as such term is defined in the Code and in any event shall include all machinery, equipment, furnishings, fixtures and
vehicles and any and all additions, accessions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean any trade or business (whether or not
incorporated) under common control with any Loan Party and which, together with
such Loan Party, is treated as a single employer within the meaning of Section
414(b), (c), (m) or (o) of the IRC.
"ERISA EVENT" shall mean, with respect to any Loan Party or any ERISA
Affiliate, (a) a Reportable Event with respect to a Title IV Plan or a
Multiemployer Plan; (b) the withdrawal of any Loan Party or any ERISA Affiliate
from a Title IV Plan subject to Section 4063 of ERISA during a plan year in
which it was a substantial employer, as defined in Section 4001(a) (2) of ERISA;
(c) the complete or partial withdrawal of any Loan Party or any ERISA Affiliate
from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceeding to terminate a Title IV
Plan or Multiemployer Plan by the PBGC; (f) the failure to make required
contributions to a Qualified Plan; or (g) any other event or condition which
might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Title
IV Plan or Multiemployer Plan or the imposition of any liability under Title IV
of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA.
"EVENT OF DEFAULT" shall have the meaning assigned to it in SECTION 8.1.
"EXCESS BORROWING AVAILABILITY" shall mean, at any time, the amount by which Borrowing Availability exceeds the outstanding principal amount of the Revolving Credit Loan.
"EXECUTIVE OFFICERS" shall mean the President, Chief Executive Officer, Chief Financial Officer, Treasurer and Controller of Borrower.
"EXISTING CREDIT AGREEMENT" shall have the meaning assigned to it in the Recitals to this Agreement.
"EXISTING LENDERS" shall have the meaning assigned to it in the Recitals to this Agreement.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by Agent from three federal funds brokers of recognized standing selected by it.
"FEES" shall mean the fees due to Agent and/or Lenders as set forth in
SECTION 1.6 or otherwise pursuant to the Loan Documents.
"FINANCIAL STATEMENTS" shall mean the financial statements referred to in paragraph 1 of SCHEDULE 3.4.
"FISCAL QUARTER" shall mean the 12 or 13-week period ending on the Saturday closest to the end of each April, July, October and January of each year.
"FISCAL YEAR" shall mean the 52 or 53-week fiscal year of Borrower and its Subsidiaries for financial accounting purposes, which in any event shall end on the last Saturday of January of each year.
"FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any period, the ratio of the following for such period of Borrower and its Subsidiaries determined in accordance with GAAP: (a) EBITDA PLUS (i) the aggregate amount of Net Proceeds received during any such period by Borrower from the issuance of its equity securities after the Closing Date and (ii) the aggregate amount of Net Proceeds received during any such period by Borrower from a sale of Fixtures and Equipment (including the proceeds received by Borrower in a Deemed Sale/Leaseback Transaction), permitted under Section 6.8 of this Agreement; LESS Capital Expenditures which are not financed through Operating Leases to (b) the sum of Interest Expense PLUS principal paid on Indebtedness (including Capitalized Lease Obligations but excluding the principal of the Revolving Credit Loan) or required to be paid during such period PLUS taxes to the extent accrued or otherwise payable with respect to such period.
"FIXTURES" shall, with respect to any Person, mean all "fixtures," as such term is defined in the Code, now or hereafter owned or acquired by such Person, wherever located, and, in any event, including all of the fixtures, systems, machinery, apparatus, equipment and fittings of every kind and nature whatsoever and all appurtenances and additions thereto and substitutions therefor or replacements thereof, now or hereafter attached or affixed to or constituting a part of, or located in or upon, real property wherever located (including all heating, electrical, mechanical, lighting, lifting, plumbing, ventilating, air-conditioning and air cooling, refrigerating, incinerating and power, loading and unloading, signs, escalators, elevators, boilers, communication, switchboards, sprinkler and other fire prevention and extinguishing fixtures, systems, machinery, apparatus and equipment, and all engines, motors, dynamos, machinery, pipes, pumps, tanks, conduits and ducts constituting a part of any of the foregoing, together with all extensions, improvements, betterments, renewals, substitutes, and replacements of, and all additions and appurtenances to any of the foregoing property).
"GE CAPITAL" shall mean General Electric Capital Corporation, a New York corporation having an office at 800 Connecticut Avenue, Two North, Norwalk, Connecticut 06854.
"GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time, consistently applied, except that, for purposes of SECTION 6.10, GAAP shall be determined on the basis of such principles in effect on March 1, 1997 and consistent with those used in the preparation of the Financial Statements referred to in SECTION 3.4.
"GENERAL INTANGIBLES" shall mean, with respect to any Person, all "general intangibles" as such term is defined in the Code, now owned or hereafter acquired by such Person and, in any event, including all right, title and interest which such Person may now or hereafter have in or under any Contract, all customer lists, Intellectual Property, interests in partnerships, joint ventures and other business associations, permits, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Intellectual Property), all rights and claims in or under insurance policies, (including insurance for fire, damage, loss, and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man, and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, and other bank accounts (including with respect to each Loan Party the Blocked Accounts, the Concentration Account and the Disbursement Accounts), rights to receive tax refunds and other payments and rights of indemnification.
"GECMG" shall mean GECC Capital Markets Group, Inc., a Delaware corporation.
"GOODS" shall mean all "goods" as such term is defined in the Code, including movables, fixtures, Equipment, inventory, or other tangible personal property.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof, and any agency, department, court, board, commission, or other entity exercising valid legal executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any manner including any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) to indemnify the owner of such primary obligation against loss in respect thereof.
"HAZARDOUS MATERIAL" shall mean (a) any element, material, compound, mixture, solution, chemical, substance, or pollutant within the definition of "hazardous substance" under Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601(14); petroleum or any fraction, byproduct or distillation product thereof; asbestos, polychlorinated biphenyls, or any radioactive substances; and any material regulated as a hazardous substance by any jurisdiction in which any Loan Party owns or operates or has owned or operated a facility; or (b) any element, pollutant, contaminate or discarded material (including any radioactive material) within the definition of Section 103(6) of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6903(6); and any material regulated as a
hazardous waste by any jurisdiction in which any Loan Party owns or operates or has owned or operated a facility, or to which any Loan Party sends material for treatment, storage or disposal as waste.
"INDEBTEDNESS" of any Person shall mean (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (including reimbursement and all other obligations with respect to
surety bonds, letters of credit and bankers' acceptances, whether or not
matured, but not including obligations to trade creditors incurred in the
ordinary course of business that are not unpaid for more than 90 days past the
stated due date therefor), (b) all obligations evidenced by notes, bonds,
debentures or similar instruments (including, without limitation, the
Subordinated Note), (c) all indebtedness created or arising under any
conditional sale or other title retention agreements with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in an event of default may be limited to
repossession or sale of such property), (d) all Capital Lease Obligations, (e)
all Guaranteed Indebtedness, (f) all obligations of such Person under any
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate option contract, foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap, commodity
purchase or option agreements or other similar agreement or contract designed to
protect such Person against fluctuations in interest rates, currency values or
commodity prices, as the case may be, or other hedging or derivative agreements,
(g) all Indebtedness referred to in clause (a), (b), (c), (d), (e) or (f) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
(h) the Obligations, and (i) all liabilities under Title IV of ERISA.
"INDEMNIFIED PERSON" shall have the meaning assigned to it in SECTION 1.15.
"INDEX RATE" shall mean, for any day, a floating rate equal to the
highest of (a) the rate publicly quoted from time to time by THE WALL STREET
JOURNAL as the "base rate on corporate loans at large U.S. money center
commercial banks" (or, if THE WALL STREET JOURNAL ceases quoting a base rate of
the type described, the highest per annum rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Effective Rate as in effect for such day plus fifty (50)
basis points per annum. Each change in any interest rate provided for in this
Agreement based upon the Index Rate shall take effect at the time of such change
in the Index Rate.
"INDEX RATE LOAN" shall mean a Loan or portion thereof bearing interest by reference to the Index Rate.
"INFORMATION STATEMENT" shall mean that certain Information Statement and Offer to Purchase Shares of the Borrower dated April 20, 2000 and supplemented on May 12, 2000 and May 19, 2000 attached as Exhibit C to the Seventh Amendment.
"INSTRUMENTS" shall mean, for any Person, all "instruments" as such term is defined in the Code, now owned or hereafter acquired by such Person, wherever located and in any event all certificated securities, certificates of deposit and all notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper.
"INTELLECTUAL PROPERTY" shall mean, for any Person, collectively, all Trademarks, all Patents, all Copyrights and all Licenses now held or hereafter acquired by such Person, together with all franchises, tax refund claims, rights of indemnification, payments under insurance, indemnities, warranties and guarantees payable with respect to the foregoing.
"INTERCREDITOR AGREEMENTS" shall mean the collective reference to the Intercreditor Agreements, each substantially in the form of EXHIBIT E or as otherwise approved by Agent, between Agent and any purchaser(s) of Fixtures and Equipment in a sale-leaseback transaction permitted pursuant to Section 6.8 of this Agreement.
"INTEREST COVERAGE RATIO" shall mean, with respect to any period, the ratio of (a) EBITDA for such period to (b) Interest Expense for such period.
"INTEREST EXPENSE" shall mean for any period the amount which would, in conformity with GAAP, be set forth opposite the caption "interest expense" or any like caption on a consolidated statement of operations of the Borrower and its Subsidiaries prepared on a consolidated basis in accordance with GAAP.
"INTEREST SETTLEMENT DATE" shall have the meaning assigned to it in
SECTION 1.13(d).
"INVENTORY" shall mean, for any Person, all "inventory" as such term is defined in the Code, now or hereafter owned or acquired by, such Person, wherever located, and, in any event, including inventory, merchandise, goods and other personal property which are held by or on behalf of such Person for sale or lease or are furnished or are to be furnished under a contract of service or which constitute raw materials, work in process or materials used or consumed or to be used or consumed in such Person's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including other supplies, and all accessions and additions thereto and all documents of title covering any of the foregoing.
"INVESTMENT" shall mean, for any Person (a) the acquisition (whether
for cash, property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition;
(b) the making of any deposit with, or advance, loan or other extension of
credit to, any other Person (including the purchase of property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such Person); and (c) the entering into of any
Guaranteed Indebtedness of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person.
"INVESTMENT PROPERTY" shall have the meaning ascribed thereto in Section
9-115 of the Code in those jurisdictions in which such definition has been adopted and shall include (i) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of any Person, including the rights of such Person to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (iii) all securities accounts held by any Person; (iv) all commodity contracts held by any Person; and (v) all commodity accounts held by any Person.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor thereto.
"LANDLORD'S WAIVER" shall mean a landlord's waiver and license agreement or other agreement executed and delivered by the landlord under any Lease in form and substance satisfactory to Agent.
"LEASE PAYMENT RESERVE" shall mean a reserve against Borrowing Availability in an amount determined by Agent in its discretion including an amount equal to the aggregate amount of a number of months (as determined by Agent) rent and utility costs payable by Borrower with respect to each Lease of real property where Eligible Inventory is located and with respect to which Borrower has failed to obtain a Landlord's Waiver from the landlord thereof in form and substance satisfactory to Agent. The Lease Payment Reserve may, in Agent's discretion, be in addition to any other reserve against Borrowing Availability established by Agent.
"LEASES" shall mean all of those leasehold estates in real property now owned or hereafter acquired by a Loan Party, as lessee.
"LENDER" and "LENDERS" shall have the meaning provided in the first paragraph of this Agreement.
"LETTER OF CREDIT" shall mean any commercial or standby letter of credit issued (including issued pursuant to the terms of the Existing Credit Agreement) at the request and for the account of Borrower for which Agent and/or Lenders have incurred Letter of Credit Obligations.
"LETTER OF CREDIT FEE" shall have the meaning assigned to it in SECTION 1.6.
"LETTER OF CREDIT OBLIGATIONS" shall mean all outstanding obligations incurred by Agent and/or Lenders at the request of Borrower, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance or guarantee, by Agent or any Lender of Letters of Credit. The amount of such Letter of Credit Obligations at any time shall equal the maximum amount which may be payable by Agent and/or Lenders under or pursuant to the outstanding Letters of Credit at such time.
"LIBOR BUSINESS DAY" shall mean a Business Day on which banks in the city of London are generally open for interbank or foreign exchange transactions.
"LIBOR LOAN" shall mean a Loan or any portion thereof bearing interest by reference to the LIBOR Rate.
"LIBOR PERIOD" shall mean, with respect to any LIBOR Loan, each period commencing on a LIBOR Business Day selected by Borrower pursuant to the Agreement and ending one, two or three months thereafter, as selected by Borrower's irrevocable notice to Agent as set forth in SECTION 1.1(c); PROVIDED that the foregoing provision relating to LIBOR Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such LIBOR Period into another calendar month in which event such LIBOR Period shall end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the Commitment Termination Date shall end two (2) LIBOR Business Days prior to such date;
(c) any LIBOR Period pertaining to a LIBOR Loan that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Period) shall end on the last LIBOR Business Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require a payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and
(e) Borrower shall select LIBOR Periods so that there shall be no more than seven (7) separate LIBOR Loans in existence at any one time.
"LIBOR Rate" shall mean for each LIBOR Period, a rate of interest determined by Agent equal to:
(a) the offered rate for deposits in United States Dollars for the applicable LIBOR Period which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the second full LIBOR Business Day next preceding the first day of each LIBOR Period (unless such date is not a Business Day, in which event the next succeeding Business Day will be used); divided by
(b) a number equal to 1.0 MINUS the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day which is two (2) LIBOR Business Days prior to the beginning of such LIBOR Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve system or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of such Board) which are required to be maintained by a member bank of the Federal Reserve System (such rate to be adjusted to the nearest one sixteenth of one percent (1/16th of 1%) or, if there is not a nearest one sixteenth of one percent (1/16th of 1%), to the next highest one
sixteenth of one percent (1/16th of 1%)).
If such interest rates shall cease to be available from Telerate News Service, the LIBOR Rate shall be determined from such financial reporting service or other information as shall be mutually acceptable to Agent and Borrower.
"LICENSE" shall mean, with respect to any Person, any Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by such Person.
"LIEN" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction).
"LOAN DOCUMENTS" shall mean this Agreement, the Revolving Credit Notes, the Subordination Agreement and the Collateral Documents.
"LOAN PARTY" means each of Borrower and each Subsidiary of Borrower, including DAMC.
"MARGIN STOCK" shall have the meaning specified in Regulation T, U or X of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the business, assets, operations, prospects, or financial condition of Borrower and its Subsidiaries, taken as a whole, (b) any Loan Party's ability to pay or perform its Obligations in accordance with the terms of the Loan Documents, (c) the Collateral or Agent's Lien on the Collateral or the priority or perfection of any such Lien or (d) the rights and remedies of Agent and Lenders under this Agreement and the other Loan Documents.
"MATERIAL CONTRACTS" shall mean the contracts listed on SCHEDULE 6.19 hereto and any other Contract of Borrower which, if cancelled or terminated, could reasonably be expected to have or result in a Material Adverse Effect.
"MAXIMUM LAWFUL RATE" shall have the meaning assigned to it in
SECTION 1.4(e).
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which Borrower or any ERISA Affiliate is
making, is obligated to make, has made or been obligated to make, contributions
on behalf of participants who are or were employed by any of them.
"NET BORROWING AVAILABILITY" shall mean as of any date of determination, the lesser of (i) the Aggregate Revolving Credit Commitment and
the Borrowing Base, in each case LESS the Revolving Credit Loan then outstanding.
"NET INCOME (LOSS)" shall mean, for any period, the aggregate net income (or loss) after provision (benefit) for income taxes of Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.
"NET PROCEEDS" shall mean (a) with respect to any sale or disposition of assets (including by sale and leaseback) by any Person, the cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such sale or disposition net of (i) attorneys' fees, accountants' fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses, and brokerage, consultant and other customary fees actually incurred in connection therewith other than such amounts payable to an Affiliate of Borrower and (ii) taxes paid or payable as a result thereof; and (b) with respect to any issuance of equity securities or the incurrence of any Indebtedness by any Person subsequent to the Closing Date, the cash proceeds received by such Person from such issuance or incurrence net of investment banking fees, legal fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses and other reasonable costs and expenses actually incurred in connection therewith other than such amounts payable to an Affiliate of Borrower.
"NET WORTH" shall mean, with respect to any Person at any date, the total assets minus the total liabilities, in each case, of such Person at such date determined in accordance with GAAP.
"NON-FUNDING LENDER" shall have the meaning assigned to it in SECTION 1.1(f).
"NON-USE FEE" shall have the meaning assigned to it in SECTION 1.6.
"NOTICE OF CONVERSION/CONTINUATION" shall have the meaning assigned to it in SECTION 1.1(c).
"NOTICE OF REVOLVING CREDIT ADVANCE" shall have the meaning assigned to it in SECTION 1.1(c).
"OBLIGATIONS" shall mean all loans, advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable) owing by any Loan Party to Agent or any Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under any of the Loan Documents. This term includes (i) any Revolving Credit Advances made pursuant to the terms of the Existing Credit Agreement, and (ii) all principal and interest (including interest which accrues after the commencement of any case or proceeding referred to in SECTION 8.1(f), (g) or (h)), on the Revolving Credit Loan, all amounts payable in respect of Letters of Credit under SECTION 1.18 or ANNEX F, all Letter of Credit Obligations, all Fees, Charges, expenses, attorneys' fees and any other sum chargeable to
any Loan Party under any of the Loan Documents.
"OCTOBER 2000 WARRANTS" shall have the meaning ascribed to such term in Borrower's Certificate of Incorporation, as amended on April 26,1999.
"ONRP" shall mean Online Retail Partners LLC, a Delaware limited liability company and its successors and assigns.
"OPERATING LEASE" shall mean any lease of real or personal property, or mixed property, which is not a Capital Lease.
"OTHER LENDER" shall have the meaning assigned to it in Section 1.1(f).
"OTHER TAXES" shall have the meaning assigned to it in Section 1.17(b).
"PARTICIPANTS" shall have the meaning assigned to it in
Section 10.2(a).
"PATENT LICENSE" shall mean, with respect to any Person, rights under any written agreement now owned or hereafter acquired by such Person granting any right with respect to any invention on which a Patent is in existence.
"PATENTS" shall mean, with respect to any Person, all of the following in which such Person now holds or hereafter acquires any right, title or interest: (a) all letters patent of the United States of America or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States of America or any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States of America, any State or Territory thereof, or any other country, and (b) all reissues, divisions, continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereto.
"PENSION PLAN" shall mean an employee pension benefit plan, as defined
in Section 3(2) of ERISA, which is not an individual account plan, as defined in
Section 3(34) of ERISA, and which any Loan Party or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"PERMITTED ENCUMBRANCES" shall mean: (a) Liens for Charges provided
payment thereof shall not at the time be required under SECTION 5.2; (b)
deposits, Liens or pledges of cash collateral to secure obligations under
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation or other public or statutory obligations
arising in the ordinary course of business; (c) deposits, Liens or pledges of
cash collateral to secure the performance of bids, tenders, contracts (other
than contracts for the payment of money), obligations of a tenant under an
Operating Lease, or surety, stay or appeal bonds or similar obligations arising
in the ordinary course of business; (d) workers', mechanics', suppliers',
carriers', warehousemen's Liens or other similar Liens arising by operation of
law in the ordinary course of business and securing sums which are not past due;
(e) any attachment or
judgment Lien which does not constitute a Default, unless the judgment it
secures shall not, within 15 days after the entry thereof, have been discharged
or execution thereof stayed pending appeal, or shall not have been discharged
within 15 days after the expiration of any such stay; (f) zoning restrictions,
easements, licenses, or other restrictions on the use of real property or other
minor irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of such real
property, leases or leasehold estates; (g) Liens created by statute or common
law in favor of landlords for unpaid rent and related amounts that are not more
than fifteen days past due; (h) subject to the Concentration Account Agreement,
the Blocked Account Agreements and the Disbursement Account Agreements, if any,
Liens of a banking institution encumbering deposits (including setoff rights)
held by such banking institution incurred in the ordinary course of business and
which are within the general parameters customary in the banking industry; and
(i) Liens listed in SCHEDULE 6.7 existing on the Closing Date.
"PERMITTED HOLDERS" shall mean any member of the Stack Family; Bamse, N.V.; Daniel Bernard; FJLM Finance Ltd.; Fondation Appomattox; Fondation Breugelem; Fondation Consuelo; Fundacion Juan March Luxembourg, S.A.; Fourcar, B.V.; Oak Investment Partners V, Limited Partnership; Oak V Affiliates Fund, Limited Partnership; Oakwood Holdings, BVI; Yves Sisteron; Societe De Noyange; Vulcan Ventures, Inc.; Bessemer Venture Partners III L.P.; Brimstone Island Co. L.P.; BVP Special Situations L.P.; Northwood Capital Partners LLC; Omega Ventures II, L.P.; Crossover Fund II, L.P.; and US WEST Pension Trust.
"PERMITTED STOCK ISSUANCE" shall mean and include the issuance of
common equity interests by Borrower to any Person (i) so long as no Default has
occurred and is continuing or would occur as a result of such issuance, in an
initial public offering (x) which is underwritten by a nationally recognized
investment banking firm or other Person satisfactory to Agent in its discretion,
(y) in which such equity interests are distributed to at least 25 Persons (other
than Persons listed on SCHEDULE 3.9), and (z) which is made pursuant to a
registration statement on Form S-1, or any successor form thereto, relating to
the registration of such common equity interests under the Securities Act of
1933, as amended, and other documents and agreements (including all underwriting
or similar agreements and all documents filed with the Securities and Exchange
Commission) in form and substance reasonably satisfactory to Agent, (ii) under
the Dick's Clothing and Sporting Goods, Inc. Stock Option Plan as amended
through September 19, 1995 as in effect on April 16, 1999 or (iii) upon the
exercise of warrants listed on SCHEDULE 3.9 or warrants to purchase Series E
Preferred Stock or common stock if the Series E Preferred Stock has previously
been converted to common stock which warrants were issued in connection with the
Series E, F and G Preferred Stock of Borrower in accordance with the applicable
Preferred Stock Agreement.
"PERSON" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether Federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).
"PLAN" shall mean, with respect to Borrower or any ERISA Affiliate, at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, which
Borrower maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement, dated as of February 1, 1996, attached hereto as Exhibit F, made by Borrower in favor of Agent for the benefit of Lenders.
"PREFERRED STOCK" shall mean the Series A, B, C, D and E Preferred Stock of Borrower.
"PREFERRED STOCK AGREEMENTS" shall mean any stock purchase or other agreements providing for or governing the terms or rights of holders of, or otherwise relating to, any Preferred Stock as in effect on the Closing Date.
"PREFERRED STOCK SUBORDINATED NOTES" shall mean those certain Promissory Notes dated May __, 2000 and due August __, 2001 in substantially the form of Annex F to the Information Statement and in an aggregate amount (including principal and interest) not to exceed $15,000,000.
"PROCEEDS" shall mean all "proceeds" as such term is defined in the Code and, in any event, shall include, with respect to any Person: (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to such Person from time to time with respect to any of its property or assets; (b) any and all payments (in any form whatsoever) made or due and payable to such Person from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of such Person's property or assets by any governmental body, authority, bureau or agency (or any person acting under color of governmental authority), (c) any claim of such Person against third parties (i) for past, present or future infringement of any Patent or Patent License or (ii) for past, present or future infringement or dilution of any Trademark or Trademark License or for injury to the goodwill associated with any Trademark, Trademark registration or Trademark licensed under any Trademark License; (d) any recoveries by such Person against third parties with respect to any litigation or dispute concerning any of such Person's property or assets; and (e) any and all other amounts from time to time paid or payable under or in connection with any of such Person's property or assets, upon disposition or otherwise.
"PROJECTIONS" shall mean the projections referred to in paragraph 3 of
Schedule 3.4 and as of any date the consolidated and consolidating balance
sheet, statements of income and cash flow for Borrower and its Subsidiaries
(including forecasted Capital Expenditures and Net Borrowing Availability) (i)
by month for each of the Fiscal years ending 2000, 2001 and 2002 and (ii) any
other projections required to be delivered by Borrower to Agent and Lenders
under the Agreement.
"PROPORTIONATE SHARE" shall mean, with respect to any Lender, the following: (a) for the purpose of repayment of principal, interest and Fees with respect to the Revolving Credit Loan and Letter of Credit Obligations, a fraction (expressed as a percentage), the numerator of which shall be the aggregate principal amount of Revolving Credit Advances held by such Lender (including Agent), and the denominator of which shall be the principal amount of the Revolving Credit Loan; and (b) for all other purposes, the fraction (expressed as a percentage), the numerator of which shall be the
Revolving Credit Commitment of such Lender and the denominator of which shall be the Aggregate Revolving Credit Commitment.
"QUALIFIED PLAN" shall mean, for any Loan Party, an employee pension benefit plan, as defined in Section 3(2) of ERISA, which is intended to be tax-qualified under IRC Section 401(a), and which such Loan Party or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them.
"REGISTER" shall have the meaning assigned to it in Section 10.2(c).
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change after the date of this Agreement in federal, state or foreign law or regulations (including Regulation D) or the adoption or making after such date of any interpretation, directive or request applying to a class of lenders including such Lender of or under any Federal, state or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof.
"RELEASE" shall mean, as to any Person, any release or any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration of a Hazardous Material into the indoor or outdoor environment by such Person (or by a person under such Person's direction or Control), including the movement of a Hazardous Material through or in the air, soil, surface water, ground water or property; but shall exclude any release, discharge, emission or disposal in material compliance with a then effective permit, order, rule regulation or law of a Governmental Authority.
"REPORTABLE EVENT" shall mean any of the events described in
Section 4043(b) (1), (2), (3), (5), (6), (8) or (9) of ERISA.
"REQUIRED LENDERS" shall mean, at any time, Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the aggregate of the Revolving Credit Commitments of all Lenders at such time (or, at any time after which the Revolving Credit Commitments of all of Lenders shall have expired or terminated, Lender's holding sixty-six and two-thirds percent (66 2/3%) of the principal of the Revolving Credit Loan outstanding at such time).
"REQUIRED PAYMENT" shall have the meaning assigned to it in Section 1.11.
"RESTRICTED PAYMENT" shall mean, with respect to any Person, either directly or indirectly, (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of such Person's Stock, (b) any payment on account of the purchase, redemption, defeasance or other retirement, or to obtain the surrender of, such Person's Stock or any other payment or distribution made in respect thereof, (c) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder or Affiliate of such Person other than relating to salaries, bonuses and other compensation to such Person's officers, directors and employees in the ordinary course of business consistent with past practice, (d) any payment, purchase, redemption, retirement, or other
acquisition for value or setting apart of any money for a sinking, or other analogous fund for the purchase, redemption, retirement or other acquisition of, or to obtain the surrender of, or any payment (scheduled, voluntary or other) of principal of or interest on, or any other amount owing in respect of any Subordinated Note or any other Subordinated Debt or (e) any payment of a claim for the recision of the purchase or sale of, or for material damages arising from the purchase or sale of any Stock of such Person, or of a claim for indemnification or contribution arising out of or relating to any such claim for damages or recision.
"RETIREE WELFARE PLAN" shall refer to any Welfare Plan providing for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC and at the sole expense of the participant or the beneficiary of the participant.
"REVOLVING CREDIT ADVANCE" shall have the meaning assigned to it in
SECTION 1.1(a).
"REVOLVING CREDIT COMMITMENT" shall mean, as to each Lender, the commitment of such Lender to make Revolving Credit Advances to Borrower pursuant to SECTION 1.1 and the other provisions hereof in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender's name on APPENDIX 1, as such amount may be reduced or modified pursuant to this Agreement.
"REVOLVING CREDIT LOAN" shall mean the aggregate amount of Revolving Credit Advances of all Lenders (including Revolving Credit Advances made by Agent pursuant to SECTION 1.13 and Revolving Credit Advances made pursuant to the terms of the Existing Credit Agreement) outstanding at any time.
"REVOLVING CREDIT NOTES" shall mean the promissory notes provided for by SECTION 1.1(d) and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time.
"RICHARD T. STACK NOTES" shall mean (a) the note dated December 31, 1992, in the aggregate principal amount of $302,036 as of December 30, 1995 issued by Borrower to Richard T. Stack and (b) the note dated November 16, 1992, in the aggregate principal amount of $70,450 as of December 30, 1995 issued by Borrower to Richard T. Stack.
"SCHEDULE OF DOCUMENTS" shall mean the schedule attached hereto as Annex C, including all appendices, exhibits or schedules thereto, listing certain documents and information to be delivered in connection with the Loan Documents and the transactions contemplated thereunder.
"SECURITY AGREEMENT" shall mean the Security Agreement, dated as of February 1, 1996, attached hereto as Exhibit D, between Agent and Borrower.
"SETTLEMENT PERIOD" shall have the meaning assigned to it in SECTION 1.13.
"SOLVENT" and "SOLVENCY" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
"STACK FAMILY" shall mean Nancy and Richard Heichemer, Kim and Tim Myers, Donna and Richard J. Stack, Edward W. Stack, Karin Lea Stack, Martin J. Stack, Stacey A. Stack and Richard T. Stack.
"STOCK" shall mean all shares, options, warrants, general or limited partnership interests, membership interests, participation or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended).
"STOCKHOLDER" shall mean each holder of Stock of Borrower.
"SUBJECT PROPERTY" shall mean all real property owned, leased or operated by any Loan Party.
"SUBORDINATED DEBT" shall mean the Indebtedness evidenced by the Subordinated Note and any other Indebtedness of Borrower which is subordinated in right of payment to the Obligations.
"SUBORDINATED NOTE" shall mean the 12% Subordinated Debenture dated May 1, 1986, in the aggregate principal amount of $976,381 as of December 30, 1995 issued by Borrower (as the successor in interest to Dick's Acquisition Corp.) to Richard J. Stack, in form and substance satisfactory to Agent.
"SUBORDINATION AGREEMENT" shall mean the Subordination Agreement among Borrower, Richard J. Stack and Agent on behalf of itself and Lenders pursuant to which the Subordinated Note is subordinated to the prior payment and satisfaction of the Obligations.
"SUBSIDIARY" shall mean, with respect to any Person, (a) any corporation of which an aggregate of 50% or more of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of 50% or more or of which any such Person is a general partner or managing member, as the case may be, or may exercise the powers of a general partner or managing member, as the case may be. Notwithstanding anything to the contrary, neither DSG Holdings nor dsports.com shall be deemed to be a "Subsidiary" for any purpose hereunder or under any other Loan Document.
"TAXES" shall mean taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes, levies, imposts, deductions, charges or withholdings and liabilities with respect thereto that are imposed on or measured by the net income of any Lender by the United States of America, the jurisdiction under the laws of which Lender is organized or the jurisdiction in which such Lender's applicable lending office is located or, in each case, any political subdivision thereof.
"TERMINATION DATE" shall mean the date on which (a) the Aggregate Revolving Credit Commitment has been terminated in full and Agent and Lenders shall have no further obligation to make any Revolving Credit Advances or any other credit extensions or financial accommodations hereunder or under any other Loan Document, and (b) all Obligations have been irrevocably paid in full and Borrower shall have funded the amounts required, if any, under the Loan Documents into the Cash Collateral Account in respect of Letter of Credit Obligations, if any, then outstanding.
"TITLE IV PLAN" shall mean a Pension Plan, other than a Multiemployer Plan, which is covered by Title IV of ERISA.
"TRADEMARK LICENSE" shall mean, with respect to any Person, rights under any written agreement now owned or hereafter acquired by such Person granting any right to use any Trademark or Trademark registration.
"TRADEMARKS" shall mean, with respect to any Person, all of the following in which such Person now holds or hereafter acquires any interest: (a) all common law and statutory trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States of America, any State or Territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all licenses thereunder and together with the goodwill associated with and symbolized by such trademark.
"WEB SITE AGREEMENT" shall mean that certain Web Site Services Agreement, dated as of October 29, 1999, between ONRP Services, LLC and
dsports.com.
"WELFARE PLANS" shall mean any welfare plan, as defined in Section 3(1) of ERISA, which is maintained or contributed to by Borrower or any ERISA Affiliate.
2. CERTAIN MATTERS OF CONSTRUCTION. Any accounting term used in the Agreement or the other Loan Documents shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed, unless otherwise specifically provided therein, in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing.
All other undefined terms contained in the Agreement or the other Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code as in effect in the State of New York to the extent the same are used or defined therein. The words "herein," "hereof" and "hereunder" or other words of similar import refer to the Agreement as a whole, including the exhibits and schedules thereto, as the same may from time to time be amended, modified or supplemented, and not to any particular section, subsection or clause contained in this Agreement.
Whenever any provision in any Loan Document refers to the "knowledge" of any Person, such provision is intended to mean that such Person has actual knowledge or awareness of a particular fact or circumstance, or that such Person, if it had exercised reasonable diligence, should have known or been aware of such fact or circumstance.
For purposes of this Agreement and the other Loan Documents, the following additional rules of construction shall apply: (a) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter; (b) the term "including" shall not be limiting or exclusive, unless specifically indicated to the contrary; (c) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations; and (d) all references to any instruments or agreements, including references to any of the Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof, in each case, made in accordance with the terms of the Loan Documents.
FIRST AMENDMENT, dated as of May 18, 2001 (this "Amendment"), to the Amended and Restated Credit Agreement referred to below among DICK'S SPORTING GOODS, INC., a Delaware corporation ("Borrower"), the lenders party hereto ("Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent for the Lenders (in such capacity, "Agent").
WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
2. AMENDMENT TO RECITAL B OF THE CREDIT AGREEMENT. Recital B of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by deleting the amount "$140,000,000" where it appears therein and inserting in lieu thereof the amount "$170,000,000".
3. AMENDMENT TO ANNEX A. ANNEX A to the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the definition of "AGGREGATE REVOLVING CREDIT COMMITMENT" in its entirety and inserting in lieu thereof the following new definition to read as follows:
"'AGGREGATE REVOLVING CREDIT COMMITMENT" shall mean
$170,000,000";
4. AMENDMENT TO APPENDIX 1. APPENDIX 1 to the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting such Appendix in its entirety and inserting in lieu thereof a new appendix to read as set forth on Appendix 1 hereto.
5. CHANGE IN LENDERS' PROPORTIONATE SHARES. Borrower and Lenders agree that upon consummation of the amendments to the Credit Agreement effected hereby, the Proportionate Share of each Lender is set forth on Appendix I attached hereto. In furtherance of the foregoing, each applicable Lender further agrees promptly to forward on the Amendment Effective Date in immediately available funds certain amounts requested by Agent directly to Agent, and Agent agrees to forward such amounts to any applicable Lender (the "LOAN ALLOCATION ADJUSTMENT") so that after giving effect to the Loan Allocation Adjustment the outstanding Revolving Credit Advances of each Lender reflects its Proportionate Share after giving effect to the Loan Allocation Adjustment.
6. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that:
(a) Each of the execution, delivery and performance by Borrower of this Amendment and the Amended and Restated Promissory Notes referred to in Section 10(b) hereof (the "AMENDED AND RESTATED PROMISSORY NOTES") and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action.
(b) This Amendment and the Amended and Restated Promissory Notes have been duly executed and delivered by or on behalf of Borrower.
(c) Each of this Amendment, the Amendment and Restated Promissory Notes and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(d) No Default has occurred and is continuing both before and after giving effect to this Amendment.
(e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date.
7. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue
to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.
8. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of May 17, 2001 the aggregate outstanding principal amount of the Revolving Credit Loan is $108,500,075.10 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date.
9. EXPENSES. Borrower hereby reconfirms its obligations pursuant to
SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all
reasonable out-of-pocket expenses (including, without limitation, reasonable
fees of counsel) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment and all other documents and instruments
delivered in connection herewith.
10. EFFECTIVENESS. This Amendment shall become effective as of May __, 2001 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to May __, 2001:
(a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Required Lenders and Borrower and acknowledged by DAMC.
(b) AMENDED AND RESTATED PROMISSORY NOTES. Each applicable Lender shall have received an Amended and Restated Promissory Note, which note amends and restates as of the Amendment Effective Date that Promissory Note dated July 26, 2000 made by Borrower in favor of such Lender.
(c) BOARD RESOLUTIONS. Agent shall have received a certificate of the Secretary or an Assistant Secretary of Borrower certifying (i) the resolutions adopted by the Board of Directors of Borrower approving this Amendment and the Amended and Restated Promissory Notes and (ii) all documents evidencing other necessary corporate action by Borrower and required governmental and third party approvals, if any, with respect to this Amendment and the Amended and Restated Promissory Notes.
(d) LEGAL OPINION. Agent shall have received an opinion of Beveridge & Diamond, P.C., counsel to the Loan Parties, in form and substance satisfactory to Agent and Lenders.
(e) FEES. Borrower shall have paid (i) an amendment fee to Agent for the account of each of the Lenders in the aggregate amount of $75,000 to be distributed as follows: General Electric Capital Corporation $12,500.00; BSB Bank & Trust Company $0.00; National Bank of Canada $0.00; The CIT Group/Business Credit, Inc. $6,250.00; Fleet Retail Finance, Inc. $18,750.00; National City Bank of Pennsylvania $12,500.00 and First Union National Bank $25,000.00.
(f) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses).
(g) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date.
11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
12. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
Name: /s/ Jeffrey Hennion
-----------------------------
Name: Jeffrey Hennion
Title: Treasurer
|
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By:______________________
Name:
Its: Duly Authorized Signatory
GENERAL ELECTRIC CAPITAL
CORPORATION
By:_____________________
Name:
Its: Duly Authorized Signatory
BSB BANK & TRUST COMPANY
By:_____________________
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
By:_____________________
Name: Jeffrey Hennion
Title: Treasurer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Charles Chiodo
--------------------------
Name: Charles Chiodo
Its: Duly Authorized Signatory
|
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Charles Chiodo
--------------------------
Name: Charles Chiodo
Its: Duly Authorized Signatory
|
BSB BANK & TRUST COMPANY
By:_____________________
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
By:___________________
Name: Jeffrey Hennion
Title: Treasurer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By:______________________
Name:
Its: Duly Authorized Signatory
GENERAL ELECTRIC CAPITAL
CORPORATION
By:____________________
Name:
Its: Duly Authorized Signatory
BSB BANK & TRUST COMPANY
By: /s/ John B. Westcott ---------------------- Name: John B. Westcott Title: Administrative Vice President |
NATIONAL BANK OF CANADA
By: /s/ David S. Vith ---------------------- Name: David S. Vith Title: Assistant Vice President By: /s/ Gerard Knell ---------------------- Name: Gerard Knell Title: Vice President |
THE CIT GROUP/BUSINESS CREDIT,
INC.
By:______________________
Name:
Title:
FLEET RETAIL FINANCE INC.
By:______________________
Name:
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
By:_____________________
Name:
Title:
FIRST UNION NATIONAL BANK
By:_____________________
Name:
Title:
NATIONAL BANK OF CANADA
By:_____________________
Name:
Title:
By:_____________________
Name:
Title:
THE CIT GROUP/BUSINESS CREDIT,
INC.
By: /s/ Evelyn Kusold --------------------- Name: Evelyn Kusold Title: AVP |
FLEET RETAIL FINANCE INC.
By: /s/ James R. Dore --------------------- Name: James R. Dore Title: Director |
NATIONAL CITY BANK OF
PENNSYLVANIA
By: /s/ John L. Hayes, IV --------------------- Name: John L. Hayes, IV Title: VP |
FIRST UNION NATIONAL BANK
By: /s/ Joan Anderson --------------------- Name: Joan Anderson Title: |
The undersigned Guarantor hereby (i) acknowledges to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment.
ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above.
DICK'S ASSET MANAGEMENT CORP.
By: /s/ Jeffrey Hennion --------------------- Name: Title: |
APPENDIX 1
APPENDIX 1
Revolving Credit Commitments
and Lender Information
---------------------------------------------------------------------------------
Lender Revolving Credit Proportionate Share of
Commitment Commitment
---------------------------------------------------------------------------------
GENERAL ELECTRIC $ 55,000,000.00 32.352941%
CAPITAL
CORPORATION
800 Connecticut Avenue,
Two North
Norwalk, CT 06854
Attn: Charles Chiodo
Telephone: (203) 852-3600
Telecopy: (203) 852-3640
--------------------------------------------------------------------------------
NATIONAL BANK OF $ 25,000,000.00 14.705882%
CANADA
One Oxford Centre
301 Grant Street
Suite 3440
Pittsburgh, PA 15219
Attn: Donald P. Haddad
Telephone: (412) 281-4890
Telecopy: (412) 281-4603
--------------------------------------------------------------------------------
THE CIT GROUP/ $ 17,500,000.00 10.294118%
BUSINESS CREDIT, INC.
1211 Avenue of the
Americas
New York, NY 10036
Attn: Evelyn Kusold
Telephone: (212) 536-1208
Telecopy: (212) 536-1293
--------------------------------------------------------------------------------
BSB BANK & TRUST $ 7,500,000.00 4.411765%
COMPANY
68 Exchange Street
Binghamton, NY 13902
Attn: Glenn Small
Telephone: (607) 779-2590
Telecopy: (607) 772-6287
--------------------------------------------------------------------------------
|
-----------------------------------------------------------------------------------
Lender Revolving Credit Proportionate Share of
Commitment Commitment
-----------------------------------------------------------------------------------
FLEET RETAIL FINANCE $ 30,000,000.00 17.647059%
INC.
40 Broad Street, 10th Floor
Boston, MA 02109
Attn: Jim Dore
Telephone: (617) 434-4184
Telecopy: (617) 434-4312
--------------------------------------------------------------------------------
NATIONAL CITY BANK $ 15,000,000.00 8.823529%
OF PENNSYLVANIA
20 Stanwix Street, 19th
Floor
Pittsburgh, PA 15222
Attn: Vince Delie
Telephone: (412) 644-6056
Telecopy: (412) 471-4883
--------------------------------------------------------------------------------
FIRST UNION $ 20,000,000.00 11.764706%
NATIONAL BANK
One South Penn Square,
12th Floor
Philadelphia, PA 19107
Attn: Joan Anderson
Telephone: (215) 973-8376
Telecopy: (215) 973-1887
--------------------------------------------------------------------------------
=============== ==================
$170,000,000.00 100.00%
--------------------------------------------------------------------------------
|
SECOND AMENDMENT, dated as of July __, 2001 to the Amended and Restated Credit Agreement referred to below and FIRST AMENDMENT to certain collateral documents related thereto and referred to in Section 10 hereof (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), DICK'S ASSET MANAGEMENT CORP., a Delaware corporation ("DAMC"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent for the Lenders (in such capacity, "AGENT").
WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
2. AMENDMENT TO SECTION 1.10. SECTION 1.10 of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by adding the following new sentence at the end thereof to read as follows:
"Notwithstanding anything to the contrary contained herein or in any other Loan Document, if an Event of Default shall have occurred and be continuing, no payment shall be made by Borrower in respect of the termination of an Interest Rate Agreement, until all of the other Obligations have been paid in full and the Aggregate Revolving Credit Commitment is terminated."
3. AMENDMENT TO SECTION 1.12(b). SECTION 1.12(b) of the Credit Agreement is hereby amended as of the Amendment Effective Date by adding the following new sentence at the end thereof to read as follows:
"For avoidance of doubt and for purposes of determining whether any adjustments are required pursuant to the terms of this SECTION 1.12(b), no effect shall be given to any Obligations owing in respect of Interest Rate Agreements."
4. AMENDMENT TO SECTION 6.2. SECTION 6.2 of the Credit Agreement is
hereby amended as of the Amendment Effective Date by deleting the clause "and
(i) the Investment by Borrower in DSG Holdings contemplated by SECTION 1.3(c)
hereof' and inserting in lieu thereof the following:
", (i) the Investment by Borrower in DSG Holdings contemplated by
SECTION 1.3(c) hereof and (j) Interest Rate Agreements not prohibited
by SECTION 6.16 hereof."
5. AMENDMENTS TO SECTION 6.3. SECTION 6.3 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (i) deleting the word "and" immediately before the parenthetical "(h)" contained therein and inserting in lieu thereof the following:
"(h) Indebtedness under Interest Rate Agreements to the extent not prohibited by SECTION 6.16 and"
(ii) relettering clause "(h)" (before giving effect to this Amendment) clause "(i)".
6. AMENDMENT TO SECTION 6.6. SECTION 6.6 of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting such Section in its entirety and inserting in lieu thereof the following new Section to read as follows:
"6.6 GUARANTEED INDEBTEDNESS. No Loan Party shall create, incur, assume
or permit to exist any Guaranteed Indebtedness except for: (a)
endorsements of instruments or items of payment for deposit to a bank
account of such Loan Party; (b) performance bonds, indemnities entered
into in the ordinary course of business consistent with past practices
and indemnities provided under the E-commerce Transaction Documents;
(c) Guaranteed Indebtedness relating to Interest Rate Agreements
permitted to be incurred pursuant to SECTION 6.3; and (d) Guaranteed
Indebtedness outstanding on the Closing Date and listed in SCHEDULE 6.3
and all extensions, renewals, replacements and modifications of such
Guaranteed Indebtedness on terms and conditions which shall in any
event be on terms no less favorable to Borrower, Agent or any Lender,
as determined by Agent than the terms of the Guaranteed Indebtedness
being extended, renewed, replaced or modified, including, without
limitation, with respect to amount, premiums, fees, indemnities,
covenants, events of default and remedies."
7. AMENDMENT TO SECTION 6.7(a). SECTION 6.7(a) of the Credit Agreement is hereby amended as of the Amendment Effective Date by inserting after the word "Lenders" contained therein the following parenthetical:
"(or any affiliate thereof in connection with any Interest Rate Agreement not prohibited by SECTION 6.16)".
8. AMENDMENTS TO ANNEX A. ANNEX A to the Credit Agreement is hereby amended as of the Amendment Effective Date by:
(a) adding the following new defined term in appropriate alphabetical order to read as follows:
"'INTEREST RATE AGREEMENT' shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or similar agreement or arrangement designed to protect Borrower against fluctuations in interest rates entered into between Borrower and any financial institution; PROVIDED, that if such financial institution is not a Lender or an affiliate thereof the obligations of the Borrower in respect of any such agreement or arrangement shall be unsecured."
and (b) deleting the definition of "Obligations" contained therein and inserting the following new definition in lieu thereof to read as follows:
"'OBLIGATIONS' shall mean all loans, advances, debts, liabilities (including, without limitation, liabilities now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Agreement entered into by Borrower in accordance with the terms of the Agreement to which a Lender or an affiliate thereof was a counterparty at the time such interest rate agreement was entered into) and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable) owing by any Loan Party to Agent or any Lender (or any affiliate thereof in connection with any Interest Rate Agreement referred to above), and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under any of the Loan Documents or any such Interest Rate Agreement. This term includes (i) any Revolving Credit Advances made pursuant to the terms of the Existing Credit Agreement, and (ii) all principal and interest (including interest which accrues after the commencement of any case or proceeding referred to in Section 8.1 (f), (g) or (h)), on the Revolving Credit Loan, all amounts payable in respect of Letters of Credit under SECTION 1.18 or ANNEX F, all Letter of Credit Obligations, all Fees, Charges, expenses, attorneys' fees and any other sum chargeable to any Loan Party under any of the Loan Documents."
9. AMENDMENTS TO ANNEX B. ANNEX B to the Credit Agreement is hereby amended as of the Amendment Effective Date by (i) deleting Paragraph 3 of such Annex in its entirety and inserting in lieu thereof the following new Paragraph 3 to read as follows:
"On or before the Closing Date, the banks at which the Blocked Accounts are held shall have entered into tri-party blocked account agreements (the "BLOCKED ACCOUNT AGREEMENTS") with Agent and the applicable Loan Parties, in form and substance acceptable to Agent. Each such Blocked Account Agreement shall provide, among other things, that (a) such bank executing such agreement has no rights of setoff or recoupment or any other claim against such Blocked Account, other than for payment of its service fees and other charges directly related to the administration of such account, and (b) such bank agrees to sweep on a daily basis all available amounts in the Blocked Account to the Concentration Account. Each Blocked Account shall be under the sole dominion and control of Agent and neither Borrower nor any other Person, through or under Borrower, shall have any control over the use of, or any right to withdraw any amount from, any Blocked Account; PROVIDED that, to the extent expressly permitted by Agent with respect to a Blocked Account in the applicable Blocked Account Agreement, Borrower may withdraw from such Blocked Account coins, one dollar bills, five dollar bills or ten dollar bills pursuant to a change or coin order. Without limiting the foregoing, Borrower agrees that no more than 55,000 per store per day may be ordered pursuant to such change or coin order. Borrower shall provide to Agent such projections and reports with respect to its coinage and petty cash needs and Blocked Account withdrawals in respect thereof as Agent may require from time to time."
and (ii) deleting Attachment I to ANNEX B to the Credit Agreement in its entirety and inserting in lieu thereof the following new Attachment I attached hereto as Attachment I.
10. AMENDMENTS TO COLLATERAL DOCUMENTS. As of the Amendment Effective Date, the term "Lender" contained in each of the Security Agreement, the DAMC Security Agreement, the DAMC Trademark Security Agreement and the Pledge Agreement shall be deemed to include any affiliate of any Lender solely to the extent relating to Obligations incurred under any Interest Rate Agreement not prohibited by SECTION 6.16 of the Credit Agreement.
11. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that:
(a) Each of the execution, delivery and performance by Borrower and DAMC of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") and each of the Collateral Documents referred to in Section 10 hereof, as amended hereby (collectively, the "AMENDED COLLATERAL DOCUMENTS") are
within Borrower's or DAMC's, as the case may be, corporate power and have been duly authorized by all necessary corporate and shareholder action.
(b) This Amendment has been duly executed and delivered by or on behalf of Borrower and DAMC.
(c) Each of this Amendment, the Amended Credit Agreement and the Amended Collateral Documents constitutes a legal, valid and binding obligation of Borrower or DAMC, as the case may be, enforceable against Borrower or DAMC, as the case may be, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(d) No Default has occurred and is continuing both before and after giving effect to this Amendment.
(e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date.
12. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.
13. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of July 1, 2001 the aggregate outstanding principal amount of the Revolving Credit Loan is $95,150,108.75 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date.
14. EXPENSES. Borrower hereby reconfirms its obligations pursuant to
SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all
reasonable out-of-pocket expenses (including, without limitation, reasonable
fees of counsel) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment and all other documents and instruments
delivered in connection herewith.
15. EFFECTIVENESS. This Amendment shall become effective as of July __, 2001 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to July __, 2001:
(a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and DAMC.
(b) BOARD RESOLUTIONS. Agent shall have received a certificate of the Secretary or an Assistant Secretary of Borrower certifying (i) the resolutions adopted by the Board of Directors of Borrower approving this Amendment and (ii) all documents evidencing other necessary corporate action by Borrower and required governmental and third party approvals, if any, with respect to this Amendment.
(c) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses).
(d) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date.
16. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
17. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
By: /s/ Jeffrey Hennion ----------------------------- Name: Jeffrey Hennion Title: Treasurer |
DICK'S ASSET MANAGEMENT CORP.
By: /s/ Jeffrey Hennion
-------------------------
Name:
Title:
|
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Charles Chiodo ----------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory |
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Charles Chiodo ----------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory |
BSB BANK & TRUST COMPANY
By: /s/ John B. Westcott -------------------------------- Name: John B. Westcott Title: Administrative Vice President |
NATIONAL BANK OF CANADA
By: /s/ Donald P. Haddad -------------------------------- Name: Donald P. Haddad Title: VP By: /s/ Eric L. Moore -------------------------------- Name: Eric L. Moore Title: V.P. |
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Evelyn Kusold -------------------------------- Name: Evelyn Kusold Title: AVP |
FLEET RETAIL FINANCE INC.
By: /s/ James R. Dore -------------------------------- Name: James R. Dore Title: Director |
NATIONAL CITY BANK OF
PENNSYLVANIA
By: /s/ John L. Hayes -------------------------------- Name: John L. Hayes Title: VP |
FIRST UNION NATIONAL BANK
By:________________________________
Name:
Title:
BSB BANK & TRUST COMPANY
Title:
NATIONAL BANK OF CANADA
Title:
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
Title:
FLEET RETAIL FINANCE INC.
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
Title:
FIRST UNION NATIONAL BANK
By: /s/ Joan Anderson ----------------------------------- Name: Joan Anderson Title: Vice President |
ATTACHMENT I TO ANNEX B
LIST OF BLOCKED ACCOUNTS, CONCENTRATION ACCOUNT AND
DISBURSEMENT ACCOUNTS
1. BLOCKED ACCOUNTS.
First Union National Bank
One South Penn Square
Widener Building, 12th Floor
Philadelphia, PA 19107
Attn: Joan Anderson, Director
Accounts:
2000006152109
2000006157560
2000006157699
Sun Trust Bank
Mail Code TN- Chattanooga-0610
P.O. Box 1638
Chattanooga, TN
Attn: Yvonne Dyer
Account:
6801063238
Bank of America, N.A.
One Kansas City Place Office
1200 Main Street
P.O. Box 419038
Kansas City, MO 64105-2100
Attention: Edwin Schober
Account:
347-426-9047
National City Bank
20 Stanwix Street, 25-181
Pittsburgh, PA 15222
Attention: Mark Sullivan
Accounts:
628981860
698216277
754116050
649968091
657320754
Key Bank National Association
127 Public Square
Cleveland, OH 44114
Attention: W. J. Kysla
Account:
350011001632
Bank One, Wisconsin
200 W. College Avenue
Appleton, WI 54911
Attention: Steve Kools
Account:
6222561926
Bank One, West Virginia
707 Virginia St
P.O. Box 1113
Attention: Marjorie Richards
Account:
625905666
Fleet Bank
75 State Street
Fourth Floor
Boston, MA 02109
Attention: James Dore
Account:
936-6072333
2. CONCENTRATION ACCOUNT.
First Union National Bank
One South Penn Square
Widener Building, 12th Floor
Philadelphia, PA 19107
Attn: Joan Anderson, Director
Account:
2000006157586
3. DISBURSEMENT ACCOUNTS.
First Union National Bank
One South Penn Square
Widener Building, 12th Floor
Philadelphia, PA 19107
Attn: Joan Anderson, Director
Accounts:
2000006157573
2079950061539
Bank of America, N.A.
One Kansas City Place Office
1200 Main Street
P.O. Box 419038
Kansas City, MO 64105-2100
Attention: Edwin Schober
Account: 347-627-1716
THIRD AMENDMENT AND WAIVER TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIRD AMENDMENT AND CONSENT, dated as of August 3, 2001, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT").
WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
2. AMENDMENT TO SECTION 6.2 OF THE CREDIT AGREEMENT. SECTION 6.2 of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the clause "and (j) Interest Rate Agreements not prohibited by SECTION 6.16 hereof" and inserting in lieu thereof the following:
", (j) Interest Rate Agreements not prohibited by SECTION 6.16 hereof, (k) investments by Borrower in those certain warrants (but not the exercise thereof) to purchase 400,000 shares of Global Sports, Inc., which warrants are each dated April 5, 2001 and (l) investments by Borrower in the common stock of Global Sports, Inc. to the extent and in accordance with the terms of Schedule "H" to that certain E-Commerce Agreement between Global Sports Interactive, Inc. and the Borrower, as such agreement and schedule are in effect on August 1, 2001."
3. AMENDMENTS TO ANNEX A. ANNEX A to the Credit Agreement is hereby amended as of the Amendment Effective Date by:
(a) adding the following new defined term in appropriate alphabetical order to read as follows:
"ELIGIBLE L/C INVENTORY" means all finished goods inventory owned by Borrower and covered by documentary Letters of Credit, which finished goods Inventory is in transit to one of Borrower's locations and which finished goods Inventory (a) is owned by Borrower, (b) is fully insured, (c) is subject to a first priority security interest in and lien upon such goods in favor of Agent (except for any possessor lien upon such goods in the possession of a freight carrier or shipping company securing only the freight charges for the transportation of such goods to Borrower), (d) is evidenced or deliverable pursuant to documents, notices, instruments, statements and bills of lading that have been delivered to Agent or an agent acting on its behalf, and (e) is otherwise deemed to be "Eligible Inventory" hereunder.
(b) deleting clause (c) of the definition of "Eligible Inventory" contained therein and inserting the following new clause in lieu thereof to read as follows:
(c) "is Inventory in transit (other than Eligible L/C Inventory and Inventory in transit from one of Borrower's distribution centers to one of Borrower's stores provided that such Inventory is being shipped in the normal course of business and consistent with Borrower's past practice and Agent continues to maintain a first priority perfected security interest in such Inventory)."
4. WAIVER. Agent and Lenders hereof waive the Event of Default that may arise from Borrower's failure to comply with SECTION 6.2 of the Credit Agreement solely to the extent such Event of Default relates to the Borrower's ownership of certain warrants to purchase 400,000 shares of the common stock of Global Sports, Inc., which warrants are each dated April 5, 2001. For avoidance of doubt, the foregoing waiver does not waive any violation of the Credit Agreement related to the exercise by the Borrower of any such warrants or any portion thereof.
5. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that:
(a) Each of the execution, delivery and performance by Borrower of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action.
(b) This Amendment has been duly executed and delivered by or on behalf of Borrower.
(c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(d) No Default has occurred and is continuing after giving effect to this Amendment.
(e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date.
6. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.
7. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of July 29, 2001 the aggregate outstanding principal amount of the Revolving Credit Loan is $104,500,100.04 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date.
8. EXPENSES. Borrower hereby reconfirms its obligations pursuant to
SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all
reasonable out-of-pocket expenses (including, without limitation, reasonable
fees of counsel) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment and all other documents and instruments
delivered in connection herewith.
9. EFFECTIVENESS. This Amendment shall become effective as of August 3, 2001 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to August 3, 2001:
(a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and DAMC.
(b) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses).
(c) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
11. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW)
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
By: /s/ Jeffrey Hennion ------------------------------------ Name: Jeffrey Hennion Title: Treasurer |
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
Its: Duly Authorized Signatory
GENERAL ELECTRIC CAPITAL
CORPORATION
Its: Duly Authorized Signatory
BSB BANK & TRUST COMPANY
Title:
NATIONAL BANK OF CANADA
Title:
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
Title:
FLEET RETAIL FINANCE INC.
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
Title:
FIRST UNION NATIONAL BANK
Title:
The undersigned Guarantor hereby (i) acknowledges each of the
amendments and waivers to the Credit Agreement effected by this Amendment and
(ii) confirms and agrees that its obligations under its Guaranty shall continue
without any diminution thereof and shall remain in full force and effect on and
after the effectiveness of this Amendments.
ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above.
DICK'S ASSET MANAGEMENT CORP.
By: /s/ Jeffrey Hennion ------------------------------------- Name: Title: |
FOURTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
FOURTH AMENDMENT, dated as of September __, 2001, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT").
WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
2. AMENDMENT TO SECTION 6.11 OF THE CREDIT AGREEMENT. SECTION 6.11 of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting clause (h) of such section in its entirety and inserting in lieu thereof the following new clause (h) to read as follows:
"(h) Borrower may make payments on or after September 9, 2001 of the Indebtedness evidenced by the Preferred Stock Subordinated Notes, together with interest thereon, in accordance with the terms thereof, to the extent that (1) both before and after giving effect to any such payment no actual or pro-forma Default or Event of Default shall have occurred and be continuing, including without limitation under SECTION 6.10 hereof, (2) after giving effect to such payment, Borrower, based on the pro-forma Projections acceptable to Agent, previously provided to Agent and assuming for purposes of this clause (2) that such payment was made on the first day of the first four Fiscal Quarter period to be tested under SECTION 6.10 after the proposed date of such payment, shall be in compliance with SECTION 6.10, (3) all accounts payable of Borrower are current, or being paid according to historical practice and with normal trade terms, and (4) after giving effect to such payment Excess Borrowing Availability shall not be less than $15,000,000 for a minimum of thirty (30) days following such payment as determined by Agent based on the pro-forma Projections referred
to in clause (2) above, provided that Borrower prior to making any such payment shall have delivered to Agent a certificate from a financial officer of Borrower and in form and substance satisfactory to Agent demonstrating compliance with the foregoing."
3. AMENDMENTS TO ANNEX F. ANNEX F to the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the first proviso of paragraph one thereof and replacing it with the following proviso to read as follows:
"PROVIDED, that the aggregate amount of all Letter of Credit Obligations at any one time outstanding (whether or not then due and payable) shall not exceed the lesser of a) $20,000,000, (b) the Aggregate Revolving Credit Commitment MINUS the outstanding Revolving Credit Loan and (c) the Borrowing Base MINUS the outstanding Revolving Credit Loan;"
4. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that:
(a) Each of the execution, delivery and performance by Borrower of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action.
(b) This Amendment has been duly executed and delivered by or on behalf of Borrower.
(c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(d) No Default has occurred and is continuing after giving effect to this Amendment.
(e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date.
5. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.
6. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of August 31, 2001 the aggregate outstanding principal amount of the Revolving Credit Loan is $86,027,824.61 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date.
7. EXPENSES. Borrower hereby reconfirms its obligations pursuant to
SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all
reasonable out-of-pocket expenses (including, without limitation, reasonable
fees of counsel) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment and all other documents and instruments
delivered in connection herewith.
8. EFFECTIVENESS. This Amendment shall become effective as of September __, 2001 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to September __, 2001:
(a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and DAMC.
(b) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses).
(c) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date.
9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
By: /s/ Jeffrey Hennion ------------------------------ Name: Jeffrey Hennion Title: Treasurer |
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Charles Chiodo ------------------------------ Name: Charles Chiodo Its: Duly Authorized Signatory |
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Charles Chiodo ------------------------------ Name: Charles Chiodo Its: Duly Authorized Signatory |
BSB BANK & TRUST COMPANY
By: /s/ John B. Westcott --------------------------------- Name: John B. Westcott Title: Administrative Vice President |
NATIONAL BANK OF CANADA
Title:
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Evelyn Kusuld --------------------------------- Name: Evelyn Kusuld Title: AVP |
FLEET RETAIL FINANCE INC.
By: /s/ James R. Dore --------------------------------- Name: James R. Dore Title: Director |
NATIONAL CITY BANK OF
PENNSYLVANIA
By: /s/ John L. Hayes IV --------------------------------- Name: John L. Hayes IV Title: VP |
FIRST UNION NATIONAL BANK
By: /s/ Joan Anderson --------------------------------- Name: Joan Anderson Title: Vice President |
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
Its: Duly Authorized Signatory
GENERAL ELECTRIC CAPITAL
CORPORATION
Its: Duly Authorized Signatory
BSB BANK & TRUST COMPANY
Title:
NATIONAL BANK OF CANADA
By: /s/ Donald P. Haddad ---------------------------------- Name: Donald P. Haddad, VP |
Title:
By: /s/ Gerald B. Knell ----------------------------------- Name: Gerald B. Knell Title: VP |
THE CIT GROUP/BUSINESS CREDIT, INC.
Title:
FLEET RETAIL FINANCE INC.
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
Title:
FIRST UNION NATIONAL BANK
Title:
The undersigned Guarantor hereby (i) acknowledges each of the amendments and waivers to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the
The undersigned Guarantor hereby (i) acknowledges each of the amendments and waivers to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendments.
ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above.
DICK'S ASSET MANAGEMENT CORP.
By: /s/ Jeffrey Hennion ------------------------------------- Name: Jeffrey Hennion Title: Vice President-Treasurer |
FIFTH AMENDMENT TO AMENDED AND
RESTATED CREDIT AGREEMENT
FIFTH AMENDMENT, dated as of February __, 2002, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT").
WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
2. AMENDMENT TO SECTION 1.3. SECTION 1.3 of the Credit Agreement is
hereby amended as of the Amendment Effective Date (as hereinafter defined) by
(a) deleting the word "and" where it appears immediately prior to clause (e) and
(b) adding at the end of such SECTION 1.3 a new clause (f) to read as follows:
"and (f) for the Option Exercise Loan as permitted by Section 6.11(i)."
3. AMENDMENT TO SECTION 6.2. SECTION 6.2 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (a) deleting the word "and" where it appears immediately prior to clause (l) and (b) adding at the end of such SECTION 6.2 a new clause (m) to read as follows:
"and (m) investments by Borrower in the form of the Option Exercise Loan and the receipt of the Option Exercise Note."
4. AMENDMENT TO SECTION 6.4. SECTION 6.4 of the Credit Agreement is hereby amended as of the Amendment Effective Date by adding immediately prior to the last sentence of such SECTION 6.4 a new clause (f) to read as follows:
"and (f) Borrower may enter into the Option Exercise Loan and hold the Option Exercise Note."
5. AMENDMENT TO SECTION 6.11. SECTION 6.11 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (a) deleting the word "and" where it appears immediately prior to clause (h) and (b) adding at the end of such SECTION 6.11 a new clause (i) to read as follows:
" and (i) Borrower may enter into the Option Exercise Loan."
6. AMENDMENTS TO ANNEX A OF THE CREDIT AGREEMENT. ANNEX A of the Credit Agreement is hereby amended as of the Amendment Effective Date by inserting the following new definitions in order to read as follows:
"OPTION EXERCISE LOAN" means that certain loan in the principal amount of $6,195,615.00 from Borrower to the Option Exercise Party made on May 18, 2001, to enable the Option Exercise Party to exercise outstanding options to purchase Stock in Borrower.
"OPTION EXERCISE NOTE" means that certain promissory note issued to Borrower by the Option Exercise Party in connection with the Option Exercise Loan.
"OPTION EXERCISE PARTY" means Edward W. Stack."
7. AMENDMENT TO ANNEX F OF THE CREDIT AGREEMENT. ANNEX F of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the first proviso of paragraph one thereof and replacing it with the following proviso to read as follows:
"PROVIDED, that the aggregate amount of all Letter of Credit Obligations at any one time outstanding (whether or not then due and payable) shall not exceed the lesser of (a) 25,000,000, (b) the Aggregate Revolving Credit Commitment MINUS the outstanding Revolving Credit Loan, and (c) the Borrowing Base MINUS the outstanding Revolving Credit Loan;"
8. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that:
(a) Each of the execution, delivery and performance by Borrower of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action.
(b) This Amendment has been duly executed and delivered by or on behalf of Borrower.
(c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(d) No Default has occurred and is continuing after giving effect to this Amendment.
(e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date.
9. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.
10. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of January 30, 2002 the aggregate outstanding principal amount of the Revolving Credit Loan is $81,000,100.00 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date.
11. EXPENSES. Borrower hereby reconfirms its obligations pursuant to
SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all
reasonable out-of-pocket expenses (including, without limitation, reasonable
fees of counsel) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment and all other documents and instruments
delivered in connection herewith.
12. Effectiveness. This Amendment shall become effective as of February __, 2002 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the
judgment of the Agent of each of the following conditions on or prior to February __, 2002:
(a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and All American Sports Licensing, Inc.
(b) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses).
(c) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date.
13. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
14. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
By: -------------------------------- Name: Jeffrey Hennion Title: Treasurer |
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
Its: Duly Authorized Signatory
GENERAL ELECTRIC CAPITAL
CORPORATION
Its: Duly Authorized Signatory
BSB BANK & TRUST COMPANY
Title:
NATIONAL BANK OF CANADA
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
Title:
FLEET RETAIL FINANCE INC.
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
Title:
FIRST UNION NATIONAL BANK
Title:
The undersigned Guarantor hereby (i) acknowledges each of the amendments and waivers to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment.
ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above.
AMERICAN SPORTS LICENSING, INC.
SIXTH AMENDMENT TO AMENDED AND
RESTATED CREDIT AGREEMENT
SIXTH AMENDMENT, dated as of April 3, 2002, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT").
WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
2. AMENDMENT TO SECTION 6.2 OF THE CREDIT AGREEMENT. SECTION 6.2 of the Credit Agreement is hereby amended as of the Amendment Effective Date by amending and restating clause (k) of such Section to read as follows:
"(k) investments by Borrower or ASL in those certain warrants (but, except as set forth in the proviso to this clause (k), not the exercise thereof) to purchase 400,000 shares of Global Sports, Inc., which warrants are each dated April 5, 2001, and any underlying shares acquired through the exercise thereof PROVIDED, that Borrower or ASL may only exercise such warrants on the terms contained therein if (i) Borrower has Excess Borrowing Availability of at least $5,000,000 after giving effect to any such exercise; and (ii) the exercise of such warrants is triggered by the approval by certain vendors of the sale of their products on the website maintained in the Borrower's name,"
3. AMENDMENTS TO ANNEX A OF THE CREDIT AGREEMENT. ANNEX A of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by: (a) inserting the following new definitions in order to read as follows:
"'ASL" means American Sports Licensing, f/k/a Dick's Asset Management Corp., a Delaware corporation and a wholly-owned Subsidiary of Borrower.
"DEPOSIT ACCOUNTS" means all "deposit accounts" as such term is defined in the Code, now or hereafter held in the name of any Loan Party.
"LETTER-OF-CREDIT RIGHTS" means letter-of-credit rights as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, including rights to payment or performance under a letter of credit, whether or not such Loan Party, as beneficiary, has demanded or is entitled to demand payment or performance.
"SOFTWARE" means all "software" as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, other than software embedded in any category of goods, including all computer programs and all supporting information provided in connection with a transaction related to any program.
"SUPPORTING OBLIGATIONS" means all supporting obligations as such term is defined in the Code, including letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property.
"UNIFORM COMMERCIAL CODE JURISDICTION" means any jurisdiction that had adopted all or substantially all of Article 9 as contained in the 2000 Official Text of the Uniform Commercial Code, as recommended by the National Conference of Commissioners on Uniform State Laws and the American Law Institute, together with any subsequent amendments or modifications to the Official Text."'
and (b) amending and restating the following definitions to read as follows:
"ACCOUNT DEBTOR" means any Person who may become obligated to any Loan Party under, with respect to, or on account of, an Account, Chattel Paper or General Intangibles (including a payment intangible).
"ACCOUNTS" means all "accounts," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, or Instruments) (including any such obligations that may be characterized as an account or contract right under the Code), (b) all of each Loan Party's rights in, to and under all purchase orders or receipts for goods or services, (c) all of each Loan Party's rights to any goods represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all rights to payment due to any Loan Party for property sold, leased, licensed, assigned or otherwise disposed of, for a policy of insurance issued or to be issued, for a secondary obligation
incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract, arising out of the use of a credit card or charge card, or for services rendered or to be rendered by such Loan Party or in connection with any other transaction (whether or not yet earned by performance on the part of such Loan Party), (e) all health care insurance receivables and (f) all collateral security of any kind, given by any Account Debtor or any other Person with respect to any of the foregoing.
"CHATTEL PAPER" means any "chattel paper," as such term is defined in the Code, including electronic chattel paper, now owned or hereafter acquired by any Loan Party.
"CODE" means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York; PROVIDED, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; PROVIDED FURTHER, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent's or any Lender's Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term "CODE" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.
"DOCUMENTS" means all "documents," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located.
"EQUIPMENT" means all "equipment," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located and, in any event, including all such Loan Party's machinery and equipment, including processing equipment, conveyors, machine tools, data processing and computer equipment, including embedded software and peripheral equipment and all engineering, processing and manufacturing equipment, office machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, together with all additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto.
"FIXTURES" means all "fixtures" as such term is defined in the Code, now owned or hereafter acquired by any Loan Party.
"GENERAL INTANGIBLES" means all "general intangibles," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, including all right, title and interest that such Loan Party may now or hereafter have in or under any Contract, all payment intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit, checking and other bank accounts, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of such Loan Party or any computer bureau or service company from time to time acting for such Loan Party.
"GOODS" means all "goods" as defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located, including embedded software to the extent included in "goods" as defined in the Code, manufactured homes, standing timber that is cut and removed for sale and unborn young of animals.
"INSTRUMENTS" means all "instruments," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located, and, in any event, including all certificated securities, all certificates of deposit, and all promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper.
"INVENTORY" means all "inventory," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located, and in any event including inventory, merchandise, goods and other personal property that are held by or on behalf of any Loan Party for sale
or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process, finished goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in such Loan Party's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software.
"INVESTMENT PROPERTY" means all "investment property" as such term is defined in the Code now owned or hereafter acquired by any Loan Party, wherever located, including (i) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of any Loan Party, including the rights of any Loan Party to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (iii) all securities accounts of any Loan Party; (iv) all commodity contracts of any Loan Party; and (v) all commodity accounts held by any Loan Party.
"PROCEEDS" means "proceeds," as such term is defined in the Code,
including (a) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Loan Party from time to time with
respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable to any Loan Party from time
to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Loan Party
against third parties (i) for past, present or future infringement of
any Patent or Patent License, or (ii) for past, present or future
infringement or dilution of any Copyright, Copyright License,
Trademark or Trademark License, or for injury to the goodwill
associated with any Trademark or Trademark License, (d) any recoveries
by any Loan Party against third parties with respect to any litigation
or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of,
defects in, or infringement of rights in, or damage to, Collateral,
(e) all amounts collected on, or distributed on account of, other
Collateral, including dividends, interest, distributions and
Instruments with respect to Investment Property and pledged Stock, and
(f) any and all other amounts, rights to payment or other property
acquired upon the sale, lease, license, exchange or other disposition
of Collateral and all rights arising out of Collateral."'
4. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that:
(a) Each of the execution, delivery and performance by Borrower of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT"), the Amended and Restated Security Agreement, dated as of the date hereof, between Borrower and Agent (the "AMENDED BORROWER SECURITY AGREEMENT") and the Amended and Restated Security Agreement, dated as of the date hereof, between ASL and Agent (the "AMENDED ASL SECURITY AGREEMENT") are within Borrower's or ASL's respective corporate power and have been duly authorized by all necessary corporate and shareholder action.
(b) This Amendment and the Amended Borrower Security Agreement have been duly executed and delivered by or on behalf of Borrower and the Amended ASL Security Agreement has been duly executed and delivered by or on behalf of ASL.
(c) Each of this Amendment, the Amended Borrower Security Agreement and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(d) The Amended ASL Security Agreement constitutes a legal, valid and binding obligation of ASL enforceable against ASL, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy insolvency, reorganization, moratorium or similar laws affecting creditor's rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(e) No Default has occurred and is continuing after giving effect to this Amendment.
(f) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date.
5. NO OTHER AMENDMENTS. Except as expressly amended herein and in the Amended Borrower Security Agreement and the Amended ASL Security Agreement, the Credit Agreement, the Security Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in
accordance with their terms. In addition, except as specifically provided herein and in the Amended Borrower Security Agreement and the Amended ASL Security Agreement, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.
6. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of April 3, 2002 the aggregate outstanding principal amount of the Revolving Credit Loan is $85,174,928.99 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date.
7. EXPENSES. Borrower hereby reconfirms its obligations pursuant to
SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all
reasonable out-of-pocket expenses (including, without limitation, reasonable
fees of counsel) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment and all other documents and instruments
delivered in connection herewith.
8. Effectiveness. This Amendment shall become effective as of April 3, 2002 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to April 3, 2002:
(a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and DAMC.
(b) AMENDED BORROWER SECURITY AGREEMENT. Agent shall have received (i) a fully executed copy of the Amended Borrower Security Agreement, (ii) a Power of Attorney in the form attached thereto and (iii) completed schedules as required by the Amended Borrower Security Agreement, all in form and substance satisfactory to Agent.
(c) AMENDED ASL SECURITY AGREEMENT. Agent shall have received (i) a fully executed copy of the Amended ASL Security Agreement, (ii) a Power of Attorney in the form attached thereto, and (iii) completed schedules as required by the Amended ASL Security Agreement, all in form and substance satisfactory to Agent.
(d) TRADEMARK SECURITY AGREEMENT AMENDMENT. Agent shall have received a fully executed amendment to the DAMC Trademark Security Agreement, in form and substance satisfactory to Agent.
(e) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses).
(e) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date.
9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
By: /s/ Jeffrey Hennion -------------------------------- Name: Jeffrey Hennion Title: Treasurer |
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
Its: Duly Authorized Signatory
GENERAL ELECTRIC CAPITAL
CORPORATION
Its: Duly Authorized Signatory
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
By: ------------------------------ Name: Jeffrey Hennion Title: Treasurer |
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By: /s/ Charles Chiodo ------------------------------ Name: Charles Chiodo Its: Duly Authorized Signatory |
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Charles Chiodo ----------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory |
BSB BANK & TRUST COMPANY
By: /s/ Lisa N. Kost ------------------------- Name: Lisa N. Kost Title: Assistant Vice President |
NATIONAL BANK OF CANADA
Title:
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
Title:
FLEET RETAIL FINANCE INC.
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
Title:
BSB BANK & TRUST COMPANY
Title:
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Eric L. Moore ------------------------ Name: Eric L. Moore Title: V.P. |
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
Title:
FLEET RETAIL FINANCE INC.
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
Title:
[WACHOVIA]
Title:
BSB BANK & TRUST COMPANY
Title:
NATIONAL BANK OF CANADA
Title:
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Evelyn Kusold ------------------------ Name: Evelyn Kusold Title: AVP |
FLEET RETAIL FINANCE INC.
By: /s/ James R. Dore ------------------------ Name: James R. Dore Title: Director |
NATIONAL CITY BANK OF
PENNSYLVANIA
Title:
BSB BANK & TRUST COMPANY
Title:
NATIONAL BANK OF CANADA
Title:
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.
Title:
FLEET RETAIL FINANCE INC.
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
By: /s/ John L. Hayes IV ------------------------ Name: John L. Hayes IV Title: VP |
[WACHOVIA]
Title:
WACHOVIA BANK, NATIONAL
ASSOCIATION
By: /s/ Mark S. Supple ------------------------ Name: Mark S. Supple Title: Director |
The undersigned Guarantor hereby (i) acknowledges each of the amendments and waivers to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment.
ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above.
AMERICAN SPORTS LICENSING, INC.
By: /s/ Gordon W. Stewart --------------------------------------- Name: Gordon W. Stewart Title: Secretary |
SEVENTH AMENDMENT TO AMENDED AND
RESTATED CREDIT AGREEMENT
SEVENTH AMENDMENT, dated as of July 15, 2002, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT").
WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and
WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follow:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
2. AMENDMENT TO RECITAL B OF THE CREDIT AGREEMENT, Recital B of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by the deleting the amount "$170,000,000" where it appears therein and inserting in lieu thereof the amount "$180,000,000".
3. AMENDMENT TO ANNEX A. ANNEX A to the Credit Agreement is hereby amended as of the Amendment Effective Date by:
(a) amending and restating the following new definitions in their entirety to read as follows:
"AGGREGATE REVOLVING CREDIT COMMITMENT" shall mean $180,000,000";
"COMMITMENT TERMINATION DATE" shall mean the earliest of (a) May 30, 2006, (b) the date of termination of the Aggregate Revolving Credit Commitment pursuant to SECTION 8.2 and (c) the date of termination of the Aggregate Revolving Credit Commitment in accordance with the provisions of SECTION 1.2(d)." and
(b) adding the following new definition to read as follows:
"Seventh Amendment Fee Letter" shall mean that certain fee letter between Agent and Borrower dated as of July 15, 2002."
4. AMENDMENT TO APPENDIX 1. APPENDIX 1 to the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting such Appendix in its entirety and inserting in lieu thereof a new appendix to read as set forth on Appendix 1 hereto.
5. CHANGE IN LENDERS' PROPORTIONATE SHARES. Borrower and Lenders agree that upon consummation of the amendments to the Credit Agreement effected hereby, the Proportionate Share of each Lender is set forth on Appendix I attached hereto. In furtherance of the foregoing, each applicable Lender further agrees promptly to forward on the Amendment Effective Date in immediately available funds certain amounts requested by Agent directly to Agent, and Agent agrees to forward such amounts to any applicable Lender (the "LOAN ALLOCATION ADJUSTMENT") so that after giving effect to the Loan Allocation Adjustment the outstanding Revolving Credit Advances of each Lender reflects its Proportionate Share after giving effect to the Loan Allocation Adjustment.
6. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that:
(a) Each of the execution, delivery and performance by Borrower of this Amendment and the Amended and Restated Promissory Notes referred to in Section 10(b) hereof (the "AMENDED AND RESTATED PROMISSORY NOTES") and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action.
(b) This Amendment and the Amended and Restated Promissory Notes have been duly executed and delivered by or on behalf of Borrower.
(c) Each of this Amendment, the Amendment and Restated Promissory Notes and the Amended Credit Agreement, constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(d) No Default has occurred and is continuing both before and after giving effect to this Amendment.
(e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true
and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date.
7. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time.
8. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of July 10, 2002 the aggregate outstanding principal amount of the Revolving Credit Loan is $83,000,100.00 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date.
9. EXPENSES. Borrower hereby reconfirms its obligations pursuant to
SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all
reasonable out-of-pocket expenses (including, without limitation, reasonable
fees of counsel) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment and all other documents and
instruments delivered in connection herewith.
10. EFFECTIVENESS. This Amendment shall become effective as of July 15, 2002 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to July 15, 2002:
(a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Required Lenders and Borrower and acknowledged by ASL.
(b) AMENDED AND RESTATED PROMISSORY NOTES. Each applicable Lender shall have received an Amended and Restated Promissory Note, which note amends and restates as of the Amendment Effective Date that Promissory Note made by Borrower in favor of such Lender.
(c) BOARD RESOLUTIONS. Agent shall have received a certificate of the Secretary or an Assistant Secretary of Borrower
certifying (i) the resolutions adopted by the Board of Directors of Borrower approving this Amendment and the Amended and Restated Promissory Notes and (ii) all documents evidencing other necessary corporate action by Borrower and required governmental and third party approvals, if any, with respect to this Amendment and the Amended and Restated Promissory Notes.
(d) LEGAL OPINION. Agent shall have received an opinion of Beveridge & Diamond, P.C., counsel to the Loan Parties, in form and substance satisfactory to Agent and Lenders.
(e) SEVENTH AMENDMENT FEE LETTER. Agent shall have received a duly executed and delivered Seventh Amendment Fee Letter, in form and substance satisfactory to Agent.
(f) FEES. Borrower shall have paid (i) an amendment fee to Agent for the account of each of the following Lenders in the aggregate amount of $190,625 to be distributed as follows: General Electric Capital Corporation $68,750.00; PNC Business Credit $31,250.00; Citizen's Business Credit $9,375.00; Fleet Retail Finance, Inc. $37,500.00; National City Bank of Pennsylvania $18,750.00 and Wachovia Bank, National Association $25,000.00 (ii) a closing fee to Agent for the account of each of the following Lenders in the aggregate amount of $68,750 to be distributed as follows: PNC Business Credit $12,500.00; Citizen's Business Credit $31,250.00; National City Bank of Pennsylvania $12,500.00 and Wachovia Bank, National Association $12,500.00 and (iii) all fees as set forth in the Seventh Amendment Fee Letter.
(g) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses).
(h) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date.
11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
12 COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.
BORROWER:
DICK'S SPORTING GOODS, INC.
By: /s/ Jeffrey Hennion
-------------------------------------
Name: Jeffrey Hennion
Title: Treasurer
|
AGENT:
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
By: /s/ James DeSantis
-------------------------------------
Name: James DeSantis
Its: Duly Authorized Signatory
|
LENDERS:
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ James DeSantis
-------------------------------------
Name: James DeSantis
Its: Duly Authorized Signatory
|
PNC BUSINESS CREDIT
By: /s/ Stephen W. Boyd
-------------------------------------
Name: Stephen W. Boyd
Title: Vice President
|
FLEET RETAIL FINANCE INC.
By: /s/ James R. Dore
-------------------------------------
Name: James R. Dore
Title: Director
|
NATIONAL CITY BANK OF PENNSYLVANIA
By: /s/ John L. Hayes IV
-------------------------------------
Name: John L. Hayes IV
Title: VP
|
WACHOVIA BANK, NATIONAL ASSOCIATION
By: /s/ Mark S. Supple
-------------------------------------
Name: Mark S. Supple
Title: Vice President
|
CITIZEN'S BUSINESS CREDIT
By: /s/ Donald P. Haddad
-------------------------------------
Name: Donald P. Haddad
Title: Vice President
|
The undersigned Guarantor hereby (i) acknowledges to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment.
ACKNOWLEDGED, CONSENTED and
AGREED to as of the date first written
above.
AMERICAN SPORTS LICENSING, INC.
By: /s/ Jeffrey R. Hennion
------------------------------
Name:
Title:
|
APPENDIX I
APPENDIX I
Revolving Credit Commitments
and Lender Information
-------------------------------------------------------------------------------
Lender Revolving Credit Proportionate Share of
------ Commitment Commitment
---------- ----------
-------------------------------------------------------------------------------
GENERAL ELECTRIC $55,000,000.00 30.55556%
CAPITAL
CORPORATION
800 Connecticut Avenue,
Two North
Norwalk, CT 06854
Attn: Charles Chiodo
Telephone: (203) 852-3600
Telecopy: (203) 852-3640
-------------------------------------------------------------------------------
PNC BUSINESS CREDIT $30,000,000.00 16.66667%
245 Fifth Avenue, 6th Floor
One PNC Plaza
Pittsburgh, PA 15222
Attn: Eric Moore
Telephone: (412) 768-1332
Telecopy: (412) 768-4369
-------------------------------------------------------------------------------
CITIZEN'S BUSINESS $20,000,000.00 11.11111%
CREDIT COMPANY
Six PPG Place
Suite 820
Pittsburgh, PA 15222
Attn: Bob Beer
Telephone: (412) 391-3333
Telecopy: (412) 391-2580
-------------------------------------------------------------------------------
FLEET RETAIL FINANCE $30,000,000.00 16.66667%
INC.
40 Broad Street, 10th Floor
Boston, MA 02109
Attn: Jim Dore
Telephone: (617) 434-4184
Telecopy: (617) 434-4312
-------------------------------------------------------------------------------
NATIONAL CITY BANK $20,000,000.00 11.11111%
OF PENNSYLVANIA
20 Stanwix Street, 19th
-------------------------------------------------------------------------------
|
Lender Revolving Credit Proportionate Share of
------ Commitment Commitment
---------- ----------
-------------------------------------------------------------------------------
Floor
Pittsburgh, PA 15222
Attn: Vince Delie
Telephone: (412) 644-6056
Telecopy: (412) 471-4883
-------------------------------------------------------------------------------
WACHOVIA BANK, $25,000,000.00 13.88889%
|
------------------- ------------------------
$180,000,000.00 100.00%
-------------------------------------------------------------------------------
|
Exhibit 10.4
DICK'S CLOTHING & SPORTING GOODS, INC.
STOCK OPTION PLAN
ARTICLE I
THE PLAN
1.1 NAME. This plan shall be known as the "Dick's Clothing & Sporting Goods, Inc. Stock Option Plan" and is referred to herein as the "Plan." It is provided by Dick's Clothing & Sporting Goods, Inc. (the "Corporation").
1.2 COMPONENTS. This plan shall have two components, Incentive Stock Options (the "Incentive Options") and Non-Qualified Stock Options (the "Non-Qualified Options"). The Incentive Options and the Non-Qualified Options are sometimes referred to together as the "Options." A participant who has been granted an Incentive or a Non-Qualified Option may be granted an additional Option or Options under this Plan if the Compensation Committee or Incentive Committee so determines.
1.3 EFFECTIVENESS; SHAREHOLDER APPROVAL. The Plan was adopted by the Board of Directors on October 30, 1992 subject to the approval of the Corporation's shareholders. The Plan was adopted by the Corporation's shareholders by unanimous written consent on November 11, 1992.
1.4 PURPOSE OF PLAN. The purpose of the Dick's Clothing & Sporting Goods, Inc. Stock Option Plan (the "Plan") is to encourage ownership of stock of the Corporation and to attract, motivate, and retain key management employees and members of the Board of Directors by providing an incentive to improve operations, increase profitability, and acquire stock ownership interests in the Corporation.
1.5 TERMINATION OF PLAN. The Plan shall terminate ten years from its date of adoption by the Board of Directors (October 30, 1992), and no options shall be granted under the Plan after that date. Any Options outstanding at the time of termination of the Plan shall continue in full force and effect according to the terms and conditions of the Option and the Plan.
ARTICLE II
INCENTIVE OPTIONS
2.1 SHARES AVAILABLE FOR INCENTIVE OPTIONS. Subject to adjustment as provided in Section 4.6, there will be reserved for use, upon the exercise of Incentive Options to be granted from time to time under the Plan, an aggregate of 300,000 shares of the Common Stock of the Corporation ("Common Stock") which shares may be in whole or in part, as the Board of Directors of the
Corporation (the "Board of Directors") shall from time to time determine, authorized but unissued shares of the Common Stock, or issued shares of the Common Stock which shall have been reacquired by the Corporation. If an Incentive Option shall expire or terminate for any reason without having been exercised in full, the shares subject to purchase under any such Incentive Option shall (unless the Plan shall then be terminated) be added to the shares otherwise available under the Plan.
2.2 ADMINISTRATION OF THE PLAN. All provisions of the Plan relating to Incentive Options shall be administered by a committee (the "Incentive Committee"), consisting of not fewer than three Directors of the Corporation who shall be disinterested within the meaning of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, and who shall serve at the pleasure of the Board of Directors. Subject to the provisions of the Plan, the Incentive Committee shall have full authority to interpret the Plan with respect to Incentive Options, to establish and amend rules and regulations relating to Incentive Options, to determine the terms and provisions of the Incentive Option agreements (which need not be identical), and make all other determinations necessary or advisable for the administration Incentive Options granted under the Plan.
2.3 EMPLOYEES TO WHOM INCENTIVE OPTIONS MAY BE GRANTED. Incentive Options may be granted in each calendar year or portion thereof while the Plan is in effect to such of the Employees as the Incentive Committee, in its discretion, shall determine.
Whenever the term "officers" is used in the Plan, such term shall be deemed to include assistant officers of the Corporation and officers of subsidiaries of the Corporation. The term "subsidiary" shall mean any domestic or foreign corporation of which the Corporation owns, directly or indirectly, at least 50% of the total combined voting power of all classes of stock of such corporation. In determining the employees to whom Incentive Options shall be granted and the number of shares to be subject to purchase under such Incentive Options, the Incentive Committee shall take into account the duties of the respective employees, their present and potential contributions to the success of the Corporation, and such other factors as the Incentive Committee shall deem relevant in connection with accomplishing the purposes of the Incentive Plan. Membership on the Board of Directors shall not disqualify a person from receiving an Incentive Option grant hereunder, although Directors who are members of the Incentive Committee or who are not officers or managerial officers of the Corporation or a subsidiary are not eligible to receive Incentive Options under the Plan.
2.4 EXERCISE PRICE AND DATE OF GRANT.
(a) INCENTIVE OPTION PRICE. The exercise price of any Incentive Option granted to an employee who at the time such Incentive Option is granted, owns, as defined in Section 425 of the Internal Revenue Code of 1954, as amended (the "Code") stock possessing not more than 10% of the total combined voting power of all classes of stock of:
(i) the Corporation; or
(ii) if applicable, any subsidiary of the Corporation qualifying as a "Subsidiary Corporation" as defined in Section 425 of the Code (any such corporation being hereinafter referred to as a "Subsidiary"); or
(iii) If applicable, any parent of the Corporation qualifying as a "Parent Corporation" as defined in Section 425 of the Code (any such corporation being hereinafter referred to as the "Parent"),
shall be at least equal to the fair market value of the Common Stock at the time of granting of the Incentive Option.
The exercise price of any Incentive Option granted to an employee who, at the time such Incentive Option is granted, owns, as defined in Section 425 of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of:
(i) the Corporation; or
(ii) if applicable, a Subsidiary; or
(iii) if applicable, the Parent,
shall be at least equal to 110% of the fair market value of the Common Stock at the time of granting of the Incentive Option.
For all purposes of the Plan, the fair market value of the Common Stock at the time of granting an Option shall be deemed to be the mean between the high and the low prices of the Common Stock on the national securities exchange on the day on which the Option is granted, if the Common Stock is then being traded on a national securities exchange, and if the Common Stock is then being traded on such an exchange but there are no sales on such day, the fair market value shall be deemed to be the mean between the high and low prices of the Common Stock on the national securities exchange on the day on which the most recent sales occurred prior to the date of grant, and if the Common Stock is not then traded on such an exchange, then the fair market value shall be deemed to be the mean between the high and low bid and
asked prices for the Common Stock on the over-the-counter market on the day on which the option is granted. If the Common Stock is not publicly traded at the time of the grant, the fair market value shall be determined in good faith at the time of the grant of any Incentive Option by decision of the Incentive Committee.
(b) DATE OF GRANT. The date of grant of an Incentive Option granted hereunder shall be the date on which the Incentive Committee acts in granting the Incentive Option.
2.5 TERMS OF INCENTIVE OPTIONS. Incentive Options granted hereunder shall be exercisable for a term of not more than ten (10) years from the date of grant thereof, but shall be subject to Section 4.1 and to earlier termination as hereinafter provided. Each Incentive Option agreement issued hereunder shall specify the term of the Incentive Option, which term shall be determined by the Incentive Committee in accordance with its discretionary authority hereunder.
Notwithstanding anything herein to the contrary, in the event an Incentive Option is granted to an employee who, at the time such option is granted, owns, as defined in Section 425 of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of:
(i) the Corporation; or
(ii) if applicable, a Subsidiary; or
(iii) if applicable, the Parent,
then such Incentive Option shall not be exercisable more than five (5) years from the date of grant thereof, but shall be subject to earlier termination as hereinafter provided.
2.6 LIMIT ON FAIR MARKET VALUE. No Option will be treated as an "incentive stock option" (as defined in Section 422A(b) of the code) to the extent that the aggregate fair market value (determined at the time the Option is granted) of the stock with respect to which the Option is exercisable for the first time by any individual during any calendar year (under all plans of the Corporation and any subsidiary) exceeds $100,000.
ARTICLE III
NON-QUALIFIED OPTIONS
3.1 SHARES AVAILABLE FOR NON-QUALIFIED OPTIONS. Subject to adjustment as provided in Section 4.6, the aggregate number of shares which may be issued pursuant to Non-Qualified Options granted by the Option Committee under this Plan shall not exceed 1,403,833 shares of Common Stock of the Corporation. These
shares may include treasury shares reacquired by the Corporation, or authorized and unissued shares, or a combination of both. Any shares, subject to a Non-Qualified Option under this Plan, which expire or are terminated for any reason shall be available for the granting of other Non-Qualified Options during the term of this Plan.
3.2 ADMINISTRATION OF PLAN. All provisions of the Plan relating to Non-Qualified Options shall be administered by the Compensation Committee (the "Compensation Committee") appointed by the Board of Directors of the Corporation. The Compensation Committee shall consist of not less than three members of the Board of Directors of the Corporation (the "Board"). The determinations of the Compensation Committee shall be made in accordance with their judgment as to the best interests of the Corporation and its stockholders and in accordance with the purposes of the Plan. No member of the Compensation Committee shall be liable for any action taken or determination made in good faith with respect to this Plan or any Non-Qualified Option granted hereunder.
The Compensation Committee shall have full authority and discretion to:
(a) determine the eligible participants to be granted Non-Qualified Options, the
times at which Non-Qualified Options shall be granted, the number of shares
subject to each Non-Qualified Option, the period during which each Non-Qualified
Option becomes exercisable (subject to Section 4.1), and the terms contained in
each Non-Qualified Option agreement; and (b) adopt all rules, regulations, and
provisions of this Plan relating to Non-Qualified Options. The Compensation
Committee's interpretation, construction and adoption of any provisions of this
Plan relating to Non-Qualified Options or any Non-Qualified Option granted
hereunder shall be binding and conclusive, unless otherwise determined by the
Board. Any power that may be exercised or action that may be taken by the
Compensation Committee under this Plan may also be exercised or taken by the
Board.
3.3 ELIGIBILITY. Eligible recipients of Non-Qualified Options under this Plan shall be Directors, officers, and selected key management employees of the Corporation and its subsidiaries. Key management employees will be nominated for participation by the President of the Corporation and will be approved by the Compensation Committee. The granting of a Non-Qualified Option under this Plan shall not affect any outstanding stock option previously granted to an optionee under this Plan or any other plan of the Corporation.
3.4 EXERCISE PRICE. On the date a Non-Qualified Option is granted, the exercise price per share shall be such price that the Committee deems appropriate.
ARTICLE IV
PROVISIONS APPLICABLE TO ALL OPTIONS
4.1 TERM OF OPTION. Options granted under the Plan shall become exercisable at such intervals and periods of time ("Exercise Period") and for such number of shares which may be purchased at any one time as determined by the Incentive Committee or the Compensation Committee (collectively "Option Terms"). These Option Terms shall be set forth by the relevant Committee in stock option agreements between individual optionees and the Corporation, but, in no event shall the Exercise Period reflected in these option agreements be less than four or more than ten years after the date of grant, and in no event shall the vesting schedule be shorter than the following:
(1) Commencing one year after the date of grant of an Option to an optionee, such optionee may exercise the Option as to not more than 25% of the shares originally subject to Option thereunder.
(2) Commencing two years after the date of grant of an Option to an optionee, such optionee may exercise the Option as to not more than 50% of the shares originally subject to Option thereunder.
(3) Commencing three years after the date of grant of an Option to an optionee, such optionee may exercise the Option as to not more than 75% of the shares originally subject to Option thereunder.
(4) Commencing four years after the date of grant of an Option to an optionee, such optionee may exercise the Option as to any part or all of the shares subject to Option thereunder.
Options which are not exercised by the tenth anniversary of the date on which the option was granted shall expire.
4.2 EXERCISE OF OPTIONS.
(a) Each Option granted under the Plan shall be exercisable on the dates and for the number of shares as shall be provided in a stock option agreement between the Corporation and optionee evidencing the Option granted by the Committee and the terms thereof. Shares shall be issued to the optionee pursuant to the exercise of an Option only upon receipt by the Corporation from the optionee of payment in full either in cash or, subject to the relevant Committee's approval, by an exchange of shares of Common Stock of the Corporation previously owned by the optionee for at least six months prior to the date of exercise or a combination of cash and such shares, in an amount or having a
combined value equal to the aggregate purchase price for the shares subject to the Option or portion thereof being exercised.
(b) The Corporation shall be entitled to withhold the amount of any tax attributable to any amounts payable or shares deliverable under the Plan after giving the person entitled to receive the payment or delivery notice as far in advance as practicable, and the Corporation may defer making payment or delivery of any benefits under the Plan if any tax is payable until indemnified to its satisfaction.
4.3 NONTRANSFERABILITY OF OPTION. No Options granted under this Plan shall be transferable except by will or the laws of descent. Such Options shall be exercisable during the optionee's lifetime only by the optionee.
4.4 TERMINATION OF EMPLOYMENT AND DEATH OF OPTIONEE.
(a) In the event that during the term of an unexercised Option, an optionee's employment with the Corporation or any of its subsidiaries is terminated without cause as determined by the relevant Committee, the Option may be exercised within the thirty-day period following the date of termination of employment, but only to the extent that the optionee was entitled to exercise such Option at the date of termination of employment and in no event later than ten years from the date of the grant of such Option.
(b) In the event that during the term of an unexercised Option, an optionee's employment with the Corporation or any of its subsidiaries is terminated for cause as determined by the relevant Committee, the Option shall be forfeited.
(c) In the event that during the term of an unexercised Option, the optionee dies or terminates employment with the Corporation or any of its subsidiaries by reason of retirement or permanent disability within the Corporation's standard guidelines, the Option may be exercised within a ninety- day period following the date of death or termination of employment, but only to the extent that the optionee was entitled to exercise such Option at the date of termination of employment and in no event later than ten years from the date of the grant of the Option. In the event of an optionee's death or disability, the legal representative of the optionee or the optionee's estate shall be entitled to exercise the Option.
(d) The unexercised portion of any Option subject to this Section which is not exercised within the thirty or ninety-day period, as the case may be, shall lapse, and shares subject to such Option shall become available for the granting of other Options under the Plan.
(e) For purposes of this provision, "cause" shall mean (i) fraud or
felonious conduct; (ii) embezzlement or misappropriation of funds or property;
(iii) consistent refusal to perform, or willful misconduct in or disregard of
the performance of duties and obligations; (iv) gross negligence, or (v) breach
of employment agreement, if applicable.
4.5 CONTINUED EMPLOYMENT. Nothing contained in this Plan shall be construed as a promise of future employment by the Corporation, its subsidiaries or affiliates, or the relevant Committee. Further, the receipt of a stock option grant in any one year shall not in any way be construed as a right to receive a stock option grant in any subsequent year.
4.6 ADJUSTMENT PROVISIONS. If the Corporation shall at any time change the number of shares of its Common Stock without new consideration to the Corporation (such as by stock dividends or stock splits), the aggregate number of shares which may be issued pursuant to Options granted under this Plan and the total number of shares then remaining subject to purchase under an outstanding Option shall be changed in proportion to such change in issued shares. The Option price per share also shall be adjusted so that the total consideration payable to the Corporation upon the purchase of all shares not theretofore purchased shall not be changed.
If, during the term of any outstanding Option, the Corporation shall issue other securities of the Corporation or distribute other property (other than cash) as a distribution or dividend on or in exchange for Common Stock of the Corporation, the Corporation shall take such steps as the Committee and the Board deems appropriate to: (a) equitably adjust the kind and amount of securities then remaining subject to purchase thereunder and the exercise price per share; or (b), to equitably adjust the rights of the optionee thereunder in order to reflect such issuance or distribution of securities or other property.
If, during the term of an outstanding Option, the Common Stock of the Corporation shall be changed into another kind of security of the Corporation or into cash, securities, or evidences of indebtedness of another corporation, other property or any combination thereof, as a result of a reorganization, sale, merger, consolidation, or other similar transaction, the optionee shall be entitled to receive, at the election of the optionee (a) upon the due exercise of the Option or (b) upon the effective date of the reorganization, sale, merger, consolidation or similar transaction, the cash, securities, evidences of indebtedness, other property or any combination thereof the optionee would have been entitled to receive for Common Stock acquired through exercise of the Option (net of the exercise price) immediately prior to the effective date of such reorganization, sale, merger, consolidation or other similar
transaction. If appropriate, the exercise price of the shares or securities remaining subject to purchase following such reorganization, sale, merger, consolidation or other similar transaction may be adjusted in each case in such equitable manner as the relevant Committee and the Board may determine.
4.7 AMENDMENTS. The Board of Directors may amend the Plan from time to
time or terminate the Plan at any time. However, no action authorized by this
Section shall reduce the amount of any then existing benefit or change the terms
and conditions thereof without the optionee's consent. No amendment of the Plan
shall, without approval of the shareholders of the Corporation: (a) materially
increase the total number of shares which may be issued under the Plan; (b)
materially reduce the minimum purchase price of shares of Common Stock which may
be made subject to Options under the Plan; or (c) materially modify the
requirements as to eligibility for Options under the Plan.
4.8 RIGHTS OF OPTION HOLDER. The holder of an Option shall not have any of the rights of a shareholder with respect to the shares subject to purchase under his Option, except to the extent that one or more certificates for such shares shall be delivered to him upon the due exercise of the Option.
4.9 OPTION REGULATIONS. If any law or regulation requires the Corporation to take any action with respect to the shares to be issued upon exercise of an Option such as, but not limited to, registration with any federal or state securities regulating organization or agency or similar body, then, and in such event, the issuance of such shares shall be deferred until the completion of such action as is required under any such law or regulation and the Board of Directors shall have been advised by counsel for the Corporation that all applicable legal requirements have been complied with. The Corporation, in its sole discretion, may require any person exercising an Option, as a condition to the effectiveness thereof, to represent in writing to the Corporation, in form satisfactory to the Corporation, that the stock purchased shall be purchased for investment and not with a view to resale or other distribution.
4.10 LISTING REQUIREMENTS. The Corporation shall not be required to issue or deliver any certificate for shares of its stock purchased upon the exercise of any Option issued under this Plan prior to the admission of such shares to listing on any stock exchange on which the stock may at that time be listed; provided, however, that the Corporation shall take all necessary steps to secure the admission of such stock to listing on any such stock exchange and shall secure admission of such shares at the earliest practicable date.
* * *
Exhibit 10.5
DICK'S SPORTING GOODS, INC.
2002 STOCK PLAN
1. PURPOSES OF THIS PLAN. The purposes of this Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Eligible Individuals, to further align Eligible Individuals' interests with those of the stockholders of the Company and to promote the success of the Company's business.
2. CERTAIN DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board and any Committee appointed by the Board to administer the Plan; provided, however, that the Board, in its sole discretion, may, notwithstanding the appointment of any Committee to administer the Plan, exercise any authority under this Plan.
(b) "AWARD" means any Incentive Bonus Award, Option, Performance Share Award, Performance Unit Award, Restricted Stock Award, Restricted Unit Award, SAR or Stock Unit Award granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CHANGE IN CONTROL" means (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than a Class B Permitted Holder (as such term is defined in the Company's Amended and Restated Certificate of Incorporation) through a tender offer, open market purchases and/or other purchases is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company's then outstanding securities or (ii) a majority of the Board shall be comprised of persons who (x) were elected in one or more contested elections for the Board and (y) had not been nominated when they were first elected by the then existing Board.
(e) "CLASS A COMMON STOCK" means the Class A Common Stock, par value $.01 per share, of the Company.
(f) "CLASS B COMMON STOCK" means the Class B Common Stock, par value $.01 per share, of the Company.
(g) "CODE" means the Internal Revenue Code of 1986, as amended.
(h) "COMMITTEE" means a committee of the Board.
(i) "COMMON STOCK" means the Class A Common Stock or the Class B Common Stock of the Company, as the case may be.
(j) "COMPANY" means Dick's Sporting Goods, Inc., a Delaware corporation.
(k) "CONSULTANT" means any person, including an advisor, who is engaged by the Company or any Parent or Subsidiary to render services and is compensated for such services, and any director of the Company whether compensated for such services or not.
(l) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any interruption or termination of the employment relationship by the Employee with the Company or any Parent or Subsidiary. Continuous Status as an Employee shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Board, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) transfers between locations of the Company or between the Company, its Parent, its Subsidiaries or its successor.
(m) "ELIGIBLE INDIVIDUAL" means any Employee, Non-Employee Director or Consultant.
(n) "EMPLOYEE" means any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company or any prospective employee who shall have received an offer of employment. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company.
(o) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(p) "FAIR MARKET VALUE" means, as of any date, the value of the applicable class of Common Stock determined as follows:
(i) If such class of Common Stock is listed on any established stock exchange or a national market system reporting last sale transactions including, without limitation, the Nasdaq National Market, its Fair Market Value shall be the closing sale price for such stock (or the closing bid, if no sales were reported) as quoted on such system or exchange for the last market trading day prior to the time of determination as reported in the Wall Street Journal or such other source as the Administrator deems reliable or;
(ii) If such class of Common Stock is quoted on Nasdaq (but not on a last reported sale basis) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high and low closing asked prices for the Common Stock for the last market trading day prior to the
time of determination as reported in the Wall Street Journal or such other source as the Administrator deems reliable or;
(iii) In the absence of an established market for a class of Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. For purposes of this Plan, the Class B Common Stock shall be deemed to have the same value per share of the Class A Common Stock unless the value of the Class B Common Stock is determinable in accordance with subparagraphs (i) or (ii) above.
(q) "INCENTIVE BONUS AWARD" means the opportunity to earn a future cash payment tied to the level of achievement with respect to one or more Qualifying Performance Criteria for a performance period as established by the Administrator.
(r) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
(s) "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an employee of the Company or any Parent or Subsidiary of the Company.
(t) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an Incentive Stock Option.
(u) "OPTION" means a right to purchase Shares granted pursuant to the Plan.
(v) "OPTIONED STOCK" means the Shares subject to an Option.
(w) "OPTIONEE" means a Participant who holds an Option.
(x) "PARENT" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.
(y) "PARTICIPANT" means any person who has an Award under the Plan including any person (including any estate) to whom an Award has been assigned or transferred in accordance with the Plan.
(z) "PERFORMANCE SHARE AWARD" means a grant of a right to receive Shares or Stock Units contingent on the achievement of performance or other objectives during a specified period.
(aa) "PERFORMANCE UNIT AWARD" means a grant of a right to receive a designated dollar value amount of Shares or Stock Units contingent on the achievement of performance or other objectives during a specified period.
(bb) "PLAN" means this 2002 Stock Plan.
(cc) "QUALIFYING PERFORMANCE CRITERIA" means any one or more of the
following performance criteria, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
subsidiary, either individually, alternatively or in any combination, and
measured over a period of time including any portion of a year, annually or
cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years' results or to a designated comparison
group, in each case as specified by the in the Award: (a) cash flow, (b)
earnings per share (including earnings before interest, taxes, depreciation, and
amortization or some variation thereof), (c) stock price, (d) return on equity,
(e) total stockholder return, (f) return on capital, (g) return on assets or net
assets, (h) revenue, (i) income or net income, (j) operating income or net
operating income, (k) operating profit or net operating profit, (l) operating
margin or profit margin, (m) return on operating revenue, and (n) market share.
To the extent consistent with Section 162(m) of the Code, the Administrator
shall appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (i) asset write- downs, (ii) litigation or claim judgments
or settlements, (iii) the effect of changes in tax law, accounting principles or
other such laws or provisions affecting reported results, (iv) accruals for
reorganization and restructuring programs and (v) any extraordinary
non-recurring items as described in Accounting Principles Board Opinion No. 30
and/or in management's discussion and analysis of financial condition and
results of operations appearing in the Company's annual report to stockholders
for the applicable year.
(dd) "RESTRICTED STOCK AWARD" means a grant of Shares subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives, as determined by the Administrator.
(ee) "RESTRICTED UNIT AWARD" means a grant of Stock Unit subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives, as determined by the Administrator.
(ff) "SAR" means a stock appreciation right, which is the right to receive an amount equal to the appreciation, if any, in the Fair Market Value of a Share from the date of the grant of the right to the date of its payment, as adjusted in accordance with Section 10 of this Plan, payable in cash, Shares or Stock Units.
(gg) "SHARE" means a share of the Common Stock, as adjusted in accordance with Section 10 of this Plan.
(hh) "STOCK UNIT" means the right to receive a Share at a future point in time.
(ii) "STOCK UNIT AWARD" means the grant of a Stock Unit.
(jj) "SUBSIDIARY" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of this Plan, the maximum aggregate number of Shares which may be issued under the Plan is 4,300,000. The Shares may be authorized, but unissued Shares, issued Shares that have been reacquired by the Company (otherwise known as treasury Shares) or Shares acquired on the open market specifically for distribution under this Plan, or any combination thereof. Notwithstanding any other provision of this Plan, Awards for Class B Common Stock or Awards for securities convertible or exchangeable into Class B Common Stock may only be issued to a Class B Permitted Holder (as such term is defined in the Company's Certificate of Incorporation, as amended).
If Shares under any Award are not issued for any reason, such Shares shall, unless the Plan shall have been terminated, become available for future grant under the Plan. In addition, any Shares delivered or deemed delivered, by attestation or otherwise, to the Company in payment of any obligation, including the exercise price of any option, the purchase price for any Shares, or for any tax obligation shall be added back to the Shares available for issuance under the Plan.
The aggregate number of Shares issuable under all Awards granted under this Plan during any calendar year to any one Eligible Individual shall not exceed 1,500,000. Notwithstanding anything to the contrary in this Plan, the foregoing limitations shall be subject to adjustment under Section 10, but only to the extent that such adjustment will not affect the status of any Award intended to qualify as "performance-based compensation" under Section 162(m) of the Code. The foregoing limitations shall not apply to the extent that they are no longer required in order for compensation in connection with grants under this Plan to be treated as "performance-based compensation" under Section 162(m) of the Code.
4. ADMINISTRATION OF THIS PLAN.
(a) AUTHORITY. Subject to the provisions of this Plan and, in the case of a Committee, the specific duties delegated to or limitation imposed upon such Committee by the Board, the Administrator shall have the authority, in its discretion:
(i) to establish, amend and rescind rules and regulations relating to the Plan;
(ii) to select the Eligible Individuals to whom Awards may from time to time be granted hereunder;
(iii) to determine the amount and type of Awards, including any combination thereof, to be granted to any Eligible Individual;
(iv) to grant Awards to Eligible Individuals and, in connection therewith, to determine the terms and conditions, not inconsistent with the terms of this Plan, of any such Award including, but not limited to, the number of Shares or Stock Units that may be issued or amount of cash that may be paid pursuant to the Award, the exercise or purchase price of any Share, the circumstances under which Awards or any Shares or Stock Units relating thereto are issued, retained, become exercisable or vested, are no longer subject to forfeiture or are terminated, forfeited or expire, based in each case on such factors as the Administrator shall determine, in its sole discretion;
(v) to determine the Fair Market Value of the Common Stock, in accordance with Section 2(p) of this Plan;
(vi) to establish, verify the extent of satisfaction of, adjust, reduce or waive any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award;
(vii) to approve forms of agreement for use under the Plan;
(viii) to determine whether and under what circumstances an Award may be settled in cash instead of Shares;
(ix) to determine whether, to what extent and under what circumstances Shares and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of the participant (including providing for and determining the amount, if any, of any deemed earnings on any deferred amount during any deferral period);
(x) to determine whether and to what extent an adjustment is required under Section 10 of this Plan;
(xi) in its discretion, upon a Change in Control, to vest and make exercisable any Award granted hereunder which is not fully vested or exercisable and to remove any restrictions effective upon the occurrence of a Change in Control or the termination of an Eligible Individual's service to the Company.
(xii) to interpret and construe this Plan, any rules and regulations under this Plan and the terms and conditions of any Award granted hereunder, and to make exceptions to any such provisions in good faith and for the benefit of the Company; and
(xiii) to make all other determinations deemed necessary or advisable for the administration of this Plan.
(b) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Participants.
5. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company in accordance with applicable state law. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 11 of this Plan; provided, however, that the Plan shall remain in effect
so long as any Award remains outstanding and as long as necessary to issue any
Awards pursuant to commitments entered into prior to the expiration of this
Plan.
6. OPTIONS.
(a) GENERAL TERMS.
(i) WRITTEN AGREEMENT. Each Option shall be set forth in a written option document setting forth the number and kind of Shares that may be issued upon exercise of the Option, the purchase price of each Share, the term of the Option, such terms and conditions on the vesting and/or exercisability of an Option as may be determined by the Administrator, any restrictions on the transfer of the Option and forfeiture provisions and such further terms and conditions, in each case not inconsistent with this Plan, as may be determined from time to time by the Administrator. The written option document need not be signed by the Optionee.
(ii) DESIGNATION. Each Option shall be designated in the written option document as either an Incentive Stock Option or a Nonstatutory Stock Option. Notwithstanding such designations, to the extent that an Option does not qualify as an Incentive Stock Option, it shall be treated as a Nonstatutory Stock Option.
(iii) ELIGIBILITY. To the extent then required by the Code, Incentive Stock Options may be granted only to Employees.
(iv) TERM OF OPTION. The term of each Option shall be the term stated in the written agreement evidencing such Option; provided, however, that, to the extent then required by the Code, in the case of an Incentive Stock Option, the term shall be no more than ten (10) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement and, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the written agreement evidencing such Option.
(v) EXERCISE PRICE. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board, but shall be subject to the following:
(A) To the extent then required by the Code, in the case of an Incentive Stock Option:
(1) granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant, and
(2) granted to any Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(B) In the case of a Nonstatutory Stock Option granted to any person, the per Share exercise price may not be less than the Fair Market Value per Share on the date of grant.
(vi) PAYMENT OF EXERCISE PRICE. Unless otherwise provided by the Administrator in the stock option document, the exercise price of an Option may be paid in one or more of the following: (1) cash, (2) check, (3) other Shares which (x) in the case of Shares acquired upon exercise of an Option either have been owned by the Optionee for more than six months on the date of surrender or were not acquired, directly or indirectly, from the Company, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (4) delivery of a properly executed exercise notice together with irrevocable instructions to a broker registered under the Exchange Act to promptly deliver to the Company the amount of proceeds required to pay the exercise price, and (5) any combination of the foregoing methods of payment.
(b) EXERCISE OF OPTIONS OR SARS.
(i) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option or SAR granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, including performance criteria with respect to the Company and/or the Participant, and as shall be permissible under the terms of this Plan.
An Option or SAR may not be exercised for a fraction of a Share.
An Option or SAR shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option
or SAR by the person entitled to exercise such Option or SAR and, if an Option is to be exercised, full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under Section 6(a)(vi) of this Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of this Plan.
Exercise of an Option or SAR in any manner shall result in a decrease in the number of Shares which thereafter may be available under the Option or SAR by the number of Shares as to which the Option or SAR is exercised.
(ii) TERMINATION OF EMPLOYMENT. In the event of termination of a Participant's Continuous Status as an Employee, status as a Non-Employee Director or consulting relationship with the Company (as the case may be), such Participant may, but only within ninety (90) days (or such other period of time as is determined by the Administrator, with such determination in the case of an Incentive Stock Option and to the extent then required by the Code, being made at the time of grant of the Option and not exceeding ninety (90) days) after the date of such termination (but in no event later than the expiration date of the term of such Option or SAR as set forth in the written document evidencing such Option or SAR), exercise such Option or SAR to the extent that such Participant was entitled to exercise it at the date of such termination. To the extent that such Participant was not entitled to exercise the Option or SAR at the date of such termination, or if such Participant does not exercise such Option or SAR to the extent so entitled within the time specified herein, the Option or SAR shall terminate.
(iii) DISABILITY OF OPTIONEE. Notwithstanding the provisions
of Section 6(b) above, in the event of termination of a Participant's
Continuous Status as an Employee, status as a Non-Employee Director or
consulting relationship with the Company (as the case may be) as a
result of total and permanent disability (as defined in Section
22(e)(3) of the Code), such Participant may, but only within twelve
(12) months (or such other period of time as is determined by the
Administrator, with such determination in the case of an Incentive
Stock Option and to the extent then required by the Code, being made at
the time of grant of the Options and not exceeding twelve (12) months)
from the date of such termination (but in no event later than the
expiration date of the term of such Option or SAR as set forth in the
written document evidencing such Option or SAR), exercise the Option or
SAR to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that such Participant was not entitled to
exercise the Option or SAR at the date of termination, or if such
Participant does not
exercise such Option or SAR to the extent so entitled within the time specified herein, the Option or SAR shall terminate.
(iv) DEATH OF OPTIONEE. In the event of the death of a Participant, the Option or SAR may be exercised at any time within twelve (12) months following the date of death (but in no event later than the expiration date of the term of such Option or SAR as set forth in the written document evidencing such Option or SAR) by the Participant's estate or by a person who acquired the right to exercise the Option or SAR by bequest or inheritance, but only to the extent the Participant was entitled to exercise the Option or SAR at the date of death or to the extent that the Administrator accelerates the vesting of such Award upon the Participant's death. To the extent that such Participant was not entitled to exercise the Option or SAR at the date of death, or if such Participant's estate or any person who acquired the right to exercise the Option or SAR by bequest or inheritance does not exercise such Option or SAR to the extent so entitled within the time specified herein, the Option or SAR shall terminate.
(v) BUYOUT PROVISIONS. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option or SAR previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Participant at the time that such offer is made.
(vi) PAYOUT PROVISIONS. At the discretion of the Company, the payment to a Participant upon exercise of a SAR, may be in cash, in Shares or Stock Units of equivalent value as determined by the Administrator, or in some combination thereof, subject to the availability of Shares under the Plan.
(c) NON-TRANSFERABILITY OF OPTIONS OR SARS. Unless otherwise provided by the Administrator, no Option or SAR may be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. The terms of the Option or SAR shall be binding upon the executors, administrators, heirs, successors and assigns of the Participant.
7. PERFORMANCE SHARE AWARDS, PERFORMANCE UNIT AWARDS, RESTRICTED STOCK AWARDS, RESTRICTED UNIT AWARDS AND STOCK UNIT AWARDS.
(a) AWARDS. Performance Share Awards, Performance Unit Awards, Restricted Stock Awards, Restricted Unit Awards, or Stock Unit Awards may be issued by the Administrator to Eligible Individuals, either alone, in addition to, or in tandem with other Awards granted under the Plan and/or cash awards made outside of this Plan. Such Awards shall be evidenced by a written document containing any provisions regarding (i) the number of Shares or Stock Units subject to such Award or a formula for determining such, (ii) the purchase price of the Shares or Stock Units, if any, and the means of payment for the Shares or Stock Units,
(iii) the performance criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares or Stock Units granted, issued, retainable and/or vested, (d) such terms and conditions on the grant, issuance, vesting and/or forfeiture of the Shares or Stock Units as may be determined from time to time by the Administrator, (e) restrictions on the transferability of the Shares and Stock Units and (f) such further terms and conditions in each case not inconsistent with this Plan as may be determined from time to time by the Administrator.
(b) VESTING. The grant, issuance, retention and/or vesting of Shares or Stock Units pursuant to any Performance Share Awards, Performance Unit Awards, Restricted Stock Awards, Restricted Unit Awards, or Stock Unit Awards of Incentive Stock shall occur at such time and in such installments as determined by the Administrator or under criteria established by the Administrator. The Administrator shall have the right to make the timing of the grant and/or the issuance, ability to retain and/or vesting of Shares or Stock Units subject to continued employment, passage of time and/or such performance criteria as deemed appropriate by the Administrator. Notwithstanding anything to the contrary herein, the performance criteria for any Award that is intended to satisfy the requirements for "performance-based compensation" under Code Section 162(m) shall be a measure based on one or more Qualifying Performance Criteria selected by the Administrator and specified at the time the Award is granted.
(c) DISCRETIONARY ADJUSTMENTS. Notwithstanding satisfaction of any performance goals, the number of Shares or Stock Units granted, issued, retainable and/or vested under a Performance Share Award, Performance Unit Award, Restricted Stock Award, Restricted Unit Award, or Stock Unit Award on account of either financial performance or personal performance evaluations may be reduced by the Administrator on the basis of such further considerations as the Administrator shall determine.
8. INCENTIVE BONUS AWARDS. Each Incentive Bonus Award will confer upon the Employee the opportunity to earn a future payment tied to the level of achievement with respect to one or more performance criteria established for a performance period established by the Committee.
(a) INCENTIVE BONUS DOCUMENT. Each Incentive Bonus Award shall be evidenced by a document containing provisions regarding (a) the target and maximum amount payable to the Employee, (b) the performance criteria and level of achievement versus these criteria that shall determine the amount of such payment, (c) the term of the performance period as to which performance shall be measured for determining the amount of any payment, (d) the timing of any payment earned by virtue of performance, (e) restrictions on the alienation or transfer of the bonus prior to actual payment, (f) forfeiture provisions and (g) such further terms and conditions, in each case not inconsistent with this Plan as may be determined from time to time by the Administrator. The maximum amount payable as an bonus may be a multiple of the target amount payable, but the maximum amount payable pursuant to that portion of an Incentive Bonus Award granted under this Plan for any fiscal year to any Employee that is intended to
satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code shall not exceed $5,000,000.
(b) PERFORMANCE CRITERIA. The Administrator shall establish the
performance criteria and level of achievement versus these criteria that shall
determine the target and maximum amount payable under an Incentive Bonus Award,
which criteria may be based on financial performance and/or personal performance
evaluations. The Administrator may specify the percentage of the target
incentive bonus that is intended to satisfy the requirements for
"performance-based compensation" under Section 162(m) of the Code.
Notwithstanding anything to the contrary herein, the performance criteria for
any portion of an Incentive Bonus Award that is intended by the Administrator to
satisfy the requirements for "performance-based compensation" under Section
162(m) of the Code shall be a measure based on one or more Qualifying
Performance Criteria selected by the Administrator and specified at the time the
Incentive Bonus Award is granted. The Administrator shall certify the extent to
which any Qualifying Performance Criteria has been satisfied, and the amount
payable as a result thereof, prior to payment of any incentive bonus that is
intended to satisfy the requirements for "performance- based compensation" under
Section 162(m) of the Code.
(c) TIMING AND FORM OF PAYMENT. The Administrator shall determine the timing of payment of any incentive bonus. The Administrator may provide for or, subject to such terms and conditions as the Administrator may specify, may permit an election for the payment of any incentive bonus to be deferred to a specified date or event. An incentive bonus may be payable in Shares, Stock Units or in cash or other property, including any Award permitted under this Plan. Any incentive bonus that is paid in cash or other property shall not affect the number of Shares otherwise available for issuance under this Plan.
(d) DISCRETIONARY ADJUSTMENTS. Notwithstanding satisfaction of any performance goals, the amount paid under an Incentive Bonus Award on account of either financial performance or personal performance evaluations may be reduced by the Administrator on the basis of such further considerations as the Administrator shall determine.
9. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the discretion of the Administrator, Participants may satisfy withholding obligations as provided in this paragraph. When a Participant incurs tax liability in connection with an Award, which tax liability is subject to tax withholding under applicable tax laws, and the Participant is obligated to pay the Company an amount required to be withheld under applicable tax laws, the Participant may satisfy the withholding tax obligation by electing to have the Company withhold from the Shares to be issued, if any, that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined (the "Tax Date").
In the event that the Company elects to make a payment to the Participant in cash upon the exercise of a SAR, the Participant may satisfy the withholding tax obligation by electing
to have the Company withhold from such payment the amount required to satisfy such withholding tax obligation.
All elections by a Participant to have Shares or cash withheld for this purpose, as the case may be, shall be made in writing in a form acceptable to the Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular Shares of the Option, stock purchase right or SAR, as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of the Administrator.
In the event the election to have Shares or cash withheld is made by a Participant and the Tax Date is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code, the Participant shall receive the full number of Shares or full amount of cash, as the case may be, with respect to which the Award is exercised but such Participant shall be unconditionally obligated to tender back to the Company the proper number of Shares, or the proper amount of cash, as the case may be, on the Tax Date.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any required action by the stockholders of the Company, the number of Shares or Stock Units covered by each outstanding Award and the number of Shares which have not yet been issued under this Plan, as well as the purchase price, if any, of each such outstanding Award, shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification or similar transaction involving the Common Stock, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or SAR.
In the event of the proposed dissolution or liquidation of the Company, the Board shall notify the Participant at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, any Option or SAR will terminate immediately prior to the consummation of such proposed action and any restrictions on Awards shall expire immediately and that such Awards shall fully vest prior to the consummation of such proposed action. In the event of a merger or consolidation of the Company with or into another corporation or the sale of
all or substantially all of the Company's assets (hereinafter, a "merger"), the Board may authorize outstanding Options or SARs to be assumed or an equivalent option or stock appreciation right to be substituted by such successor corporation or a parent or subsidiary of such successor corporation and may assign any Awards to the successor corporation. In the event that such successor corporation does not agree to assume the Option or SAR, or to substitute an equivalent option or stock appreciation right, the Board shall, in lieu of such assumption or substitution, provide for the Participant to have the right to exercise all Options or SARs previously granted to such Participant, including Options or SARs which would not otherwise be exercisable. If the Board makes an Option or SAR fully exercisable in lieu of assumption or substitution in the event of a merger, the Board shall notify the Participant that the Option or SAR shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option or SAR will terminate upon the expiration of such period. For the purposes of this paragraph, the Option or SAR shall be considered assumed if, following the merger, the Option or SAR, confers the right to purchase, or receive the appreciation in Fair Market Value, as the case may be, for each Share of stock subject to the Option or SAR immediately prior to the merger, the consideration (whether stock, cash, or other securities or property) received in the merger by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger was not solely common stock of the successor corporation or its Parent, the Board may, with the consent of the successor corporation and the participant, provide for the consideration to be received upon the exercise of the Option or SAR, for each Share of stock subject to the Option or SAR, to be solely common stock of the successor corporation or its Parent equal in Fair Market Value to the per share consideration received by holders of Common Stock in the merger or sale of assets.
11. AMENDMENT AND TERMINATION OF THIS PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter, suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made which would impair the rights of any Participant under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act or with Section 422 of the Code (or any other applicable law or regulation, including the requirements of Nasdaq or an established stock exchange), the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or termination of this Plan shall not affect Awards already granted and such Awards shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Participant and the Board, which agreement must be in writing and signed by the Participant and the Company.
12. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to the Plan unless the issuance and delivery of such Shares shall comply with all relevant provisions of law including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of Nasdaq or of any stock exchange upon which the Shares may then be listed.
13. RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of this Plan.
The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
14. INFORMATION TO PARTICIPANTS. The Company shall provide to each Participant, during the period for which such Participant has one or more Awards outstanding, copies of all annual reports and other information which are provided to all stockholders of the Company.
15. NO RIGHT TO EMPLOYMENT. The Plan shall not confer upon any Participant any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with his right or the Company's right to terminate his employment or consulting relationship at any time, with or without cause.
16. GOVERNING LAW. The validity, constrictions and effect of this Plan, agreements entered into pursuant to the Plan, and of any rules, regulations, determinations or decisions made by the Administrator relating to the Plan or such agreements, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with applicable federal laws and the laws of the state of Delaware, without regard to its conflict of laws principles.
Exhibit 10.6
$6,195,615 May 18, 2001
FOR VALUE RECEIVED, EDWARD W. STACK, a resident of the Commonwealth of Pennsylvania ("Maker"), hereby promises to pay to the order of DICK'S SPORTING GOODS, INC., a Delaware corporation ("Holder"), or its registered assigns, the principal sum of Six Million One Hundred Ninety Five Thousand Six Hundred Fifteen Dollars ($6,195,615), in lawful money of the United States of America, together with interest on the unpaid principal balance outstanding and unpaid from time to time at the rate set forth below, from the date hereof until said unpaid principal balance shall become due and payable (whether at maturity or by declaration of acceleration or otherwise).
1. PRINCIPAL. Maker shall pay the entire principal amount of this Note to Holder or its registered assigns on or before May 18, 2011 (the "Maturity Date"), unless the maturity date is accelerated as set forth herein or unless sooner paid in full.
2. INTEREST. Simple interest shall accrue and be payable on the outstanding principal amount of this Note at the rate of Five and One Half Percent (5.5%) per annum from the date of this Note until the principal amount is paid in full. Interest on this Note shall be computed on the basis of a Three Hundred and Sixty (360) day year. All accrued interest shall be due and payable annually on May 18 of each year that any portion of the principal amount of this Note is outstanding, beginning May 18, 2002, and on the date on which all principal is due and payable, whether on the Maturity Date, the Accelerated Maturity Date (as defined herein), or upon any prepayment.
3. METHOD OF PAYMENT. Maker shall pay the principal of and accrued interest on this Note in money of the United States. All payments received hereon shall be applied first to interest and then to principal.
4. PREPAYMENT. This Note may be prepaid in whole at any time or in part from time to time prior to the Maturity Date, without premium or penalty, upon payment of the principal amount being prepaid together with interest accrued thereon to the date of prepayment.
5. ACCELERATION OF PAYMENT. In the event that Maker ceases, for any reason, to be an employee of Dick's Sporting Goods, Inc. or any subsidiary of or successor to Dick's Sporting Goods, Inc., the Maturity Date of this Note shall be accelerated to the last date on which Maker is employed by Dick's Sporting Goods, Inc., a subsidiary
thereof, or successor thereto (the "Accelerated Maturity Date"), and all outstanding principal and accrued interest shall be due and payable on the Accelerated Maturity Date.
6. NEGATIVE PLEDGE OF COMMON STOCK. The loan by Holder to Maker that is represented by this Note is made in connection with the exercise by Maker of employee stock options to purchase One Million Two Hundred Thirty Nine Thousand One Hundred Twenty Three (1,239,123) shares of Common Stock of Dick's Sporting Goods, Inc. (the "Common Stock"), and the proceeds of such loan are being used by Maker solely to pay the exercise price for the Common Stock. Maker covenants and agrees with Holder that so long as any principal, interest, or other amounts are due by Maker to Holder under this Note, Maker shall not, directly or indirectly, (a) sell, assign, transfer, or otherwise dispose of, in one transaction or any series of transactions, all or any portion of the Common Stock; or (b) create, incur, assume, or permit to exist any lien, security interest, or encumbrance of any nature whatsoever on the Common Stock. Maker further covenants and agrees that he shall cause Dick's Sporting Goods, Inc. to place a legend on the certificate representing the Common Stock that identifies the foregoing negative pledge, and that he shall not cause or allow such legend to be removed from such certificate until this Note is paid in full. Notwithstanding the foregoing or any other provision hereof this Note is made with full recourse to any and all monies, funds, properties and other tangible and intangible assets of Maker, in any form and wherever located.
7. EVENTS OF DEFAULT AND REMEDIES. (a) Each of the following shall constitute an event of default ("Event of Default") under this Note: (i) the failure of Maker to repay the outstanding principal and/or accrued interest on the Maturity Date or on the Accelerated Maturity Date; (ii) the failure of Maker to perform, observe, or comply with any other provision of this Note, including but not limited to Section 6 hereof; (iii) the commencement by Maker of a voluntary case under the federal Bankruptcy Code, as amended, or any similar federal or state law now or hereafter in effect; (iv) the commencement of an involuntary case under the federal Bankruptcy Code, or any similar federal or state law now or hereafter in effect, against Maker that is not dismissed within thirty (30) days of its commencement; (v) the initiation by or against Maker of any other proceedings for reorganization, arrangement, or readjustment of any of his debts under any other federal or state law for the relief of debtors, now or hereafter in effect; (vi) the admission by Maker of his inability to pay his debts as they mature or the making by Maker of any assignment for the benefit of his creditors; (vii) the appointment of a receiver, custodian, or trustee for Maker or for any substantial part of his assets; or (viii) the issuance of any attachment or garnishment against the Common Stock.
(b) Upon the occurrence of any Event of Default, (i) the principal of and interest on this Note shall, by declaration of acceleration at the option of Holder and without notice to Maker, become immediately due and payable; (ii) interest on the outstanding principal amount shall accrue at the default rate of Twelve Percent (12%) per annum until all principal and interest are paid in full; and (iii) Holder shall be entitled to exercise any and all remedies available at law or in equity.
(c) Should this Note be placed in the hands of attorneys for collection by reason of an Event of Default, Maker shall pay all expenses, including reasonable attorneys' fees and legal expenses, incurred by Holder in endeavoring to collect any amounts payable hereunder.
6. PLACE OF PAYMENT. Payments hereon are to be made at 200 Industry Drive, RIDC Park West, Pittsburgh, Pennsylvania 15275, or at such other place as Holder may designate in writing from time to time.
7. WAIVERS. Maker hereby waives, to the fullest extent permitted by law, presentment, demand, notice of dishonor and protest of this debt and each and every other notice of any kind respecting this Note.
8. GOVERNING LAW. This Note is made under and governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, Maker has executed this Note as of the 18th day of May, 2001.
WITNESS:
Exhibit 10.7
DICK'S ACQUISITION CORP.
12% Subordinated Debenture
May 1, 1986
DICK'S ACQUISITION CORP., a New York corporation (hereinafter called the "Corporation") for value received hereby promises to pay to the order of Richard J. Stack, at the office or agency of the corporation referred to below, the principal sum of One Million Two Hundred Fifty One Thousand Dollars ($1,251,000.00), together with interest from the date of this Debenture at the rate of twelve percent (12%) per annum in monthly installments of $13,774.59 commencing June 1, 1986 until May 1, 2006, when the entire unpaid principal amount shall be due and payable, together with accrued interest thereon.
Both principal and interest shall be payable in lawful money of the United States of America to the holder hereof at the office or agency of the Corporation referred to in Section 5. Any overdue installment hereof and the entire unpaid principal amount after maturity (whether by acceleration or otherwise) shall bear interest at the rate of 18% per annum until paid in full.
1. This Debenture is issued to the holder in connection with that certain Agreement of Merger between the Corporation and Dick's Clothing & Sporting Goods of Binghamton, Inc. dated May 1, 1986.
2. This Debenture shall be registered in the name of Richard J. Stack at the office or agency of the Corporation and such registration shall be noted hereon by an officer or a duly authorized agent of the Corporation. After such registration and notation, no transfer hereof shall be valid unless made at the office or agency of the Corporation by the registered owner in person, or by his duly authorized attorney, and similarly noted hereon. The Corporation may deem and treat the registered owner hereof as the absolute owner hereof for all purposes, whether or not this Debenture shall be overdue or in default, and the Corporation shall be affected by any notice to the contrary.
3. The Corporation may, at its option, at any time and from time to time prior to maturity, prepay this Debenture either in whole or in part, at the principal amount so to be prepaid, without premium, plus accrued interest thereon to the date fixed for prepayment. For the purposes hereof, any purchase by the Corporation of this Debenture from the owner thereof shall be deemed a prepayment of such Debenture.
4. The Corporation covenants and agrees that on and after the date hereof, and so long as any Debenture shall be outstanding:
(a) The Corporation will punctually pay or cause to be paid the principal and interest to become due in respect of all the Debentures according to the terms hereof; and
(b) The Corporation will maintain an office or agency, presently located at 347 Court Street, Binghamton, New York 13905-, where notices, presentations and demands to or upon the Corporation in
respect of the Debenture may be given or made, or at such other place by the Corporation from time to time to the owner of the Debenture.
(c) The Corporation will comply with covenants, restrictions and agreements contained in a certain Guarantee of this Debenture dated as of the date hereof and made by Stock Holding Company, Inc. and Dick's Clothing and Sporting Goods of Syracuse, Inc.
5. The Corporation, for itself and for its successors and assigns, covenants and agrees and the owner of this Debenture by his acceptance hereof likewise covenants and agrees that the payment of, or in respect of, the principal of and interest on each and all of the Debentures and any prepayments provided in Section 3 of this Debenture are hereby expressly subordinated to the extent and in the manner hereinafter set forth, in right of payment, to the prior payment in full of all other indebtedness of the Corporation of any kind, secured or unsecured, contingent or otherwise, to any and all banks, trust companies, savings and loan associates, insurance companies and other financial or lending institutions, which may at any time and from time to time be outstanding (such other indebtedness, including interest thereon, being herein collectively referred to as "Senior Indebtedness").
(a) The indebtedness of the Corporation represented by this Debenture shall not be payable, discharged or satisfied, and no payment or other consideration on account thereof, whether by way of loan or otherwise nor any security therefor, shall be made or given by the Corporation or received, accepted or retained by the holders of the Debentures, or any of them, unless and until the Corporation has
paid and satisfied in full the Senior Indebtedness. Anything herein contained to
the contrary notwithstanding, until a default on any Senior Indebtedness has
occurred and is continuing in accordance with the terms of such Senior
Indebtedness, the Corporation may pay scheduled principal installments of and
interest on the Debentures, including prepayments or principal on the
debentures, and the holders of the Debentures may receive, accept and retain,
such payments on the Debentures as and when due and payable as herein stated
without, however, giving any effect to any acceleration of such payments by
reason of any event of default hereunder. Upon the occurrence of an event of
default under such Senior Indebtedness, the Corporation shall notify the holder
of the Debenture by mail in accordance with the notice provisions contained in
Section 4(a) hereof. Immediately upon the occurrence of a default on any
Senior Indebtedness, the foregoing rights of the Corporation to pay and of the
holder hereof to receive, accept and retain such payments shall automatically
terminate until such default has been cured or waived by the holders of Senior
Indebtedness.
(b) Upon any receivership, insolvency, bankruptcy, assignment for the benefit of creditors, arrangement, composition or reorganization whether or not pursuant to bankruptcy laws, sale of all or substantially all of the assets, dissolution, liquidation or any other marshalling of the assets and liabilities of the Corporation (whether or not involving insolvency or bankruptcy), or upon the institution and during the pendency of any proceeding or the taking of any steps for the general application of the Corporation's assets to the payment of the Corporation's liabilities, voluntary or involuntary, or
upon the institution and during the pendency of any proceeding by or against the Corporation for any relief under any bankruptcy or insolvency law or laws relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangement, composition or extension, or any marshalling of the assets and liabilities of the Corporation:
(i) No amount shall be paid by the Corporation, its successors and assigns, in respect of the principal of, or interest of such Debentures, unless and until all the Senior Indebtedness of the Corporation which at the time shall be outstanding shall have been paid in full together with all interest thereon and all other amounts payable in respect of the Senior Indebtedness; and
(ii) Any payment or distribution of assets of the Corporation of
any kind or character, whether in cash, property or securities to which the
owners of the Debentures would be entitled except of the provisions of this
Section 6 shall be paid by the liquidating trustee or agent or other person
making such payment or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or otherwise, directly to the holders of the
Senior Indebtedness held or represented by each, to the extent necessary to
pay in full all the Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness; and in the event any payment or distribution of assets of the
Corporation of any kind or character, whether in cash, property or securities
shall be received (directly or indirectly, whether by way of loan, set-off or
otherwise) by the owner of this Debenture before all the Senior Indebtedness
shall have been paid in
full, such payment or distribution shall be forthwith turned over and paid to the holders of such Senior Indebtedness, ratably as aforesaid, for application to the payment of the Senior Indebtedness, remaining, unpaid until all the Senior Indebtedness shall have been paid in full, after giving effect to any concurrent payment or distribution to the holders of the Senior Indebtedness, the owners of the distribution to the holders of the Senior Indebtedness, the owners of the Debentures shall be subrogated to the rights of the holders of the Senior Indebtedness to receive payments or distributions of assets of the Corporation made on the Senior Indebtedness until the Debentures shall be paid in full.
(c) The foregoing subordination provisions of this Section 5 are solely for the purposes of defining the relative rights of the holders of the Debentures and the holders of Senior Indebtedness and nothing herein shall impair as between the Corporation and the holder of this Debenture, the obligation of the corporation, which is unconditional and absolute as herein set forth, to pay the holder of this Debenture the principal of and interest on this Debenture as and when the same shall become due and payable in accordance with its terms, subject to such subordination provisions.
6. Subject to the provisions of Section 6 hereof, this Debenture together with accrued and unpaid interest shall become and be due and payable upon demand made by the owner hereof if one or more of the following events (herein called "events of default"), shall happen and be continuing at the time of such demand, that is to say:
(a) Default in the payment of any installment of this Debenture when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, and the continuance of such default for a period of fifteen (15) days after written notices thereof; or
(b) Default in the due observance or performance of any other covenant, condition or agreement on the part of the Corporation to be observed or performed pursuant to the terms hereof, and the continuance of such default for 30 days thereafter;
(c) Any default (unless duly waived in writing by the obligee) shall occur with respect to any evidence of indebtedness (other than the Debenture) of the Corporation or under any agreement under which any evidence of indebtedness may be issued by the Corporation and such default results in the acceleration of such indebtedness by the holder thereof; or
(d) The Corporation shall make an assignment for the benefit of creditors or a composition with creditors, shall be unable, or admit in writing its inability, to pay its debts as they mature, shall generally not pay its debts when they are due, shall file a petition in bankruptcy, shall become insolvent (howsoever such insolvency may be evidenced), shall suffer an order for relief to be entered against it under any bankruptcy law, shall petition or apply to any tribunal for the appointment of any receiver, custodian, liquidator or trustee of or for it or any substantial part of it property or other assets or shall commence any proceeding relating to it under any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
receivership, dissolution or liquidation law or statutes of any jurisdiction,
whether now or hereafter in effect; or there shall be commenced against the
Corporation any such proceeding which shall remain undismissed for a period of
sixty (60) days or more, or the Corporation shall by any act or failure to act
indicate its consent to, approval of or acquiescence in, any such proceeding or
in the appointment of any receiver, custodian, liquidator or trustee of or for
it or any substantial part of its property or other assets, or shall suffer any
such appointment to continue undischarged or unstayed for a period of sixty
(60) days or more; or the Corporation shall take any action for the purpose of
effecting any of the foregoing.
7. In case any one or more of the events of default specified in
Section 6 of this Debenture, shall occur and be continuing, the owner of the
Debenture subject to the provisions of Section 5 hereof, may proceed to
protect and enforce its rights by suit in equity, action at law and/or by other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in this Debenture or in aid or the exercise of any power
granted in this Debenture, or may proceed to enforce the payment of this
Debenture or to enforce any other legal or equitable right of the owner of this
Debenture.
8. This Debenture shall be construed in accordance with the internal laws of the State of New York applicable to contracts between residents of that State, entered into and to be performed entirely within that State. All the covenants, stipulations, promises
and agreements in the Debentures by or on behalf of the Corporation shall bind its successors and assigns, whether so expressed or not.
9. The Corporation agrees that as long as any Debenture is outstanding, it will furnish to the holder.
(a) annually, within three months after the close of the Corporation's fiscal year, a copy of a consolidated balance sheet of the Corporation as at the close of the previous fiscal year, reviewed by the Corporation's independent, certified public accountants; and
(b) quarterly, within 60 days after the close of each quarter annual period, a copy of the Corporations' unaudited consolidated balance sheet as currently prepared by the Corporation for its officers and directors.
IN WITNESS WHEREOF, Dick's Acquisition Corp. has caused this Debenture to be signed in its corporate name by one of its officers thereunto duly authorized and to be dated as of the 1st day of May, 1986.
DICK'S ACQUISITION CORP.
By: /s/ Edward W. Stack
-------------------------------------
President
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Date of Name and Address of Signature of registration Registered Owner Registrar ------------ ------------------- ------------ May 1, 1986 Richard J. Stack /s/ Asst Secy |
Exhibit 10.8
California Chapters of the
Society of Industrial and Office Realtors, Inc.
INDUSTRIAL REAL ESTATE LEASE
(SINGLE-TENANT FACILITY)
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the Lease referred to in this Article One explain and define the Basic Terms and are to be read in conjunction with the Basic Terms.
Section 1.01. DATE OF LEASE: February 4, 1999
Section 1.02. LANDLORD (INCLUDE LEGAL ENTITY): Panattoni Development Company, or Assignee
Address of Landlord: 8401 Jackson Road
Sacramento, CA 95826
Section 1.03. TENANT (INCLUDE LEGAL ENTITY): Dick's Clothing & Sporting Goods, Inc.
Address of Tenant: 400 Fairway Drive
Coraopolis, PA 15108
|
Section 1.04. PROPERTY: (include street address, approximate square footage and description) an approximately 388,190 square foot facility on approximately fifty acres in the I-70 Industrial Park in Westmoreland County, Pennsylvania.
Section 1.05. LEASE TERM: 20 years 0 months BEGINNING ON approximately December 1.1999 or such other date as is specified in this Lease, and ending on approximately November 30, 2019
Section 1.06. PERMITTED USES: (See Article Five) storage, distribution, and other such uses as permitted by code and applicable local regulations
Section 1.07. TENANT'S GUARANTOR: (If none, so state) None
Section 1.08. BROKERS: (See Article Fourteen) (If none, so state)
Landlord's Broker: Eagan Real Estate
Tenant's Broker: Eagan Real Estate
Section 1.09. COMMISSION PAYABLE TO LANDLORD'S BROKER: (See Article Fourteen) $______ per separate agreement
Section 1.10. INITIAL SECURITY DEPOSIT: (See Section 3.03) $235,000
Section 1.11. VEHICLE PARKING SPACES ALLOCATED TO TENANT: per site plan
Section 1.12. RENT AND OTHER CHARGES PAYABLE BY TENANT:
(a) BASE RENT: __________________, or (ii) See Addendum to Lease, Paragraph 1.
(If (ii) is completed, then (i) and Section 3.02 are inapplicable.)
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02); (ii) Utilities (See Section 4.03); (iii) Insurance Premiums (See Section 4.04); (iv) Impounds for Insurance Premiums and Property Taxes (See Section 4.07);(v) Maintenance, Repairs and Alterations (See Article Six).
Section 1.13. LANDLORD'S SHARE OF PROFIT ON ASSIGNMENT OR SUBLEASE: (See Section 9.05) fifty percent (50%) of the Profit (the "Landlord's Share").
Section 1.14. RIDERS: The following Riders are attached to and made a part of
this Lease: (If none, so state)
Addendum to Lease
Exhibit A - Site Plan
Hazardous Materials Rider
Exhibit B - Construction Specifications (to be attached)
Note: The language in this Lease is based on the SIOR Format and has been modified throughout per mutual agreement of Landlord and Tenant.
1988 California Chapters of the Initials JQ Society of Industrial and (SINGLE TENANT NET FORMS) Initials JC CP Office Realtors(R), Inc. |
ARTICLE TWO: LEASE TERM
Section 2.01. LEASE OF PROPERTY FOR LEASE TERM. Landlord leases the Property to Tenant and Tenant leases the Property from Landlord for the Lease Term. The Lease Term is for the period stated in Section 1.05 above and shall begin and end on the dates specified in Section 1.05 above, unless the beginning or end of the Lease Term is changed under any provision of this Lease. The "Commencement Date" shall be the date specified in Section 1.05 above for the beginning of the Lease Term, unless advanced or delayed under any provision of this Lease.
Section 2.02. DELAY IN COMMENCEMENT. Landlord shall not be liable to Tenant if Landlord does not deliver possession of the Property to Tenant on the Commencement Date. Landlord's non-delivery of the Property to Tenant on that date shall not affect this Lease or the obligations of Tenant under this Lease except that the Commencement Date shall be delayed until Landlord delivers possession of the Property to Tenant and the Lease Term shall be extended for a period equal to the delay in delivery of possession of the Property to Tenant, plus the number of days necessary to end the Lease Term on the last day of a month. If delivery of possession of the Property to Tenant is delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to this Lease setting forth the actual Commencement Date and expiration date of the Lease. Failure to execute such amendment shall not affect the actual Commencement Date and expiration date of the Lease.
Section 2.03. EARLY OCCUPANCY. If Tenant occupies the Property prior to the Commencement Date, Tenant's occupancy of the Property shall be subject to all of the provisions of this Lease. Early occupancy of the Property shall not advance the expiration date of this Lease. Tenant shall pay Base Rent and all other charges specified in this Lease for the early occupancy period.
Section 2.04. HOLDING OVER. Tenant shall vacate the Property upon the expiration or earlier termination of this Lease. Tenant shall reimburse Landlord for and indemnify Landlord against all damages which Landlord incurs from Tenant's delay in vacating the Property. If Tenant does not vacate the Property upon the expiration or earlier termination of the Lease and Landlord thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall be a "month-to-month" tenancy, subject to all of the terms of this Lease applicable to a month-to-month tenancy, except that the Base Rent then in effect shall be increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. TIME AND MANNER OF PAYMENT. Upon execution of this Lease, Tenant shall pay Landlord the Base Remit in the amount stated in Paragraph 1.12(a) above for the first month of the Lease Term, on the first day of the second month of the Lease Term and each month thereafter, Tenant shall pay Landlord the Base Rent, in advance, without offset, deduction or prior demand. The Base Rent shall be payable at Landlord's address or at such other place as Landlord may designate in writing. So long as there is no interference with the construction activities of the facility, the Tenant may commence the installation of trade fixtures thirty (30) days prior to the occupancy (target date of December 1, 1999). This provision is merely an accommodation to the tenant to allow early occupancy and shall not be considered "free rent."
Section 3.02. COST OF LIVING INCREASES.
Section 3.03. SECURITY DEPOSIT; INCREASES.
(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a cash Security Deposit in the amount set forth in Section 1.10 above. Landlord may apply all or part of the Security Deposit to any unpaid rent or other charges due from Tenant or to cure any other defaults of Tenant. If Landlord uses any part of the Security Deposit,
1988 California Chapters of the Initials JQ Society of Industrial and (Single Tenant Net Forms) Initials JC CP Office Realtors(R), Inc. |
Tenant shall restore the Security Deposit to its full amount within ten (10) days after Landlord's written request. Tenant's failure to do so shall be a material default under this Lease. No interest shall be paid on the Security Deposit. Landlord shall not be required to keep the Security Deposit separate from its other accounts and no trust relationship is created with respect to the Security Deposit.
Section 3.04. TERMINATION; ADVANCE PAYMENTS. Unless earlier terminated as set forth in the Addendum to the Lease, upon termination of this Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any other termination not resulting from Tenant's default, and after Tenant has vacated the Property in the manner required by this Lease, Landlord shall refund or credit to Tenant (or Tenant's successor) the unused portion of the Security Deposit, any advance rent or other advance payments made by Tenant to Landlord, and any amounts paid for real property taxes and other reserves which apply to any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. ADDITIONAL RENT. All charges payable by Tenant other than Base Rent are called "Additional Rent." Unless this Lease provides otherwise, Tenant shall pay all Additional Rent then due with the next monthly installment of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02. PROPERTY TAXES.
(a) REAL PROPERTY TAXES. Tenant shall pay all real property taxes on
the Property (including any fees, taxes or assessments against, or as a result
of, any tenant improvements installed on the Property by or for the benefit of
Tenant) during the Lease Term. Subject to Paragraph 4.02(c) and Section 4.07
below, such payment shall be made at least ten (10) days prior to the
delinquency date of the taxes. Within such ten (10) -day period, Tenant shall
furnish Landlord with satisfactory evidence that the real property taxes have
been paid, Landlord shall reimburse Tenant for any real property taxes paid by
Tenant covering any period of the prior to or after the Lease Term. If Tenant
fails to pay the real property taxes when due, Landlord may pay the taxes and
Tenant shall reimburse Landlord for the amount of such tax payment as Additional
Rent.
(b) DEFINITION OF "REAL PROPERTY TAX." "Real property tax" means: (i)
any fee, license fee, license tax, business license fee, levy, charge,
assessment, penalty or tax imposed by any taxing authority against the Property;
(ii) (iii) any tax or charge for fire protection, streets, sidewalks, road
maintenance, refuse or other services provided to the Property by any
governmental agency; (iv) any tax (except Tenant shall not be responsible for
associated transfer taxes) imposed upon this transaction or based upon a
re-assessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; and (v) any charge or fee replacing any tax previously included within
the definition of real property tax, "Real property tax" does not, however,
include Landlord's federal or state income, franchise, inheritance or estate
taxes.
(c) JOINT ASSESSMENT.
(d) PERSONAL PROPERTY TAXES.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the Property.
(ii) If any of Tenant's personal property is taxed with the
Property, Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord for
such personal property taxes.
(e) TENANT'S RIGHT TO CONTEST TAXES. Tenant may attempt to have the assessed valuation of the Property reduced or may initiate proceedings to contest the real property taxes. If required by law, Landlord shall join in the proceedings brought by Tenant. However, Tenant shall pay all costs of the proceedings, including any costs or fees incurred by Landlord. Upon the final determination of any proceeding or contest, Tenant shall immediately pay the real property taxes due, together with all costs, charges, interest and penalties incidental to the proceedings. If Tenant does not pay the real property taxes when due and contests such taxes. Tenant shall not be in default under this Lease for nonpayment of such taxes if Tenant deposits funds with Landlord or opens an interest-bearing account reasonably acceptable to Landlord in the joint names of Landlord and Tenant. The amount of such deposit shall be sufficient to pay the real property taxes plus a reasonable estimate of the interest, costs, charges and penalties which may accrue if Tenant's action is unsuccessful, less any applicable tax impounds previously paid by Tenant to Landlord. The deposit shall be applied to the real property taxes due, as determined at such proceedings. The real property taxes shall be paid under protest from such deposit if such payment under protest is necessary to prevent the Property from being sold under a "tax sale" or similar enforcement proceeding.
Section 4.03. UTILITIES. Tenant shall pay, directly to the appropriate supplier, the cost of all natural gas, heat, light, power, sewer service, telephone, water, refuse disposal and other utilities and services supplied to the Property
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However, if any services or utilities are jointly metered with other property, Landlord shall make a reasonable determination of Tenant's proportionate share of the cost of such utilities and services and Tenant shall pay such share to Landlord within fifteen (15) days after receipt of Landlord's written statement.
Section 4.04. INSURANCE POLICIES.
(a) LIABILITY INSURANCE. During the Lease Term, Tenant shall maintain a
policy of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property. Tenant
shall name Landlord as an additional insured under such policy. The initial
amount of such insurance shall be One Million Dollars ($1,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii)
contain cross-liability endorsements; and (iii) insure Landlord against Tenant's
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and coverage
of such insurance shall not limit Tenant's liability nor relieve Tenant of any
other obligation under this Lease. Landlord may also obtain comprehensive public
liability insurance in an amount and with coverage determined by Landlord
insuring Landlord against liability arising out of ownership, operation, use or
occupancy of the Property. The policy obtained by Landlord shall not be
contributory and shall not provide primary insurance.
(b) PROPERTY AND RENTAL INCOME INSURANCE. During the Lease Term, Landlord shall maintain policies of insurance covering loss of or damage to the Property in the full amount of its replacement value. Such policy shall contain an Inflation Guard Endorsement and shall provide protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, special extended perils (all risk), sprinkler leakage and any other perils which Landlord deems reasonably necessary. Landlord shall have the right to obtain flood and earthquake insurance if required by any lender holding a security interest in the Property. Landlord shall not obtain insurance for Tenant's fixtures or equipment or building improvements installed by Tenant on the Property. During the Lease Term, Landlord shall also maintain a rental income insurance policy, with loss payable to Landlord, in an amount equal to one year's Base Rent, plus estimated real property taxes and insurance premiums. The Tenant agrees to reimburse Landlord for rental income insurance to a maximum of One Thousand Dollars ($1,000) per annum. Tenant shall be liable for the payment of any deductible amount under Landlord's or Tenant's insurance policies maintained pursuant to this Section 4.04, in an amount not to exceed Ten Thousand Dollars ($10,000). Tenant shall not do or permit anything to be done which invalidates any such insurance policies.
(c) PAYMENT OF PREMIUMS. Subject to Section 4.07, Tenant shall pay all
premiums for the insurance policies described in Paragraphs 4.04(a) and (b)
(whether obtained by Landlord or Tenant) within fifteen (15) days after Tenant's
receipt of a copy of the premium statement or other evidence of the amount due,
except Landlord shall pay all premiums for non-primary comprehensive public
liability insurance which Landlord elects to obtain as provided in Paragraph
4.04(a). The Tenant agrees to reimburse Landlord for rental income insurance to
a maximum of One Thousand Dollars ($1,000) per annum. If insurance policies
maintained by Landlord cover improvements on real property other than the
Property, Landlord shall deliver to Tenant a statement of the premium applicable
to the Property showing in reasonable detail how Tenant's share of the premium
was computed. If the Lease Term expires before the expiration of an insurance
policy maintained by Landlord, Tenant shall be liable for Tenant's prorated
share of the insurance premiums. Before the Commencement Date, Tenant shall
deliver to Landlord a copy of any policy of insurance which Tenant is required
to maintain under this Section 4.04. At least thirty (30) days prior to the
expiration of any such policy, Tenant shall deliver to Landlord a renewal of
such policy. As an alternative to providing a policy of insurance, Tenant shall
have the right to provide Landlord a certificate of insurance, executed by an
authorized owner of the insurance company, showing that the insurance which
Tenant is required to maintain under this Section 4.04 is in full force and
effect and containing such other information which Landlord reasonably requires.
(d) GENERAL INSURANCE PROVISIONS.
(i) Any insurance which the either party is required to maintain
under this Lease shall include a provision which requires the insurance carrier
to give the other party not less than thirty (30) days' written notice prior to
any cancellation or modification of such coverage.
(ii) If either party fails to deliver any policy, certificate or
renewal to the other party required under this Lease within the prescribed time
period or if any such policy is canceled or modified during the Lease Term
without the other party's consent, the other party may obtain such insurance, in
which case either party shall reimburse the other party for the cost of such
insurance within fifteen (15) days after receipt of a statement that indicates
the cost of such insurance.
(iii) Tenant shall maintain all insurance required under this Lease
with companies holding a "General Policy Rating" of A-12 or better, as set forth
in the most current issue of "Best Key Rating Guide". Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in
the form and amounts described in this Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this Section 4.04
is for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant's type of
business, as that coverage may change from time to time. Landlord makes no
representation as to the adequacy of such insurance to protect
1988 California Chapters of the Initials JQ Society of Industrial and (Single Tenant Net Forms) Initials JC CP Office Realtors(R), Inc. |
Landlord's or Tenant's interests. Therefore, Tenant shall obtain any such
additional property or liability insurance which Tenant deems necessary to
protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance policies
maintained, Landlord and Tenant each hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents or representative
of the other, for loss of or damage to its property or the property of others
under its control, if such loss or damage is covered by any insurance policy in
force (whether or not described in this Lease) at the time or such loss or
damage. Upon obtaining the required policies of insurance, Landlord and Tenant
shall give notice to the insurance carriers of this mutual waiver of
subrogation.
Section 4.05. LATE CHARGES. Tenant's failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
five percent (5%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
Section 4.06. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant to Landlord which is not paid when due shall bear interest at the rate of twelve percent (12%) per annum from the due date of such amount. However, interest shall not be payable on late charges to be paid by Tenant under this Lease. The payment of interest on such amounts shall not excuse or cure any default by Tenant under this Lease. If the interest rate specified in this Lease is higher than the rate permitted by law, the interest rate is hereby decreased to the maximum legal interest rate permitted by law.
Section 4.07. IMPOUNDS FOR INSURANCE PREMIUMS AND REAL PROPERTY TAXES. If requested by any ground lessor or lender to whom Landlord hat granted a security interest in the Property, or if Tenant is more than ten (10) days late in the payment of rent more than three times in any consecutive twelve (12) -month period, Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real property taxes and insurance premiums payable by Tenant under this Lease, together with each payment of Base Rent. Landlord shall hold such payments in a noninterest bearing impound account. If unknown, Landlord shall reasonably estimate the amount of real property taxes and insurance premiums when due. Tenant shall pay any deficiency of funds in the impound account to Landlord upon written request. If Tenant defaults under this Lease, Landlord may apply any funds in the impound account to any obligation then due under this Lease.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. PERMITTED USES. Tenant may use the Property only for the Permitted Uses set forth in Section 1.06 above.
Section 5.02. MANNER OF USE. Tenant shall not cause or permit the Property to be used in any way which constitutes a violation of any law, ordinance, or governmental regulation or order, which annoys or interferes with the rights of other tenants of Landlord, or which constitutes a nuisance or waste. Tenant shall obtain and pay for all permits, including a Certificate of Occupancy, required for Tenant's occupancy of the Property and shall promptly take all actions necessary to comply with all applicable statutes, ordinances, rules, regulations, orders and requirements regulating the use by Tenant of the Property, including the Occupational Safety and Health Act.
See Hazardous Materials Rider for additional details Sections 5.03. HAZARDOUS MATERIALS. As used in this Lease, the term "Hazardous Material" means any flammable items, explosives, radioactive materials, hazardous or toxic substances, material or waste or related materials, including any substances defined as or included in the definition of "hazardous substances", "hazardous wastes", "hazardous materials" or "toxic substances" now or subsequently regulated under any applicable federal, state or local laws or regulations, including without limitation petroleum-based products, paints, solvents, lead, cyanide, DDT, printing inks, acids, pesticides, ammonia compounds and other chemical products, asbestos, PCBs and similar compounds, and including any different products and materials which are subsequently found to have adverse effects on the environment or the health and safety of persons. Tenant shall not cause or permit any Hazardous Material to be generated, produced, brought upon, used, stored, treated or disposed of in or about the Property by Tenant, its agents, employees, contractors, sublessees or invitees without the prior written consent of Landlord. Landlord shall be entitled to take into account such other factors or facts as Landlord may reasonably determine to be relevant in determining whether to grant or withhold consent to Tenant's proposed activity with respect to Hazardous Material. In no event, however, shall Landlord be required ho consent to the installation or use of any storage tanks on the Property.
Section 5.04. SIGNS AND AUCTIONS. Tenant shall not place any signs on the Property without Landlord's prior written consent. Landlord's consent will not be unreasonably withheld. Tenant shall not conduct or permit any auctions or sheriff's sales at the Property.
Section 5.05. INDEMNITY. Tenant shall indemnify Landlord against and hold Landlord harmless from any and all costs, claims or liability arising from: (a) Tenant's use of the Property; (b) the conduct of Tenant's business or anything else done or permitted by Tenant to be done in or about the Properly, including any contamination of the Property or any other property resulting from the presence or use of Hazardous Material caused or permitted by Tenant; (c) any breach or default in the performance of Tenant's obligations under this Lease; (d) any
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misrepresentation or breach of warranty by Tenant under this Lease; or (c) other acts or omissions of Tenant. Tenant shall defend Landlord against any such cost, claim or liability at Tenant's expense. As a material part of the consideration to Landlord, Tenant assumes all risk of damage to property or injury to persons in or about the Property arising from any cause, and Tenant hereby waives all claims in respect thereof against Landlord, except for any claim arising out of Landlord's negligence or willful misconduct. As used in this Section, the term "Tenant" shall include Tenant's employees, agents, contractors and invitees, if applicable. Landlord shall indemnify Tenant for damage arising from acts done, or failure to act where required by Landlord, for all costs and expenses incurred by Tenant in connection therewith.
Section 5.06. LANDLORD'S ACCESS. Landlord or its agents may enter the Property, subject to reasonable notice and access does not interfere with Tenant's operations, at all reasonable times to show the Property to potential buyers, investors or tenants or other parties; to do any other act or to inspect and conduct tests in order to monitor Tenant's compliance with all applicable environmental laws and all laws governing the presence and use of Hazardous Material; or for any other purpose Landlord deems necessary. Landlord shall give Tenant prior notice of such entry, except in the case of an emergency. Landlord may place customary "For Sale" or "For Lease" signs on the Property.
Section 5.07. QUIET POSSESSION. If Tenant pays the rent and complies with all other terms of this Lease, Tenant may occupy and enjoy the Property for the full Lease Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. EXISTING CONDITIONS. At the beginning of the 13th month of the lease, Tenant accepts the Property in its condition as of the Commencement/Occupancy Date subject to all recorded matters, laws, ordinances, and governmental regulations and orders, and Contractor warranties. Landlord agrees to assign to the Tenant all contractor's warranties Except as provided herein. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation as to the condition of the Property or the suitability of the Property for Tenant's intended use. As of the Commencement/Occupancy Date, Tenant represents and warrants that Tenant has made its own inspection of and inquiry regarding the condition of the Property and is not relying on any representations of Landlord (except as set forth within) or any Broker with respect thereto.
Section 6.02. EXEMPTION OF LANDLORD FROM LIABILITY. After the expiration of any
warranty period, Landlord shall not be liable for any damage or injury to the
person, business (or any loss of income therefrom), goods, wares, merchandise or
other property of Tenant, Tenant's employees, invitees, customers or any other
person in or about the Property, whether such damage or injury is caused by or
results from: (a) fire, steam, electricity, water, gas or rain; (b) the
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures or any other cause;
(c) conditions arising in or about the Property or from other sources or places;
or (d) any act or omission of any other tenant of Landlord. Landlord shall not
be liable for any such damage or injury even though the cause of or the means of
repairing such damage or injury are not accessible to Tenant. The provisions of
this Section 6.02 shall not, however, exempt Landlord from liability for
Landlord's negligence or willful misconduct.
Section 6.03. LANDLORD'S OBLIGATIONS. Subject to the provisions of Article Seven (Damage or Destruction) and Article Eight (Condemnation). Landlord shall have absolutely no responsibility to repair, maintain or replace any portion of the Property at any time. Tenant waives the benefit of any present or future law which might give Tenant the right to repair the Property at Landlord's expense or to terminate the Lease due to the condition of the Property.
Section 6.04. TENANT'S OBLIGATIONS.
(a) Except as provided in Article Seven (Damage or Destruction) and
Article Eight (Condemnation), Tenant shall keep all portions of the Property
(including structural, nonstructural, interior, exterior, and landscaped areas,
portions, systems and equipment) in good order, condition and repair (including
interior repainting and refinishing, as needed). If any portion of the Property
or any system or equipment in the Property which Tenant is obligated to repair
cannot be fully repaired or restored, Tenant shall promptly replace such portion
of the Property or system or equipment in the Property, regardless of whether
the benefit of such replacement extends beyond the Lease Term; but if the
benefit or useful life of such replacement extends beyond the Lease Term (as
such term may be extended by exercise of any options), the useful life of such
replacement shall be prorated over the remaining portion of the Lease Term (as
extended), and Tenant shall be liable only for that portion of the cost which is
applicable to the Lease Term (as extended). Tenant shall maintain a preventive
maintenance contract providing for the regular inspection and maintenance of the
heating and air conditioning system by a licensed heating and air conditioning
contractor. If any part of the Property is damaged by any act or omission of
Tenant, Tenant shall pay Landlord the cost of repairing or replacing such
damaged property, whether or not Landlord would otherwise be obligated to pay
the cost of maintaining or repairing such property. It is the intention of
Landlord and Tenant that at all times Tenant shall maintain the portions of the
Property which Tenant is obligated to maintain in an attractive, first-class and
fully operative condition.
(b) Tenant shall fulfill all of Tenant's obligations under this Section 6.04 at Tenant's sole expense. If Tenant fails to maintain, repair or replace the Property as required by this Section 6.04, Landlord may, upon ten (10) days' prior
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notice to Tenant (except that no notice shall be required in the case of an emergency), enter the Property and perform such maintenance or repair (including replacement, as needed) on behalf of Tenant. In such case, Tenant shall reimburse Landlord for all costs incurred in performing such maintenance or repair immediately upon demand.
Section 6.05. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
(a) Tenant shall not make any alterations, additions, or improvements
to the Property without Landlord's prior written consent, except for
non-structural alterations which do not exceed Ten Thousand Dollars ($10,000) in
cost cumulatively over the Lease Term and which are not visible from the outside
of any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and improvements
shall be done in a good and workmanlike manner, in conformity with all
applicable laws and regulations, and by a contractor approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with "as built"
plans, copies of all construction contracts, and proof of payment for all labor
and materials.
(b) Tenant shall pay when due all claims for labor and material furnished to the Property. Tenant shall give Landlord at least twenty (20) days' prior written notice of the commencement of any work on the Property, regardless of whether Landlord's consent to such work is required. Landlord may elect to record and post notices of nonresponsibility on the Property.
Section 6.06. CONDITION UPON TERMINATION. Upon the termination of the Lease, Tenant shall surrender the Property to Landlord, broom clean and in the same condition as received except for ordinary wear and tear which Tenant was not otherwise obligated to remedy under any provision of this Lease. However, Tenant shall not be obligated to repair any damage which Landlord is required to repair under Article Seven (Damage or Destruction). In addition, Landlord may require Tenant to remove any alterations, additions or improvements (whether or not made with Landlord's consent) prior to the expirations of the Lease and to restore the Property to its prior condition, all at Tenant's expense. All alterations, additions and improvements when Landlord has not required Tenant to remove shall become Landlord's property and shall be surrendered to Landlord upon the expirations or earlier termination of the Lease, except that Tenant may remove any of Tenant's machinery or equipment which can be removed without material damage to the Property. Tenant shall repair, at Tenant's expense, any damage to the Property caused by the removal of any such machinery or equipment. In no event, however, shall Tenant remove any of the following materials or equipment (which shall be deemed Landlord's property) without Landlord's prior written consent: any power wiring or power panels; lighting or lighting fixtures; wall coverings; drapes, blinds or other window coverings; carpets or other floor coverings; heaters, air conditioners or any other heating or air conditioning equipment; fencing or security gates; or other similar building operating equipment and decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Sections 7.01. PARTIAL DAMAGE TO PROPERTY.
(a) Tenant shall notify Landlord in writing immediately upon the
occurrence of any damage to the Property. If the Property is only partially
damaged (i.e., less than fifty percent (50%) of the Property is untenantable as
a result of such damage or less than fifty percent (50%) of Tenant's operations
are materially impaired) and if the proceeds received by Landlord from the
insurance policies described in Paragraph 4.04(b) are sufficient to pay for the
necessary repairs, this Lease shall remain in effect and Landlord shall repair
the damage within nine (9) months. Landlord may elect (but is not required) to
repair any damage to Tenant's fixtures, equipment, or improvements.
(b) If the insurance proceeds received by Landlord are not sufficient to pay the entire cost of repair, or if the cause of the damage is not covered by the insurance policies which Landlord maintains under Paragraphs 4.04(b) Landlord may elect either to (i) repair the damage within nine (9) months, in which case this Lease shall remain in full force and effect, or (ii) terminate this Lease as of the date the damage occurred. Landlord shall notify Tenant within thirty (30) days after receipt of notice of the occurrence of the damage whether Landlord elects to repair the damage or terminate the Lease. If Landlord elects to repair the damage, Tenant shall pay Landlord the "deductible amount" (if any) under Landlord's insurance policies and, if the damage was due to an act or omission of Tenant, or Tenant's employees, agents, contractors or invitees, the difference between the actual cost of repair and any insurance proceeds received by Landlord. If Landlord elects to terminate this Lease, Tenant may elect to continue this Lease in full force and effect, in which each Tenant shall repair any damage to the Property and any building in which the Property is located. Tenant shall pay the cost of such repairs, except that upon satisfactory completion of such repairs, Landlord shall deliver to Tenant any insurance proceeds received by Landlord for the damage repaired by Tenant. Tenant shall give Landlord written notice of such election within ten (10) days after receiving Landlord's termination notice.
(c) If the damage to the Property occurs during the last six (6) months of the Lease Term and such damage will require more than thirty (30) days to repair, either Landlord or Tenant may elect to terminate this Lease as of the date the damage occurred, regardless of the sufficiency of any insurance proceeds. The party electing to terminate this Lease shall give written notification to the other party of such election within thirty (30) days after Tenant's notice to Landlord of the occurrence of the damage.
Section 7.02. SUBSTANTIAL OR TOTAL DESTRUCTION. If the Property is substantially or totally destroyed by any cause whatsoever (i.e., the damage to the Property is greater than partial damage as described in Section 7.01), and
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regardless of whether Landlord receives any insurance proceeds, this Lease shall terminate as of the date the destruction occurred. Notwithstanding the preceding sentence, if the Property can be rebuilt within nine (9) months after the date of destruction, Landlord may elect to rebuild the Property at Landlord's owns expense, in which case this Lease shall remain in full force and effect. Landlord shall notify Tenant of such election within thirty (30) days after Tenant's notice of the occurrence of total or substantial destruction, if Landlord so elects, Landlord shall rebuild the Property at Landlord's sole expense, except that if the destruction was caused by an act or omission of Tenant, Tenant shall pay Landlord the difference between the actual cost of rebuilding and any insurance proceeds received by Landlord.
Section 7.03. TEMPORARY REDUCTION OF RENT. If the Property is destroyed or damaged and Landlord or Tenant repairs or restores the Property pursuant to the provisions of this Article Seven, any rent payable during the period of such damage, repair and/or restoration shall be reduced according to the degree, if any, to which Tenant's use of the Property is impaired. Except for such possible reduction in Base Rent, insurance premiums and real property taxes, Tenant shall not be entitled to any compensation, reduction, or reimbursement from Landlord as a result of any damage, destruction, repair, or restoration of or to the Property, unless such damage was caused by the negligence or willful misconduct of Landlord, its agents, servants or employees.
Section 7.04. WAIVER. Tenant waives the protection of any statute, code or judicial decision which grants a tenant the right to terminate a lease in the event of the substantial or total destruction of the leased property. Tenant agrees that the provisions of Section 7.02 above shall govern the rights and obligations of Landlord and Tenant in the event of any substantial or total destruction to the Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent domain or sold under the threat of that power (all of which are called "Condemnation"), this Lease shall terminate as to the part taken or sold on the date the condemning authority takes title or possession, whichever occurs first. If more than twenty percent (20%) of the floor area of the building in which the Property is located, or which is located on the Property, is taken, either Landlord or Tenant may terminate this Lease as of the date the condemning authority takes title or possession, by delivering written notice to the other within ten (10) days after receipt of written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority takes title or possession). If neither Landlord nor Tenant terminates this Lease, this Lease shall remain in effect as to the portions of the Property not taken, except that the Base Rent and Additional Rent shall be reduced in proportion to the reduction in the floor area of the Property. Any Condemnation award or payment shall be distributed in the following order: (a) first, to any ground lessor, mortgagee or beneficiary under a deed of trust encumbering the Property, the amount of its interest in the Property; (b) second, to Tenant, only the amount of any award specifically designated for loss of or damage to Tenant's trade fixtures or removable personal property; and (c) third, to Landlord, the remainder of such award, whether as compensation for reductions in the value of the leasehold, the taking of the fee, or otherwise. If this Lease is not terminated, Landlord shall repair any damage to the Property caused by the Condemnation, except that Landlord shall not be obligated to repair any damage for which Tenant has been reimbursed by the condemning authority. If the severance damages received by Landlord are not sufficient to pay for such repair, Landlord shall have the right to either terminate this Lease or make such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. LANDLORD'S CONSENT REQUIRED. No portion of the Property or of
Tenant's interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, or act of tenant,
without Landlord's prior written consent, except as provided in Section 9.02
below. Landlord has the right to grant or withhold its consent as provided in
Section 9.05 below. Any attempted transfer without consent shall be void and
shall constitute a non-curable breach of this Lease. If Tenant is a partnership,
any cumulative transfer of more than twenty percent (20%) of the partnership
interests shall require Landlord's consent.
As long as Tenant is not subject to reporting requirements to the
Securities Exchange Act of 1934 (the "Act"), any change in the ownership of a
controlling interest of the voting stock of the corporation shall require
Landlord's consent which shall not be unreasonably withheld, but may be
conditioned upon the provisions of Section 9.05 hereof. In the event that Tenant
becomes subject to the reporting requirements of the Act, the preceding sentence
will no longer become applicable and Tenant's undertaking an initial public
offering and becoming subject to the Act will not constitute an assignment or
otherwise require Landlord's consent.
Section 9.02. TENANT AFFILIATE. Tenant may assign this Lease or sublease the Property, without Landlord's consent, to any corporation which controls, is controlled by or is under common control with Tenant, or to any corporation resulting from the merger of or consolidation with Tenant ("Tenant's Affiliate"). In such case any Tenant's Affiliate shall assume in writing all of Tenant's obligations under this Lease.
Section 9.03. NO RELEASE OF TENANT.
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Section 9.04. OFFER TO TERMINATE. If Tenant desires to assign the Lease or sublease the Property Tenant shall have the right to offer, in writing, to terminate the Lease as of a date specified in the offer. If Landlord elects in writing to accept the offer to terminate within twenty (20) days after notice of the offer, the Lease shall terminate as or the date specified and all the terms and provisions of the Lease governing termination shall apply. If Landlord does not so elect. the Lease shall continue in effect until otherwise terminated and the provisions of Section 9.05 with respect to any proposed transfer shall continue to apply.
Section 9.05. LANDLORD'S CONSENT.
(a) Tenant's request for consent to any transfer described in Section
9.01 shall set forth in writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent and
security deposit payable under any proposed assignment or sublease), and any
other information Landlord deems relevant. Landlord shall have the right to
withhold consent, if reasonable, or to grant consent, based on the following
factors: (i) the business of the proposed assignee or subtenant and the proposed
use of the Property; (ii) the net worth, and financial reputation of the
proposed assignee or subtenant; (iii) Tenant's compliance with all of its
obligations under the Lease; and (iv) such other factors as Landlord may
reasonably deem relevant. If Landlord objects to a proposed assignment solely
because of the net worth and or financial reputation of the proposed assignee,
Tenant may nonetheless sublease (but not assign), all or a portion of the
Property to the proposed transferee, but only on the other terms of the proposed
transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the Lease
the Landlord's Share (stated in Section 1.13) of the Profit (defined below) on
such transaction as and when received by Tenant, unless Landlord gives written
notice to Tenant and the assignee or subtenant that Landlord's Share shall be
paid by the assignee or subtenant to Landlord directly. The "Profit" means (A)
all amounts paid to Tenant for such assignment or sublease, including "key"
money, monthly rent in excess of the monthly rent payable under the Lease, and
all fees and other consideration paid for the assignment or sublease, including
fees under any collateral agreements, less (B) costs and expenses directly
incurred by Tenant in connection with the execution and performance of such
assignment or sublease for real estate broker's commissions and costs of
renovation or construction of tenant improvements required under such assignment
or sublease. Tenant is entitled to recover such costs and expenses before Tenant
is obligated to pay the Landlord's Share to Landlord. The Profit in the case of
a sublease of less than all the Property is the rent allocable to the subleased
space as a percentage on a square footage basis.
(ii) Tenant shall provide Landlord a written statement certifying
all amounts to be paid from any assignment or sublease of the Property within
thirty (30) days after the transaction documentation is signed, and Landlord may
inspect Tenant's books and records to verify the accuracy of such statement. On
written request, Tenant shall promptly furnish to Landlord copies of all the
transaction documentation, all of which shall be certified by Tenant to be
complete, true and correct. Landlord's receipt of Landlord's Share shall not be
a consent to any further assignment or subletting. The breach of Tenant's
obligation under this Paragraph 9.05(b) shall be a material default of the
Lease.
Section 9.06. NO MERGER. No merger shall result from Tenant's sublease of the Property under this Article Nine, Tenant's surrender of this Lease or the termination of this Lease in any other manner. In any such event, Landlord may terminate any or all subtenancies or succeed to the interest of Tenant as sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. COVENANTS AND CONDITIONS. Tenant's performance of each of Tenant's obligations under this Lease is a condition as well as a covenant. Tenant's right to continue in possession of the Property is conditioned upon such performance. Time is of the essence in the performance of all covenants and conditions.
Section 10.02. DEFAULTS. Tenant shall be in material default under this Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the
Property results in the cancellation of any insurance described in Section 4.04;
(b) If Tenant fails to pay rent or any other charge when due;
(c) If Tenant fails to perform any of Tenant's non-monetary obligations under this Lease for a period of thirty (30) days after written notice from Landlord; provided that if more than thirty (30) days are required to complete such performance, Tenant shall not be in default if Tenant commences such performance within the thirty (30)-day period and thereafter diligently pursues its completion. However, Landlord shall not be required to give such notice if Tenant's failure to perform constitutes a non-curable breach of this Lease. The notice required by this Paragraph is intended to satisfy any and all notice requirements imposed by law on Landlord and is not in addition to any such requirement.
(d) (i) If Tenant makes a general assignment or general arrangement for the benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for reorganization or rearrangement is filed by or against Tenant and is not
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dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed to take possession of substantially all or Tenant's assets located at the Property or of Tenant's interest in this Lease and possession is not restored to Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets located at the Property or of Tenant's interest in this Lease is subjected to attachment, execution or other judicial seizure which is not discharged within thirty (30) days. If a court of competent jurisdiction determines that any of the acts described in this subparagraph (d) is not a default under this Lease, and a trustee is appointed to take possession (or if Tenant remains a debtor in possession) and such trustee or Tenant transfers Tenant's interest hereunder, then Landlord shall receive, as Additional Rent, the excess, if any, of the rent (or any other consideration) paid in connection with such assignment or sublease over the rent payable by Tenant under this Lease.
Section 10.03. REMEDIES. On the occurrence or any material default by
Tenant, Landlord may, at any time after the expiration of any applicable cure
period and after notice and demand, and without limiting Landlord in the
exercise of any right or remedy which Landlord may have: (a) Terminate Tenant's
right to possession of the Property by any lawful means, in which case this
Lease shall terminate and Tenant shall immediately surrender possession of the
Property to Landlord. In such event, Landlord shall be entitled to recover from
Tenant all damages incurred by Landlord by reason of Tenant's default, including
(i) the worth at the time of the award of the unpaid Base Rent, Additional Rent
and other charges which Landlord had earned at the time of the termination;
(ii) the worth at the time of the award of the amount by which the unpaid Base
Rent, Additional Rent and other charges which Landlord would have earned after
termination until the time of the award exceeds the amount of such rental loss
that Tenant proves Landlord could have reasonably avoided; (iii) the worth at
the time of the award of the amount by which the unpaid Base Rent, Additional
Rent and other charges which Tenant would have paid for the balance of the Lease
term after the time of award exceeds the amount of such rental loss that Tenant
proves Landlord could have reasonably avoided; and (iv) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under the Lease or which in the
ordinary course of things would be likely to result therefrom, including, but
not limited to, any costs or expenses Landlord incurs in maintaining or
preserving the Property after such default, the cost of recovering possession of
the Property, expenses of reletting, including necessary renovation or
alteration of the Property, Landlord's reasonable attorneys' fees incurred in
connection therewith, and any real estate commission paid or payable. As used in
subparts (i) and (ii) above, the worth at the time of the award" is computed by
allowing interest on unpaid amounts at the rate of twelve percent (12%) per
annum, or such lesser amount as may then be the maximum lawful rate. As used in
subpart (iii) above, the "worth at the time of the award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%). If Tenant has
abandoned the Property, Landlord shall have the option of (i) retaking
possession of the Property and recovering from Tenant the amount specified in
this Paragraph 10.03(a), or (ii) proceeding under Paragraph 10.03(b);
(b) Maintain Tenant's right to possession, in which case this Lease shall continue in effect whether or not Tenant has abandoned the Property. In such event, Landlord shall be entitled to enforce all of Landlord's rights and remedies under this Lease, including the right to recover the rent as it becomes due;
(c) Pursue any other remedy now or hereafter available to Landlord under the laws or judicial decisions of the state in which the Property is located.
(d) Landlord will use its best efforts to mitigate damages.
Section 10.04. REPAYMENT OF "FREE" RENT. If this Lease provides for a postponement of any monthly rental payments, a period of "free" rent or other rent concession, such postponed rent or "free" rent is called the "Abated Rent". Tenant shall be credited with having paid all of the Abated Rent on the expiration of this Lease Term only if Tenant has fully, faithfully, and punctually performed all of Tenant's obligations hereunder, including the payment of all rent (other than the Abated Rent) and all other monetary obligations and the surrender of the Property in the physical condition required by this Lease. Tenant acknowledges that its right to receive credit for the Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual performance of its obligations under this Lease. If Tenant defaults and does not cure within any applicable grace period, the Abated Rent shall immediately become due and payable in full and this Lease shall be enforced as if there were no such rent abatement or other rent concession. In such case Abated Rent shall be calculated based on the full initial rent payable under this Lease.
Section 10.05. AUTOMATIC TERMINATION. Notwithstanding any other term or provision hereof to the contrary, the Lease shall terminate on the occurrence of any act which affirms the Landlord's intention to terminate the Lease as provided in Section 10.03 hereof, including the filing of an unlawful detainer action against Tenant. On such termination, Landlord's damages for default shall include all costs and fees, including reasonable attorneys' fees that Landlord incurs in connection with the filing, commencement, pursuing and or defending of any action in any bankruptcy court or other court with respect to the Lease; the obtaining of relief from any stay in bankruptcy restraining any action to evict Tenant; or the pursuing of any action with respect to Landlord's right to possession of the Property. All such damages suffered (apart from Base Rent and other rent payable hereunder) shall constitute pecuniary damages which must be reimbursed to Landlord prior to assumption of the Lease by Tenant or any successor to Tenant in any bankruptcy or other proceeding.
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Section 10.06. CUMULATIVE REMEDIES. Landlord's exercise of any right or remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. SUBORDINATION. Landlord shall have the right to subordinate this Lease to any ground lease, deed of trust or mortgage encumbering the Property, any advances made on the security thereof and any renewals, modifications, consolidations, replacements or extensions thereof, whenever made or recorded. Tenant shall cooperate with Landlord and any lender which is acquiring a security interest in the Property or the Lease. Tenant shall execute such further documents and assurances as such lender may require, provided that Tenant's obligations under this Lease shall not be increased in any material way (the performance of ministerial acts shall not be deemed material), and Tenant shall not be deprived of its rights under this Lease. Tenant's right to quiet possession of the Property during the Lease Term shall not be disturbed if Tenant pays the rent and performs all of Tenant's obligations under this Lease and is not otherwise in default. If any ground lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of its ground lease, deed of trust or mortgage and gives written notice thereof to Tenant, this Lease shall be deemed prior to such ground lease, deed of trust or mortgage whether this Lease is dated prior or subsequent to the date of said ground lease, deed of trust or mortgage or the date of recording thereof.
Section 11.02. ATTORNMENT. If Landlord's interest in the Property is acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or successor to Landlord's interest in the Property and recognize such transferee or successor as Landlord under this Lease. Tenant waives the protection of any statute or rule of law which gives or purports to give Tenant any right to terminate this Lease or surrender possession of the Property upon the transfer of Landlord's interest.
Section 11.03. SIGNING OF DOCUMENTS. Tenant shall sign and deliver any instrument or documents necessary or appropriate to evidence any such attornment or subordination or agreement to do so. If Tenant fails to do so within ten (10) days after written request, Tenant hereby makes, constitutes and irrevocably appoints Landlord, or any transferee or successor of Landlord, the attorney-in-fact of Tenant to execute and deliver any such instrument or document.
Section 11.04. ESTOPPEL CERTIFICATES.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver to Landlord a written statement certifying: (i) that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
canceled or terminated; (iii) the last date of payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that
Landlord is not in default under this Lease (or, if Landlord is claimed to be in
default, stating why); and (v) such other representations or information with
respect to Tenant or the Lease as Landlord may reasonably request or which any
prospective purchaser or encumbrancer of the Property may require. Tenant shall
deliver such statement to Landlord within ten (10) days after Landlord's
request. Landlord may give any such statement by Tenant to any prospective
purchaser or encumbrancer of the Property. Such purchaser or encumbrancer may
rely conclusively upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such ten (10)-day period, Landlord, and any prospective purchaser or encumbrancer, may conclusively presume and rely upon the following facts: (i) that the terms and provisions of this Lease have not been changed except as otherwise represented by Landlord; (ii) that this Lease has not been canceled or terminated except as otherwise represented by Landlord; (iii) that not more than one month's Base Rent or other charges have been paid in advance; and (iv) that Landlord is not in default under the Lease. In such event, Tenant shall be estopped from denying the truth of such facts.
Section 11.05. TENANT'S FINANCIAL CONDITION. Within ten (10) days after written request from Landlord, Tenant shall deliver to Landlord such financial statements as Landlord reasonably requires to verify the net worth of Tenant or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall deliver to any lender designated by Landlord any financial statements required by such lender to facilitate the financing or refinancing of the Property. Tenant represents and warrants to Landlord that each such financial statement is a true and accurate statement as of the date of such statement. All financial statements shall be confidential and shall be used only for the purposes set forth in this Lease. Provided, however, such financial statements need only include those prepared in the ordinary course of Tenant's business. In the event that Tenant becomes a company whose shares are registered under the Securities Act of 1933, then Tenant shall be required to provide Landlord with financial statements on forms filed with the Securities and Exchange Commission, and Landlord may request and receive additional financial information if there are material changes in Tenant's ownership and/or there is a material change in the financial status of Tenant.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01 LEGAL PROCEEDINGS. If Tenant or Landlord shall be in breach or default under this Lease, such party (the "Defaulting Party") shall reimburse the other party (the "Nondefaulting Party") upon demand for any costs or expenses that the Nondefaulting Party incurs in connection with any breach or default of the Defaulting Party under this Lease, whether or not suit is commenced or judgment entered. Such costs shall include legal fees and costs incurred for the negotiation of a settlement, enforcement of rights or otherwise. Furthermore, if any action for
1988 California Chapters of the Initials JQ Society of Industrial and (Single Tenant Net Forms) Initials JC CP Office Realtors(R), Inc. |
breach of or to enforce the provisions of this Lease is commenced, the court in such action shall award to the party in whose favor a judgment is entered, a reasonable sum as attorneys' fees and costs. The losing party in such action shall pay such attorneys' fees and costs. Tenant shall also indemnify Landlord against and hold Landlord harmless from all costs, expenses, demands and liability Landlord may incur if Landlord becomes or is made a party to any claim or action (a) instituted by Tenant against any third party, or by any third party against Tenant, or by or against any person holding any interest under or using the Property by license of or agreement with Tenant; (b) for foreclosure of any lien for labor or material furnished to or for Tenant or such other person; (e) otherwise arising out of or resulting from any act or transaction of Tenant or such other person; or (d) necessary to protect Landlord's interest under this Lease in a bankruptcy proceeding, or other proceeding under Title 11 of the United States Code, as amended. Tenant shall defend Landlord against any such claim or action at Tenant's expense with counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant shall reimburse Landlord for any legal fees or costs Landlord incurs in any such claim or action.
Section 12.02. LANDLORD'S CONSENT.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. NON-DISCRIMINATION. Tenant promises, and it is a condition to the continuance of this Lease, that there will be no discrimination against, or segregation of, any person or group of persons on the basis of race, color. sex, creed, national origin or ancestry in the leasing, subleasing, transferring, occupancy, tenure or use of the Property or any portion thereof.
Section 13.02. LANDLORD'S LIABILITY; CERTAIN DUTIES.
(a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or the leasehold estate under a
ground lease of the Property at the time in question. Each Landlord is
obligated to perform the obligations of Landlord under this Lease only during
the time such Landlord owns such interest or title. Any Landlord who transfers
its title or interest is relieved of all liability with respect to the
obligations of Landlord under this Lease to be performed on or after the date of
transfer. However, each Landlord shall deliver to its transferee all funds
that Tenant previously paid if such funds have not yet been applied under the
terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to perform any of its obligations under this Lease to Landlord and to any ground lessor, mortgagee or beneficiary under any deed of trust encumbering the Property whose name and address have been furnished to Tenant in writing. Landlord shall not be in default under this Lease unless Landlord (or such ground lessor, mortgagee or beneficiary) fails to cure such non-performance within thirty (30) days after receipt of Tenant's notice. However, if such non-performance reasonably requires more than thirty (30) days to cure, Landlord shall not be in default if such cure is commenced within such thirty (30)-day period and thereafter diligently pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the liability of Landlord for the performance of its duties and obligations under this Lease is limited to Landlord's interest in the Property, and neither the Landlord nor its partners, shareholders, officers or other principals shall have any personal liability under this Lease.
Section 13.03. SEVERABILITY. A determination by a court of competent jurisdiction that any provision of this Lease or any part thereof is illegal or unenforceable shall not cancel or invalidate the remainder of such provision or this Lease, which shall remain in full force and effect.
Section 13.04. INTERPRETATION. The captions of the Articles or Sections of this Lease are to assist the parties in reading this Lease and are not a part of the terms or provisions of this Lease. Whenever required by the context of this Lease, the singular shall include the plural and the plural shall include the singular. The masculine, feminine and neuter genders shall each include the other. In any provision relating to the conduct, acts or omissions of Tenant, the term "Tenant" shall include Tenant's agents, employees, contractors, invitees, successors or others using the Property with Tenant's expressed or implied permission.
Section 13.05. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This Lease is the only agreement between the parties pertaining to the lease of the Property and no other agreements are effective. All amendments to this Lease shall be in writing and signed by all parties. Any other attempted amendment shall be void.
Section 13.06. NOTICES. Wherever notice is required herein by either party, the same shall not be unreasonably withheld, conditioned or delayed. All notices required or permitted under this Lease shall be in writing and shall be personally delivered or sent by certified mail, return receipt requested, postage prepaid. Notices to Tenant shall be delivered to the address specified in Section 1.03 above, except that upon Tenant's taking possession of the Property, the Property shall be Tenant's address for notice purposes. Notices to Landlord shall be delivered to the address specified in Section 1.02 above. All notices shall be effective upon delivery. Either party may change its notice address upon written notice to the other party.
Section 13.07. WAIVERS. All waivers must be in writing and signed by the waiving party. Landlord's failure to enforce any provision of this Lease or its acceptance of rent shall not be a waiver and shall not prevent Landlord
1988 California Chapters of the Initials JQ Society of Industrial and (Single Tenant Net Forms) Initials JC CP Office Realtors(R), Inc. |
from enforcing that provision or any other provision of this Lease in the future. No statement on a payment check from Tenant or in a letter accompanying a payment check shall be binding on Landlord. Landlord may, with or without notice to Tenant, negotiate such check without being bound to the conditions of such statement.
Section 13.08. NO RECORDATION. Tenant shall not record this Lease without prior written consent from Landlord. However, either Landlord or Tenant may require that a "Short Form" memorandum of this Lease executed by both parties be recorded. The party requiring such recording shall pay all transfer taxes and recording fees.
Section 13.09. BINDING EFFECT; CHOICE OF LAW. This Lease binds any party who legally acquires any rights or interest in this Lease from Landlord or Tenant. However, Landlord shall have no obligation to Tenant's successor unless the rights or interests of Tenant's successor are acquired in accordance with the terms of this Lease. The laws of the state in which the Property is located shall govern this Lease.
Section 13.10. CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant is a corporation, each person signing this Lease on behalf of Tenant represents and warrants that he has full authority to do so and that this Lease binds the corporation. Within thirty (30) days after this Lease is signed, Tenant shall deliver to Landlord a certified copy of a resolution of Tenant's Board of Directors authorizing the execution of this Lease or other evidence of such authority reasonably acceptable to Landlord. If Tenant is a partnership, each person or entity signing this Lease for Tenant represents and warrants that he or it is a general partner of the partnership, that he or it has full authority to sign for the partnership and that this Lease binds the partnership and all general partners of the partnership. Tenant shall give written notice to Landlord of any general partner's withdrawal or addition. Within thirty (30) days after this Lease is signed, Tenant shall deliver to Landlord a copy of Tenant's recorded statement of partnership or certificate of limited partnership.
Section 13.11. JOINT AND SEVERAL LIABILITY. All parties signing this Lease as Tenant shall be jointly and severally liable for all obligations of Tenant.
Section 13.12. FORCE MAJEURE. If Landlord cannot perform any of its obligations due to events beyond Landlord's control, the time provided for performing such obligations shall be extended by a period of time equal to the duration of such events. Events beyond Landlord's control include, but are not limited to, acts of God, war, civil commotion, labor disputes, strikes, fire, flood or other casualty, shortages of labor or material, government regulation or restriction and weather conditions.
Section 13.13. EXECUTION OF LEASE. This Lease may be executed in counterparts and, when all counterpart documents are executed, the counterparts shall constitute a single binding instrument. Landlord's delivery of this Lease to Tenant shall not be deemed to be an offer to lease and shall not be binding upon either party until executed and delivered by both parties.
Section 13.14. SURVIVAL. All representations and warranties of Landlord and Tenant shall survive the termination of this Lease.
Per Separate Agreement
Section 14.03. BROKER'S DISCLOSURE OF AGENCY. Landlord's Broker hereby discloses to Landlord and Tenant and Landlord and Tenant hereby consent to Landlord's Broker acting in this transaction as the agent of (check one):
[ ] Landlord exclusively; or
[X] both Landlord and Tenant.
Section 14.04. NO OTHER BROKERS. Tenant represents and warrants to Landlord that the brokers named in Section
1988 California Chapters of the Initials JQ Society of Industrial and (Single Tenant Net Forms) Initials JC CP Office Realtors(R), Inc. |
1.08 above are the only agents, brokers, finders or other parties with whom Tenant has dealt who are or may be entitled to any commission or fee with respect to this Lease or the Property.
ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED HERETO OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED, PLEASE DRAW A LINE THROUGH THE SPACE BELOW.
1988 California Chapters of the Initials JQ Society of Industrial and (Single Tenant Net Forms) Initials JC CP Office Realtors(R), Inc. |
Landlord and Tenant have signed this Lease at the place and on the dates specified adjacent to their signatures below and have initialed all Riders which are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on March 9, 1999 PANATTONI DEVELOPMENT COMPANY, OR ASSIGNEE
at Sacramento, CA By: /s/ Carl D. Panattoni
--------------------------------------
Carl D. Panattoni
Its: Partner
--------------------------------------
By: /s/ James R. Carlsen
--------------------------------------
James R. Carlsen
Its: Partner
--------------------------------------
|
"TENANT"
Signed on Feb. 22, 1999 DICK'S CLOTHING & SPORTING GOODS, INC.
at By: /s/ Joseph Queri, Jr.
--------------------- ---------------------------------------
Joseph Queri, Jr.
Its: Vice President of Real Estate
--------------------------------------
|
IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE TANKS.
THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE DIRECTION OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS, INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS, INC, ITS LEGAL COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR AGENTS, AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR OF THIS TRANSACTION. LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL TO ADVISE THEM ON SUCH MATTERS AND SHOULD RELY UPON THE ADVICE OF SUCH LEGAL COUNSEL.
1988 California Chapters of the Initials JQ Society of Industrial and (Single Tenant Net Forms) Initials JC CP Office Realtors(R), Inc. |
ADDENDUM TO LEASE
BY AND BETWEEN
PANATTONI DEVELOPMENT COMPANY OR ASSIGNEE, "LANDLORD"
and
DICK'S CLOTHING & SPORTING GOODS, INC., "TENANT"
1. BASE RENT
The Base Monthly Rent, On an "Absolute Net" basis, shall be:
Months 1 - 60 $107,723 Months 61 - 120 $115,810 Months 121 - 180 $123,897 Months 181 - 240 $131,985 |
In addition to Base Rent, Tenant shall be responsible for its pro-rata share of the Other Periodic Payments as set forth in Section 1.12(b) of the Lease.
2. SECURITY DEPOSIT
Tenant shall pay a security deposit of $239,708 that will be applied by Landlord as follows:
$107,723 (first month's rent) to be applied to the Month 1 Base Rent, and $131,985 (last months rent) to be retained as a security deposit. The security deposit shall be remitted to Landlord upon Landlord's purchase of the subject fifty acre parcel.
Said Security Deposit shall be returned to Tenant once Tenant's Net Worth becomes greater than $100,000,000 and Tenant's Income Statement shows profitability for three (3) consecutive years.
3. OCCUPANCY DATE
Landlord shall work to complete the Property by December 1, 1999 ("Target Date"). The Target Date shall be subject to the following milestones, 1) the Lease signed by all parties by February 10, 1999, and 2) mutual approval of plans and specifications (design documents) for the subject facility by March 1, 1999. The Commencement Date shall be adjusted for any deviations from the milestones above any delays caused by Tenant and any event(s) of Force Majeure per Section 13.12 of this Lease. The cumulative Force Majeure delay shall be limited to a maximum of thirty (30) days.
Tenant shall be provided early occupancy by November 1, 1999 for the purpose of installing racking, conveyor systems, and other Tenant fixtures, so long as said early occupancy does not unnecessarily interfere with construction activities/progress.
4. LATE PENALTY
Landlord shall pay Tenant a penalty equal to $10,000 per day for every day late after December 1, 1999. Said date shall be adjusted for each day of delay caused by Tenant and for events of force majeure. However, a force majeure adjustment shall not exceed thirty (30) days.
5. TENANT IMPROVEMENTS/CONSTRUCTION OF PREMISES
Landlord shall provide a base building and improvements per mutually agreeable specifications to be attached as an Exhibit to the Lease.
6. RENEWAL OPTIONS
Tenant shall be granted four (4) five year options to extend the lease term with twelve (12) months prior written notice. Prior to the execution of the lease, Tenant shall select one of the following options regarding the base rental for the option periods:
(a) The market rent at the time of extension as determined by good faith negotiation or arbitration if necessary, or
(b) Fixed rental rate subject to a $.25 per square foot per annum increase every sixty (60) months.
In no event will the rent be less than the Base Rent in effect at the end of the original lease term or previous extension period.
7. CONTINGENCIES
This Lease is contingent on the review of the title matters associated with the property.
8. COMMISSIONS
Landlord shall pay Eagan Real Estate a leasing commission per the terms of a separate agreement. Landlord shall indemnify and hold Tenant harmless from any claims for any brokers' commissions.
9. FINANCING
A copy of Landlord's loan commitment letter from the selected lender shall be presented to Tenant prior to February 26, 1999.
THIS ADDENDUM IS UNDERSTOOD AND AGREED UPON BY:
LANDLORD: PANATTONI DEVELOPMENT COMPANY
By: /s/ Carl D. Panattoni 3/9/99
--------------------------------- ------------
Carl D. Panattoni Date
Partner
By: /s/ James R. Carlsen 3/9/99
--------------------------------- ------------
James R. Carlsen Date
Partner
TENANT: DICK'S CLOTHING & SPORTING GOODS, INC.
By: /s/ Joseph Queri, Jr. 2/22/99
--------------------------------- -----------
Joseph Queri, Jr. Date
Its: Vice President of Real Estate
--------------------------------
|
DICK'S CLOTHING & SPORTING GOODS, INC.
Tenant shall (i) not cause or permit any Hazardous Material to be brought upon, kept or used in or about the Premises by Tenant, its agents, employees, contractors or invitees, without the prior written consent of Landlord (which consent Landlord shall not unreasonably withhold or delay as long as Tenant demonstrates to Landlord's reasonable satisfaction that such Hazardous Material is necessary or useful to Tenant's business and will be used, kept and stored in a manner that complies with all laws relating to any such Hazardous Material so brought upon or used or kept in or about the Premises). If Tenant breaches the obligations stated in the preceding sentence, or if the presence of Hazardous Material on the Premises caused or permitted by Tenant results in contamination of the Premises by Hazardous Material or otherwise occurs for which Tenant is legally liable to Landlord for damage resulting therefrom, then Tenant shall indemnify, defend and hold Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses (including, without limitation, diminution on value of the Premises, damages for the loss or restrictions on use of rentable or usable space or of any amenity of the Premises, damages arising from any adverse impact on marketing of the Premises, and reasonable sums paid in settlement of claims, attorneys' fees, consultant fees and expert fees) which arise during or after the lease term as a result of such contamination. The indemnification set forth herein shall run to the benefit of any bank or other lender to which Landlord or Landlord's successors and assigns may grant a security interest in the Property and or assigns may grant a security interest in the Property and or the Premises. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of Hazardous Material present in the soil or ground water on or under the Premises caused or permitted by Tenant, its agents, employees, contractors or invitees. Without limiting the foregoing, if the presence of any Hazardous Material on the Premises caused or permitted by Tenant results in any contamination of the Premises, Tenant shall promptly take all actions at its sole expense as are necessary to return the Premises to the condition existing prior to the introduction of any such Hazardous Material to the Premises; provided that Landlord's approval of such actions shall first be obtained, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises.
Landlord represents that to the best of their knowledge, they are not aware of the existence of any hazardous material or related environmental concerns. Furthermore, Landlord shall indemnify Tenant for any breach of this representation.
As used herein, the term "Hazardous Material" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of Pennsylvania or the United States Government. The term "Hazardous Material" includes, without limitation, any material or substance which is (i) defined as a "hazardous waste," "extremely hazardous waste" or "restricted hazardous waste" under Pennsylvania Health and Safety Code.
Administrative Code, Division 4, Chapter 20; (viii) designated as a "hazardous
substance" pursuant to Section 311 of the Federal Water Pollution Control Act
(33 U.S.C. Section 1317); (ix) defined as a "hazardous waste" pursuant to
Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq. (42 U.S.C. Section 6903); (x) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C.
Section 9601); or (xi) or any substance requiring remediation under any federal,
state, municipal or other governmental statute, ordinance, rule, regulation or
policy.
AGREED BY:
("TENANT")
TENANT: DICK'S CLOTHING & SPORTING GOODS, INC.
BY: /s/ Joseph Queri, Jr. DATE: 2/22/99
------------------------------------- ----------------
JOSEPH QUERI, JR.
ITS: VICE PRESIDENT OF REAL ESTATE
------------------------------------
|
("LANDLORD")
LANDLORD: PANATTONI DEVELOPMENT COMPANY
BY: /s/ Carl D. Panattoni DATE: 3/9/99
------------------------------------- ----------------
CARL D. PANATTONI
PARTNER
BY: /s/ James R. Carlsen DATE: 3/9/99
------------------------------------- ----------------
JAMES R. CARLSEN
PARTNER
|
FIRST AMENDMENT
TO SINGLE-TENANT NET LEASE
DATED FEBRUARY 4, 1999
BY AND BETWEEN
PANATTONI DEVELOPMENT COMPANY (SINCE ASSIGNED TO
WEST PENN INVESTMENTS) "LANDLORD"
AND
DICK'S CLOTHING AND SPORTING GOODS (SINCE CHANGED TO
"DICK'S SPORTING GOODS") "TENANT"
To the extent of any inconsistencies or contradictions between the terms and conditions of the Lease and this Amendment, the terms and conditions contained herein shall supercede and take precedence over those contained in the Lease.
The parties above acknowledge and hereby agree that the Lease as referenced above, the Lease Riders, the Addendum and the Exhibits attached thereto are hereby amended as follows:
1. SECTION 1.05. LEASE TERM: This amendment confirms that the commencement date ofthe lease is December 1, 1999.
2. PARAGRAPH 1 OF THE ADDENDUM TO LEASE: Based on the attached Exhibit "A" to this amendment, the Base Monthly Rent shall be adjusted to the following:
Months 1 - 60: $111,569 Months 60 - 120: $119,654 Months 121 - 180: $127,739 Months 181-240: $135,824 |
3. PARAGRAPH 6 OF THE ADDENDUM TO LEASE: The Base Monthly Rent for the option periods shall be adjusted in accordance with paragraph 6 of the Lease subject to the revised monthly rental amounts per paragraph 2 of this amendment.
The parties have executed this Amendment as of the dates signed below.
LANDLORD: TENANT:
West Penn Investments, LLC Dick's Sporting Goods, Inc.
By: /s/ James R. Carlsen By: /s/ Michael R. ________?
---------------------------- ------------------------------
Its: Managing Member Its: CFO
--------------------------- -----------------------------
Date: 1-20-00 Date: 1/4/00
-------------------------- ----------------------------
|
1/3/00 EXHIBIT "A"
10:07 AM DICK'S SPORTING GOODS
C.O.
# Description Cost
------------------------------------------------------------------------------------------------------------
2 Install grooved check valves for sprinkler risers $ 10,388.00
3 Install flag pole at entry $ 3,148.00
6 Conveyor electrical panel load Increase $ 75,236.00
8 Install monument signage $ 689.00
9 Increase roof ballast from 10 lbs to 12 lbs. $ 30,539.00
10 Provide dishwasher and counters $ 5,696.00
72 Install mezzanine footings $ 40,000.00
15 Pour back of mezzanIne footing "diamonds" $ 1,750.00
16 Revise columns to accommodate footings $ 4,250.00
18 Provide sidelIghts at interior doors $ 1,032.00
19 Retaining wall at break area $ 7,670.00
20 Install bumpers at stone lot (west side) $ 3,303.00
21 Paint interior columns $ 3,831.00
23 Furnish fire extinguishers $ 3,936.00
25 Install trash door for conveyor $ 3,191.00
26 Sprinkler/Lighting at Mezzanine $ 206,647.00
TOTAL $ 401,306.00
==================
|
RENT CALCULATION:
$401,306.00 times 11.5% = $46,150.19/annum
FIRST AMENDMENT
TO SINGLE-TENANT NET LEASE
DATED FEBRUARY 4, 1999
BY AND BETWEEN
PANATTONI DEVELOPMENT COMPANY (SINCE ASSIGNED TO
WEST PENN INVESTMENTS) "LANDLORD"
AND
DICK'S CLOTHING AND SPORTING GOODS (SINCE CHANGED TO
"DICK'S SPORTING GOODS") "TENANT"
To the extent of any inconsistencies or contradictions between the terms and conditions of the Lease and this Amendment, the terms and conditions contained herein shall supercede and take precedence over those contained in the Lease.
The parties above acknowledge and hereby agree that the Lease as referenced above, the Lease Riders, the Addendum and the Exhibits attached thereto are hereby amended as follows:
1. SECTION 1.05. LEASE TERM: This amendment confirms that the commencement date of the lease is December 13 1999.
2. PARAGRAPH I OF THE ADDENDUM TO LEASE: Based on the attached Exhibit "A" to this amendment, the Base Monthly Rent shall be adjusted to the following:
Months 1-60: $111,569 Months 60 - 120: $119,654 Months 121 - 180: $127,739 Months 181-240: $135,824 |
3. PARAGRAPH 6 OF THE ADDENDUM TO LEASE: The Base Monthly Rent for the option periods shall be adjusted in accordance with paragraph 6 of the Lease subject to the revised monthly rental amounts per paragraph 2 of this amendment.
The parties have executed this Amendment as of the dates signed below.
LANDLORD: TENANT:
West Penn Investments, LLC Dick's Sporting Goods, Inc.
By: By:
-------------------------- ---------------------------------
Its: Managing Member Its: CFO
------------------------- --------------------------------
Date: 1-20-00 Date: 1-4-00
------------------------ -------------------------------
|
EXHIBIT "A"
DICK'S SPORTING GOODS
C.O.
# Description Cost
--------------------------------------------------------------------------------------------------
2 Install grooved check valves for sprinkler risers $ 10,388.00
3 Install flagpole at entry $ 3,148.00
6 Conveyor electrical panel load increase $ 75,236,00
8 Install monument signage $ 689.00
9 Increase roof ballast from 10 lbs to 12 lbs. $ 30,539.00
10 Provide dishwasher and counters $ 5,696.00
12 Install mezzanine footings $ 40,000,00
15 Pour back of mezzanine footing "diamonds" $ 1,750.00
16 Revise columns to accommodate footings $ 4,250.00
18 Provide sidelights at interior doors $ 1,032.00
19 Retaining wall at break area $ 7,670.00
20 Install bumpers at stone lot (west side) $ 3,303.00
21 Paint interior columns $ 3,831.00
23 Furnish fire extinguishers $ 3,936.00
25 Install trash door for conveyor $ 3,191.00
26 Sprinkler/Lighting at Mezzanine $ 206,647.00
TOTAL $ 401,306.00
==================
|
RENT CALCULATION:
$401,306.00 times 11.5% = $46,150.19/annum
PURCHASE OPTION AGREEMENT
This Agreement is hereby made this 5th day of March, 1999, by and between PANATTONI DEVELOPMENT COMPANY, a California sole proprietor with offices at 8401 Jackson Road, Sacramento, California 95926 ('Optionor') and DICK'S CLOTHING & SPORTING GOODS, INC., a Delaware corporation with offices at 400 Fairway Drive, Coraopolis, Pennsylvania 15108 ("Optionee")
WITNESSETH:
WHEREAS, the parties hereby are parties to a lease dated February 4, 1999 (the "Lease") for the lease of a 388,100 square foot warehouse and distribution facility (the 'Facility') located on an approximately 50 (greater or less than) acre tract of land (the "Land") at the I-70 Industrial Park in Westmoreland County, Pennsylvania (the Facility and the Land are together referred to as the "Property'); and
WHEREAS, Optionee desires to option from Optionor and Optionor desires to grant to Optionee the option to purchase the Property (the 'Option") upon the terms and conditions and in accordance with the procedures herein contained.
NOW THEREFORE, in consideration of the mutual covenants and conditions' herein contained and intending to be legally bound thereby, the parties hereto agree as follows:
1. GRANT. Optionor hereby grants to Optionee the Option to acquire the Property.
2. EXERCISE. The Option may be exercised at any time prior to the expiration of ten (10) days from Optionor's substantial completion of the Facility as provided under the Lease.
3. PRICE. The purchase price in the event of an exercise of this Option shall be Optionor's costs plus $3.00 per square foot ($13,909,698 plus the costs incurred by Optionor in securing long-term financing prior to Optionee's notice of intent to purchase the Property).
4. NOTICE OF EXERCISE. In order to exercise this Option, Optionee must provide Optionor written notice (the "Notice') of optionee's intention to exercise this Option, which Notice shall be delivered to Optionor via Federal Express, or similar overnight service, no later than October 1, 1999. The Notice shall specify a closing date on the purchase of the Property, which shall be not less than ten (10) days from the date of Notice nor later than ten (10) days after the Facility is substantially complete in accordance with the Lease. The Notice shall be accompanied by a proposed real estate purchase contract executed by Optionee and containing such terms as are reasonable and customary for the purchase of industrial or commercial real estate in Westmoreland County, Pennsylvania. Optionor shall use its reasonable good faith in determining whether the proposed purchase contract is acceptable and in negotiating any
necessary revisions when the contract is acceptable to Optionor, Optionor shall execute the real estate purchase contract and return a fully executed counterpart to Optionee.
5. CLOSING. At closing on the sale of the Property, Optionor shall convey the Property to Optionee by a General Warranty Deed and such as is insurable, without exception (except as may be agreed in writing by the parties) by a nationally rated title insurance company. Notwithstanding anything to the contrary in this Paragraph 5, Optionee agrees to accept the Property subject to any exceptions that the Property was subject to at the time it was purchased by Optionor.
6. ASSIGNABILITY. This Agreement shall be assignable by Optionee without the consent of Optionor.
In witness whereof, the parties hereto have set their hands and seals this day of 1999.
WITNESS: PANATTONI DEVELOPMENT COMPANY
------------------------------ By: /s/ Carl D. Panattoni
--------------------------------
Carl D. Panattoni, Partner
------------------------------ By: /s/ James R. Carlsen
--------------------------------
James R. Carlsen, Partner
ATTEST. DICK'S CLOTHING & SPORTING
GOODS, INC.
------------------------------- By: /s/ Joseph Queri
----------------------------------
Joseph Queri, Jr.,
Vice President of Real Estate
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ASSIGNMENT AND ASSUMPTION
OF
OPTION AGREEMENT
This Assignment and Assumption of Option Agreement ("Assignment") is made this 5th day of March, 1999, by and between Dick's Clothing and Sporting Goods, Inc., a New York corporation ("Assignor") and Panattoni Development Company (or Assignee), a sole proprietor ("Assignee").
A. Dick's Clothing and Sporting Goods, Inc., as Optionee, entered into that certain Agreement with Westmoreland County, as Optionor, dated November 12, 1998, attached hereto as Exhibit "A" and made a part hereof ("Agreement"), wherein Optionee was granted the exclusive right to purchase certain real property for a period of one (1) year.
B. For good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, Dick's Clothing and Sporting Goods, Inc., as Assignor, intends to assign and transfer to Assignee, all right, title, and interest of Assignor in the Agreement and Assignee agrees to accept all right, title, and interest of Assignor in the Agreement subject to the terms and conditions of this Assignment and assume, fulfill, perform, and observe each and every condition, covenant, and obligation of Assignor under the Agreement.
C. The parties agree that this assignment is intended to be an absolute, present assignment from Assignor to Assignee.
1. ASSIGNMENT. Assignor hereby assigns and transfers to Assignee all right, title, and interest in the Agreement, and Assignee accepts from Assignor all right, title, and interest, subject to the terms and conditions set forth in this Assignment, in and to the Agreement.
2. ASSUMPTION. Assignee assumes and agrees to perform and fulfill all the terms, covenants, conditions, and obligations required to be performed and fulfilled by Assignor under the Agreement.
3. WARRANTIES AND COVENANTS.
3.1 WARRANTIES OF ASSIGNOR.
3.1.1 Assignor hereby warrants and represents to Assignee that
Assignor is a holder of the rights, title, and interest in
the Agreement, and has good right to sell, assign, transfer,
and set over the same and to grant to and confer upon
Assignee, the rights, interest, powers, and authorities
herein granted and conferred.
3.1.2 Other than as required by the terms and conditions in the
Agreement, Assignor has neither made, nor permitted to be
made, any Assignment other than this Assignment of any of
its rights relating to the Agreement to any person or
entity.
3.1.3 No action has been brought or threatened which in any way
would interfere with the right of Assignor to execute this
Assignment and perform all of Assignor's obligations
contained herein.
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3.2 COVENANTS OF ASSIGNEE. Assignee hereby covenants and agrees with Assignor that Assignee shall assume, fulfill, perform, and observe each and every material condition and obligation of Assignor contained in the Agreement and indemnify and hold Assignor harmless from any liability arising from any breach thereof by Assignee.
4 GENERAL PROVISIONS.
4.1 SUCCESSORS AND ASSIGNS. This Assignment shall inure to the benefit of and be binding upon Assignor and Assignee and their respective heirs, executors, legal representatives, successors, and assigns. Whenever a reference is made to Assignor or Assignee, such reference shall be deemed to include a reference to the heirs, executors, legal representatives, successors, and assigns of Assignor or Assignee.
4.2 TERMINOLOGY IN CAPITALIZED TERMS. All personal pronouns used in this Assignment, whether used in the masculine, feminine, or neutral gender, should include all other genders, and the singular shall include the plural, and vice versa. Titles of sections are for convenience only and neither limit nor amplify the provisions of this Assignment.
4.3 SEVERABILITY. If any provision of this Assignment or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Assignment and the application of such provisions to other persons or circumstances shall not be affected and shall be enforced to the greatest extent allowed by law.
4.4 APPLICABLE LAW. This Assignment shall be interpreted, construed, and enforced according to the laws of the State of Pennsylvania.
4.5 NO ORAL MODIFICATIONS. Neither this Assignment nor any provisions hereof may be changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver, discharge, or termination is sought.
4.6 COUNTERPARTS. This Assignment may be executed in any number of counterparts all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Assignment has been executed as of the day and year first written above.
ASSIGNOR:
DICK'S CLOTHING AND SPORTING GOODS, INC.,
A NEW YORK CORPORATION
By: /s/ Joseph Queri -------------------------------- Name: Joseph Queri, Jr. Title: Senior Vice President |
ASSIGNEE:
PANATTONI DEVELOPMENT COMPANY (or Assignee)
EXHIBIT "A"
OPTION AGREEMENT
THIS AGREEMENT, made this 12th day of November, 1998, between the WESTMORELAND COUNTY INDUSTRIAL DEVELOPMENT CORPORATION, incorporated under the laws of the Commonwealth of Pennsylvania, having its principal offices in the City of Greensburg, County of Westmoreland, Commonwealth of Pennsylvania, hereinafter called OPTIONOR, and DICK'S CLOTHING & SPORTING GOODS, a corporation organized and existing under the laws of the State of New York, having its principal offices in 400 Fairway Drive, Coraopolis, Commonwealth of Pennsylvania, hereinafter called OPTIONEE:
WITNESSETH, that said Optionor, for itself, its successors and assigns, in consideration of the sum of ONE THOUSAND DOLLARS ($1,000.00) to them in hand paid, the receipt of which is hereby acknowledged as well as in consideration of the covenants and conditions hereinafter mentioned, hereby grant to Optionee the exclusive Option to purchase for the price and on the terms and conditions hereinafter mentioned, the following parcel of land:
ALL THAT CERTAIN TRACT OF LAND situate in the Township of South Huntingdon, County of Westmoreland, Commonwealth of Pennsylvania, being Parcel No.7 in the 1-70 INDUSTRIAL PARK SUB-DIVISION PLAN to be recorded. Both Optionor and Optionee understand that a subdivision of the property would have to be performed by the Optionor at the Optionor's cost and expense and the subdivision would have to be approved by South Huntingdon Township and Westmoreland County Department of Planning and Development prior to closing on the sale of the property if the Option is exercised by the Optionee. The specific plan of subdivision must be reviewed and approved by both Optionor and Optionee.
CONTAINING a parcel of land approximately 50 acres in size, as indicated on marked drawing Exhibit "A," " attached hereto and made a part of hereof.
Being part of the same parcel of land conveyed by Charles A. Rhodes and Dolores J. Rhodes, his wife, situate in the Township of South Huntingdon to Westmoreland County Industrial Development Corporation by deed dated October 9, 1991 and recorded in the Office of the Recorder of Deeds of Westmoreland County,
Pennsylvania in DBV 3052, pages 518-521. Also being the part of the same parcel of land conveyed by John Thurman Painter, Jr. and Judith W. Painter, his wife, situate in the Township of South Huntingdon to Westmoreland County Industrial Development Corporation by deed dated October 30, 1991 and recorded in the Office of the Recorder of Deeds of Westmoreland County, Pennsylvania in DBV 3056, pages 616-618.
If the aforementioned right to purchase is not exercised by the Optionee as hereinafter mentioned, Optionor may retain the said Optionee's "Option Money" in the amount of ONE THOUSAND DOLLARS ($1000.00).
The aforementioned right to purchase may be exercised by the Optionee by giving written notice in the manner hereinafter provided of its intention to the Optionor within a period of twelve (12) months from the date of this Agreement to the effect that the Optionee will purchase said parcel of land for the following price and on the following terms and conditions:
1. The purchase price will be EIGHT HUNDRED THOUSAND and 00/100 DOLLARS ($800,000.00), payable as follows: The "Option Money" in the amount of ONE THOUSAND DOLLARS ($1000.00) paid at the time of execution of this Agreement and the "Down Money" in the amount Of FORTY THOUSAND and 00/100 DOLLARS ($40,000.00), paid at the time such right to purchase is exercised, which shall be placed by the Optionee with an escrow agent to be chosen by Optionee and with evidence being provided to Optionor that the Down Money has been placed with the escrow agent, and shall be pad of the purchase price and the balance of SEVEN HUNDRED FIFTY-NINE THOUSAND and 00/100 DOLLARS ($759,000.00), shall be paid upon delivery of Deed at final settlement.
2. The premises are to be conveyed free and clear of all liens, encumbrances and
easements, and the title is to be good and marketable and such as will be insured by any reputable title insurance company in the Commonwealth at Pennsylvania at its regular rates, free of exceptions. If the Optionor is unable to convey good and marketable title free and clear of all liens, encumbrances and easements, and insurable as aforesaid, the Optionee may elect to take such title as the Optionor can convey, without abatement of price, or to be repaid all monies which have been paid on account (including the initial "Option Money" payment and the "Down Money" payment referred to above).
3. The Optionee and Optionor will agree to pay The Pennsylvania Realty Transfer Tax and the Local Realty Transfer Tax based upon the purchase price of the herein described property by splitting the total due equally.
4. Real Estate Taxes for the current year, water and sewer usage charges, if any are due or applicable at the time of settlement, shall be apportioned on a pro rata basis at, and as of the date of settlement. All applicable real estate taxes shall be prorated on a fiscal basis as of the date levied (County and Local levied an January 1st of each year and School levied on July 1st of each year). All taxes and charges, if any are due, shall be considered paid at discount rate.
5. The Optionor shall give Optionee immediate exclusive possession of the premises with the Deed at the time of settlement.
6. The Optionor agrees, that upon payment of the Down Money at the time the Optionee exercises its option pursuant to this Agreement, to proceed expeditiously with the preparation and submission of a Plan of Subdivision for the property which is the subject of this Agreement, after review and approved by the Optionee, in order to seek the review
and approval of said Plan of Subdivision by the Supervisors of the Township of South Huntingdon, which shall be done at the sole cost and expense of the Optionor. The Optionor agrees to close with the Optionee as soon as possible after the approval of the Plan of Subdivision by the Supervisors of the Township of South Huntingdon. It is agreed that the final settlement shall be within a sixty (60) day period of the day the optionee gives written notice to the Optionor exercising the Option or when the Plan of Subdivision is approved if prior to the sixty (60) day period.
7. At the time of settlement, Optionor shall deliver in the Optionee, a General Warranty Deed for the herein described property in fee simple, free and clear of all liens and encumbrances as aforesaid. The Deed, prepared at the Optionor's expense by the Optionor's Solicitor, shall be satisfactory in form to the Optionee and the description for the property utilized shall be based upon the courses and distances set forth on the applicable recorded plan of subdivision or a survey prepared at the direction of the Optionee with the choice to be made solely by the Optionee.
8. The Optionee shall have the right to cancel this Agreement if prior to the time of settlement hereunder the Optionee's proposed use of the premises for distribution/warehousing or manufacturing shall be prohibited or restricted by the provisions of any zoning or other law, ordinance, or regulation then in force or in the event that additional restrictions are adopted by the Optionor which are unacceptable to the Optionee, then in that event, at the Optionee's sole discretion this Agreement may be canceled and all monies paid hereunder shall be returned. In the event of any such cancellation, the Optionor shall repay to the Optionee all monies which have been paid on
account hereunder, including the initial "Option Money" payment and the "Down Money" payment referred to above.
9. It is understood and agreed between the parties hereto, that during the option period, the Optionee shall have the opportunity, right and privilege to perform all necessary site specific evaluations of the herein described property, such as but not limited to, environmental conditions, surface and subsurface conditions, availability and sufficiency of all required utilities, at its own risk, cost and expense. The Optionee agrees to repair or correct any damage or change in condition of the herein described property, at its own cost and expense, caused by such site specific evaluation if the Optionee does not exercise its option to purchase the herein described property. Optionee further agrees to provide copies of such reports generated from the site specific evaluation process only to the Optionor if the Optionee does not exercise its option to purchase the herein described property. It is understood by the Optionor and Optionee that any and all information concerning the condition of the herein described property and the required quality and quantity of all utilities required for the type and use of the proposed building is to be determined solely by the Optionee and information and documentation provided to the Optionee or its agents by the Optionor for assistance only and cannot be relied upon by the Optionee or its agents or contractors. The Optionee understands it has the sole responsibility to determine whether the herein described property and existing utilities are suitable for its desired building and use thereof by the Optionee. If the site specific evaluations performed by the Optionee reveal that the Optionee's proposed building use will be prohibited, the Optionee shall have the right to cancel the Agreement and all monies
paid to the Optionor by the Optionee shall be returned by the Optionor to the Optionee.
10. The Optionor hereby represents to the Optionee that the herein described property has been surveyed and is depicted on a Plan of Subdivision that is or will be recorded in the Recorder of Deeds Office of Westmoreland County, Pennsylvania. If the Optionee requires a specific survey of the herein described property for use by its contractor, lending institution, and/or title insurance company, the Optionee has the obligation to secure such survey at its own effort and expense.
11. If after exercise of the purchase Option herein granted, this transaction shall not be completed because of a default on the part of the Optionee, the Optionor may retain the Optionee's "Option Money" payment and "Down Money" payment as liquidated damages, and this Agreement shall be null and void. The right of retention of such sums shall constitute the Optionor's exclusive remedy for breach of the agreement by the Optionee.
12. The Optionor and Optionee agree that the Optionor shall be solely responsible to pay the real estate commission or brokerage fee which is due to NAI/Pyramid Brokerage Company Inc. and Gold & Company collectively referred to as Broker pursuant to a separate agreement by and between Optionor and Broker. Optionor and Optionee hereby represent, covenant and warrant to each other that there are no other brokers or agents who brought the parties together or assisted in the negotiations of this Option Agreement. The Optionor agrees to hold harmless, defend and indemnify the Optionee from any responsibility, obligation or liability to pay a commission fee to Broker.
13. Optionee retains the right to assign this Option Agreement and the rights and
obligations contained herein to assignee of the Optionee's choice without requiring the consent of the Optionor provided that the Optionee provides to the Optionor written confirmation that the Optionee's assignee agrees to be bound by the terms and conditions of this Agreement.
14. If the Optionee exercises its option under this Option Agreement, at the time of closing on the purchase of the property by the Optionee, the Optionor agrees to deliver to Optionee and Optionee's title insurer a seller's affidavit in order for Optionee's title insurer to issue in favor of Optionee the ALTA Policy in an amount not less then the purchase price insuring Marketable Title to the Property, Optionor further agrees to provide to Optionee an affidavit concerning those facts set forth on Exhibit "C" warranting, guaranteeing and representing to Optionee its actual personal knowledge of those facts set forth on Exhibit "C."
15. Optionor agrees to arrange with Columbia Gas of Pennsylvania, Inc. for the relocation of the existing gas line from its present location, which traverses through the property, to a location along the northern property line of the property.
16. All rights and liabilities under this Agreement shall extend to and be binding upon the heirs, personal representatives, successors and assigns of the parties hereto.
17. The deed to be delivered to the Optionee shall make reference to the Restrictive Covenants and Building Restrictions which shall run with the land and shall be binding upon the Optionee, its heirs, personal representatives, successors and assigns, which said Restrictive Covenants and Building Restrictions are set forth on Exhibit "B," which is made part hereof and incorporated herein.
18. All notices hereunder must be in writing and shall be deemed validly given if sent by registered United States Mail addressed to the party to be notified at the address or addresses set forth below (or to any other address that a party to be notified may have designated to the sender, by like notice):
TO OPTIONOR: Westmoreland County Industrial
Development Corporation
Courthouse Square
2 North Main Street
Suite 601
Greensburg, PA 15601
TO OPTIONEE: Dick's Clothing & Sporting Goods
400 Fairway Drive
Coraopolis, PA 15108
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IN WITNESS WHEREOF, the parties have executed this Agreement under Seal as of the date first above written.
WITNESS: DICK'S CLOTHING & SPORTING GOODS
/s/ Priscilla K. Roney /s/ Joseph Queri
---------------------------- --------------------------------
Joseph Queri, Vice President - Real Estate
WESTMORELAND COUNTY INDUSTRIAL
DEVELOPMENT CORPORATION
/s/ Richard Vidmer
----------------------------------
Richard F. Vidmer
/s/ Terry R. Marolt
----------------------------------
ATTEST: Terry R. Marolt, Vice Chairman
/s/ illegible /s/ Tom Balya
---------------------------- -----------------------------------
Executive Director Tom Balya, Secretary
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[MAP]
EXHIBIT "A"
INDUSTRIAL DEVELOPMENT CORP.
DATE: OCTOBER 20, 19?? SCALE: 1" = ???'
RESTRICTIVE COVENANTS AND BUILDING RESTRICTIONS
FOR
1-70 INDUSTRIAL PARK
SITUATE IN SOUTH HUNTINGDON TOWNSHIP
WESTMORELAND COUNTY
COMMONWEALTH OF PENNSYLVANIA
EXHIBIT "B"
RESTRICTIVE COVENANTS AND BUILDING RESTRICTIONS
FOR I-70 INDUSTRIAL PARK
(SOUTH HUNTINGDON TOWNSHIP)
EXHIBIT "B"
THIS AGREEMENT, made and entered into this 1st day of July, 1996, by and between WESTMORELAND COUNTY INDUSTRIAL DEVELOPMENT CORPORATION, a non-profit corporation of the Commonwealth of Pennsylvania. Party y of the First Part (hereinafter called "WCIDC") and ALL PURCHASERS, THEIR RESPECTIVE HEIRS, SUCCESSORS AND ASSIGNS, of lots in I-70 Industrial Park situated in the Township of South Huntingdon, Westmoreland County, Pennsylvania, Parties of the Second Part;
WHEREAS, WCIDC is the owner of a plan of lots called "I-70 Industrial Park," situated partly in the Township of South Huntingdon, Westmoreland County, Pennsylvania, hereinafter called "I-70 Industrial Park," which plan is recorded in the Office of the Recorder of Deeds in and for the County of Westmoreland, Pennsylvania in PBV 90 Pages 2928 to 2931 inclusive; and
WHEREAS, the party of the first part intends to lease, sell and convey lost in the said I-70 Industrial Park by deeds referring to the restrictive covenants herein contained and subjecting the purchaser thereto, to the end that such covenants will inure to the benefit of each and all of the purchasers of such lots, their respective heirs, successors and assigns, and will insure sound industrial development;
NOW, THEREFOR, WCIDC agrees that all lots in said I-70 Industrial Park will be leased or sold subject to the restrictive covenants herein contained and all purchasers of lots in said I-70 Industrial Park for themselves, their heirs, successors and assigns, by the acquisition of said lots, agree to be bound by the restrictive covenants herein contained
by reference in their respective deeds to the Volume and Page in the Recorder's Office in and for the County of Westmoreland, Pennsylvania, wherein this Agreement will be recorded.
IN CONSIDERATION of the foregoing, the procurer of any lot in said I-70 Industrial Park, intending to bind himself and all persons whom title to said lot may hereafter vest, agrees to the following restrictive covenants:
1. The covenants herein contained shall run with the land and shall bind all parties and persons claiming under them until DECEMBER 31, 2021, at which time said covenants shall be automatically extended for successive period of ten (10) years, unless by a vote of the majority of the ten owners of said lots it is agreed to change said covenants in whole or in part.
2. In order to make possible adjustments and variances which in the sole opinion of WCIDC are necessary or desirable, enforcement rights will be held only by WCIDC, its successors or assigns. If the parties hereto, or any of them or their heirs, successors or assigns, shall violate or attempt to violate, any; of the covenants herein, it shall be lawful for WCIDC, its successor or assigns, to prosecute any proceedings at law or in equity against the person or persons violating or attempting to violate any such covenants and either to prevent him or them from doing, or to recover damages or other dues for such violation. In the event neither WCIDC nor its successors and assigns is in existence, or in the event WCIDC executes and records an Agreement relinquishing its sole right of enforcement
hereunder, such proceedings may be brought by a majority of the owners of real property in said 1-70 industrial Park.
3. Invalidation of any one of the covenants by a judgment or court order shall not affect any of the other covenants which shall remain in full force and effect.
4. The following restrictive covenants shall be applicable to the land in I-70 Industrial Park.
(a) LAND-TO-BUILDING RATIO - Provision will be made for limiting the area which may be covered by buildings, to assure adequate space for parking, loading, future expansion, and an attractive park-like setting. The minimum land-to-building ratio will be 2 to 1 in the initial development and on full development, after expansion a maximum building coverage not to exceed 50% of the lot size.
(b) PERMITTED USES - The property is to be utilized for office, laboratories, manufacturing, processing, servicing, testing, repair, research and development, and distribution activities. All buildings and land use shall be for service and industrial purposes as opposed to any commercial/retail uses. No products will be sold from the premises as a retail trade unless such retail sales are incidental in nature to the function of the facility. Use which create objectionable noise, odor, vibration, fumes, glare, heat, hazard radiation or waste problems are prohibited. Trailer courts, coal and natural gas extraction, sanitary
land fills, junk and salvage yards are expressly prohibited. In regards to emissions, there shall be no emission of fly ash, dust, dirt, fumes, vapors or gases in the atmosphere from any operation that would cause any damage to the public health or other forms of property or which can cause excessive soiling of any point beyond the lot line. Operations and uses which are neither specifically prohibited nor specifically authorized by these restrictions may be permitted in a specific case if operational plans and specifications are submitted and approved in writing by the WCIDC. Approval or disapproval of such operational pans and specifications shall be based upon the effect of operations or uses on other property subject to these restrictions. Neither the WCIDC, nor its successors or assigns, shall be liable in damages to anyone submitting operational plans to them for approval by reason of mistake in judgment, negligence or nonfeasance arising out of, or in connection wit the approval or disapproval of any such operational plans. Every person who submits operational plans to the WCIDC for approval agrees, by submission of such plans that he will not bring any action or suit against WCIDC to recover any such damages.
(c) LANDSCAPING - The total ground area of the site not covered by buildings, paved parking, interior roadways and service areas is to be landscaped. A minimum of 50% of the front yard area is to be
landscaped with lawn or other appropriate planting materials such as trees and shrubs. A minimum of one tree for every 40' of front footage is required set back 20' from right-of-way. Side and rear yards are to be landscaped with lawn or other appropriate planting or materials except paved areas for loading, unloading, driveway and parking. For each lineal foot of side lot line between the front property line and the rear line of the building, at least three (3) square feet of landscaping is to be provided on that side yard, no matter how much area is to be paved. All slopes are to be entirely covered by grass or ground cover.
A minimum of one (1) 2" caliper shade tree for every 40' of front footage is required; set back 20' from right-of-way. (This species of tree will be specified by the WCIDC).
The total front yard area not covered by paved parking and drives, sidewalks and other service areas shall be landscaped with lawn, or other appropriate planting materials, as defined in Landscape Treatment below.
Landscape Treatment for all areas of the site may include the use of ground covers, ornamental grasses, flower beds, deciduous and evergreen shrubs, shade and ornamental trees, coniferous trees, fountains, pools and sculptured materials. All planting material shall be hardly to this geographical planting zone.
(d) ___________ - the Building front yard setback line will be established not less than fifty (50) feet back from the street rights-of-way. Only walks, driveways, visitor and executive parking, and landscaping will be permitted in the setback area.
(e) OTHER SETBACKS - To provide sufficient light and air for all buildings, and to assure an attractive setting, building setback lines will be established at not less than twenty-five (25) feet from side property lines. The building setback line will be not less than twenty-five (25) feet from rear property lines. Where improved residential properties existed on the date of this Agreement, the building setback from the abutting property line or street right-of-way, will be not less than fifty (50) feet. Setbacks will be measured from the wall of the building or the end of the loading dock, whichever is closer to the property line.
(f) BUILDING HEIGHT LIMITATIONS - Buildings will normally be limited to two
(2) stories, except that in cases of buildings with special
requirements, additional height may be permitted by WCIDC, provided the
setbacks are also increased as required herein. Generally, any building
over thirty-five (35) feet in height will require a setback from the
nearest property line at least 25% greater in lineal footage than the
height of the building, however, no building or structure including
office buildings, shall exceed three stories or forty-
five (45) feet in height.
(g) CONSTRUCTION MATERIAL - All exterior walls of building are to be finished in materials of pleasing and harmonious appearance; unsightly or low-grate exteriors will not be permitted. This will require the use of face brick, its equivalent, or better on the facing for office space. If office space is going to be included on the internal portions of the building, and thus, will not be accented, the WCIDC may consider the use of an all metal building with a requirement of higher landscape treatment. Non-masonry materials may be permitted by WCIDC if compatible with the basic objective of achieving high-grade and harmonious development. WCIDC expressly reserves the right to PROHIBIT certain colors and exterior materials such as concrete block, split face block, fluted block, pre-engineered metal siding, etc. Any buildings where split face block may be permitted, the WCIDC will require the use of accent courses and/or other trim applications as deemed appropriate by the WCIDC. All exterior metal walls shall be prefabricated panels and pre-finished with a standard manufacturer's color.
(h) OFF-STREET PARKING AND LOADING - No parking on streets is permitted. All parking is to be located to the side or the rear of the building except for limited visitor and executive parking which may occur in the area fronting upon the street. Front area parking may be permitted
based on the peculiar topography features and meeting an additional requirement of higher landscape treatment. Shipping may be permitted from the front of the building, however, the WCIDC will require additional landscape treatment and possible screening. All areas used for driveway, loading, service, parking or vehicular storage shall be surfaced with a pavement approved by the WCIDC. All paved areas shall be appropriately drained so that storm water will not create erosion and/or storm water problems on the property or on adjacent properties. No surface storm runoff may be drained on to public streets unless approved by WCIDC. Adequate shipping facilities are to be located on those sides of buildings which do not front on streets except to conditions previously mentioned. Truck and trailer maneuvering are to be confined to the property of the user.
(i) STORM WATER DETENTION - Peak storm runoff from the developed site, if not conducted to the public storm system, will be limited to an amount or quantity that is no greater than the existing peak storm water discharge before proposed development. A review of the amount of storm water shall be performed by the WCIDC engineer to insure that the storm water system can handle the level of runoff. Extremely large development may require additional on-site retention. The peek storm runoff will be computed, using the "rational method," on the basis of an average rainfall intensity of 5.16 inches per hour.
Storm run-off from the developed site shall be channeled and collected within the site and shall not flow on or affect adjacent lots.
(j) STORAGE AREAS - Outdoor storage materials, supplies, products, and equipment will be permitted only in areas which do not front on streets, and only if enclosed or screened by an approved wall, planting, earthen mound or other suitable barriers, providing year-round visual screening from adjacent properties.
(k) WASTE DISPOSAL AND STORAGE - Refuse, trash and waste, if stored outside of the building, is to be kept in closed, fire resistant sanitary containers, especially manufactured for waste storage. Hazardous waste must be stored in approved buildings.
The size and number of containers is to be such that refuse will not overflow the container between pickups. Refuse containers shall be so located and screened so as not to be visible from any street or adjoining property. No burial of waste materials is permitted on the premises. No lagoons or open vessels for sludge or spent chemical storage will be permitted. Radioactive waste storage outside of a building is not permitted. Open burning of rubbish and trash is prohibited.
(l) TRANSMITTING RECEIVING TOWERS, DISHES OR ANTENNAS - No tower, dish or antenna for the transmission or reception of electromagnetic or laser radiation shall be erected, used or maintained on the property
if visible outside of any building whether attached to an improvement or self-standing without prior written approval of WCIDC.
(m) SIGN STANDARDS - No flashing, animated or glaring signs will be permitted. Signs will be placed on the face of the building, except for entrance and directional signs or a ground mounted identification sign as an alternate to an identification sign on the building. No building mounted sign shall project above the roof line of the building. Sign copy shall be restricted to the company name, logo and principal product. Directional signs located on owner's or leasee's property will be of a uniform type and permanent quality and will not exceed four (4) square feet in area; ground mounted identification and entrance sign will not exceed thirty-five (35) square feet in area. The WCIDC may permit larger signs when considering such aspects as building size and setbacks from the right-of-way. No billboards or similar advertising signs will be permitted except a sign advertising a property for sale or lease.
(n) EXTERIOR LIGHTING - In order to minimize the trespass of light onto adjacent streets and properties only lighting fixtures utilizing shielded or screened lamps, and designed to control glare by having a light cutoff feature shall be used for exterior lighting. Wiring for exterior lighting fixtures shall be installed underground. Lighting shall be compatible and harmonious throughout and shall be in keeping with
the design and function of the building. Flood lighting is not permitted as a source of general area illumination.
(o) MECHANICAL EQUIPMENT - All mechanical equipment including air handling units, condensers, compressors, ventilators, chimneys, stacks, ductwork, vents and conductors erected, used and installed on the property if visible outside of any building, must be screened from view in a manner approved by WCIDC.
(p) FENCES AND WALLS - Erection of fences and walls will be subject to prior written approval of WCIDC to assure that they will harmonize with the surroundings. No fencing is permitted within the setback areas.
(q) MINERAL RESERVATIONS - Mineral, oil and gas rights will be restricted to avoid the possibility of undermining structures of unsightly exploitation of underground resources.
(r) MAINTENANCE OF BUILDINGS AND GROUNDS - Buildings, grounds, pavements, improvements and appurtenances shall be kept in a safe, clean, neat wholesome and well repaired condition and owner or lessee shall comply in all respects with governmental statutes, ordinances, regulations, health, police and fire requirements. Trash, debris or used materials are not permitted to accumulate on the property. Lawn and landscape materials are to be kept trim and free of obnoxious weeds and deleterious growth.
(s) FUTURE ADJUSTMENTS - In order to make possible adjustments which are desirable and do not detract from the industrial park's overall development, and to allow future changes needed to protect or enhance the value of the total industrial park development, enforcement rights will be held only by the WCIDC, it successors and assigns. This will permit the flexibility and adaptability vital to the industrial park. Requests for variances or adjustments will be considered by WCIDC on a case-by-case basis and in it sole discretion, and approval of any variance or adjustment shall not be deemed to change or generally waive the covenants and restrictions herein contained or to serve as precedent for any proposed future variances or adjustments which maybe be requested.
(t) PLAN APPROVAL - To assure architectural and landscaping integrity, prior approval by WCIDC will be required of a user's site plan and construction plans, including landscaping, sign design (including supporting structures), and contemplated alterations. Any future additions or alterations to the building are subject to this same plan approval process. Plans are to be submitted to WCIDC prior to making application for a building permit. Review of plans by the WCIDC shall be provided within thirty (30) days. Plans should show among other things, the location of main and accessory structures o the site and in relation to one another, the exterior building materials,
colors and textures to be used in construction; storm drainage systems; the height and bulk of structures; roads and parking areas; the provision of other open space on the site; the landscaping, paving, fences and walls on the site; and the display of signs.
(u) PROPERTY DEVELOPMENT - Upon closing of the sale each purchaser shall close within one (1) year of such date, actual construction to be started of an industrial building. Said construction shall be completed within two (2) years of the start of construction. If the provisions of this paragraph are not strictly complied with, title to the subject property shall revert to the WCIDC and the consideration, less the option fee, shall be returned without interest.
(v) SUBSEQUENT TRANSFER - Upon closing of the sale and after transfer of deed from WCIDC to a purchaser such lot shall not be further sold or leased without the express written consent of the WDIDC, which consent shall not be withheld unreasonably so long as the prospect occupant, owner or tenant's use of the property is permitted within the limits set forth in paragraph 4(b). No lot shall be further subdivided without the expressed written consent of the WCIDC, which consent shall not be withheld unreasonably so long as the proposed subdivision meet the requirements of paragraph 4(a) Land-to-Building Ratio and the intended use of the proposed subdivision is within the scope of Permitted Uses as set forth in paragraph 4(b).
Exhibit 10.9
LEASE
THIS INDENTURE OF LEASE (this "Lease"), made as of the 3rd of November, 1999, between COOLIDGE BINGHAMTON, LLC, a New York limited liability company, having an address at c/a Houlihan-Parnes Realtors, LLC, 455 Central Park Avenue, Scarsdale, New York 10583, Attn: Mr. Sheldon Stahl, hereinafter referred to as "Landlord", and DICK'S SPORTING GOODS, INC., a Delaware corporation, having an office at 200 Industry Drive, Pittsburgh, Pennsylvania 15275, hereinafter referred to as "Tenant".
WITNESSETH:
The parties hereto hereby agree as follows:
That Landlord hereby demises and leases to Tenant, and Tenant hereby hires and takes from Landlord, subject to and in accordance with the terms and conditions hereof, the premises described in SCHEDULE A hereto annexed and made a part hereof together with all of the buildings and improvements now or hereafter located thereon, which premises and improvements are hereinafter called "the demised premises":
THE DEMISED PREMISES IS LEASED TO TENANT SUBJECT to all of the liens, charges, encumbrances and other matters, encumbering or otherwise affecting the demised premises as set forth on Schedule B attached hereto and made a part hereof (collectively, the "Permitted Encumbrances"):
TO HAVE AND TO HOLD the demised premises for the term of ten (10) year(s) to commence on the date hereof (the "Commencement Date"), and to end on the day (the "Expiration Date") immediately preceding the tenth (10th) anniversary of the date hereof, both dates inclusive, (unless such term shall be sooner terminated or shall be extended as hereinafter provided) at the fixed minimum rent hereinafter set forth, payable in equal monthly installments, in advance, on the first day of each and every month during the term, together with the additional rent hereinafter reserved, all of which shall be payable to Landlord, at Landlord's address above stated or at such other place or to such other person as Landlord shall, by notice, direct, in lawful money of the United States, which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, without set-off or deduction whatsoever, except as expressly provided otherwise herein.
In the event that the Lease shall commence on other than the first day of a calendar month, then the Tenant shall pay to the Landlord the pro rata portion of the first month's rent upon the signing of this Lease. If the Expiration Date shall fall on any day other than the last day of a calendar month, the fixed minimum rent for the calendar month in which falls the Expiration Date shall be prorated, based on the number of days in such month occurring within the term of this Lease.
IT IS HEREBY MUTUALLY FURTHER AGREED by and between the parties hereto that this Lease is made upon the foregoing and upon the following agreements, term, covenants and conditions:
1. FIXED MINIMUM RENT. Tenant shall pay fixed minimum rent in the manner and at the times as above provided. The fixed minimum rent payable by Tenant for the period commencing on the date hereof and expiring on the last day of the calendar month in which falls the fifth (5th) anniversary of the date hereof shall be Four Hundred Thousand ($400,000.00) Dollars per annum, and the fixed minimum rent payable by Tenant for the period commencing on the first day of the calendar month immediately following the calendar month in which falls said fifth (5th) anniversary and ending on the Expiration Date shall be Four Hundred Eighty Thousand ($480,000.00) Dollars per annum.
2. ADDITIONAL RENT. All taxes, charges, costs and expenses which Tenant assumes or agrees to pay hereunder, together with all interest and penalties that may accrue thereon in the event of Tenant's failure to pay the same as herein provided, all other damages, costs and expenses which Landlord may suffer or incur, and any and all other sums which may become due, by reason of any default of Tenant or failure on Tenant's part to comply with the agreements, terms, covenants and conditions of this Lease on Tenant's part to be performed, and each or any of them shall be deemed to be additional rent and, in the event of nonpayment thereof, Landlord shall have all the rights and remedies herein provided or provided at law in the case of nonpayment of fixed minimum rent. Fixed minimum rent, additional rent and all other sums and charges payable by Tenant pursuant to or in connection with this Lease are herein sometimes collectively referred to as "Rent".
3. LATE CHARGES, INTEREST. In the event that Tenant shall fail to pay
any Rent within five (5) days after the date the same is due, Tenant shall be
required to pay a late charge of $.05 for each $1.00 which remains unpaid after
such five (5) day period. Such late charge is intended to compensate Landlord
for additional expenses incurred by Landlord in processing such late payments.
In addition, if Tenant fails to pay any installment of Rent for a period of five
(5) days after such installment or payment shall have become due, Tenant shall,
upon demand of Landlord, pay to Landlord as additional rent, interest on the
unpaid installment or other amount (exclusive of any late charge) at the per
annum rate of three percent (3%) in excess of the prime rate of The Chase
Manhattan Bank (or any successor thereto) from time to time in effect, from the
date when such amount became due to the data of payment thereof to Landlord.
4. NET LEASE. (a) Except as expressly provided otherwise herein, this Lease shall be deemed and construed to be a "net lease", and Tenant shall pay to Landlord, absolutely net throughout the term of this Lease, the fixed minimum rent and other sums payable hereunder, free of any charges, assessments, taxes, Impositions (as hereinafter defined) or deductions of any kind and without abatement, deferment, reduction, demand, notice, deduction, credit or set-off of any kind. Except as expressly provided otherwise herein, all costs, expenses, charges, taxes, Impositions and other payments of every kind and nature whatsoever relating to the demised premises, or the use, operation or maintenance thereof, which may arise or become due during or in respect of the term of this Lease shall be paid by Tenant, and under no circumstances or conditions, whether now existing or hereafter arising, or whether beyond the present contemplation of the parties, shall Landlord be expected or required to make any payment of any kind whatsoever or be under any other obligation or liability hereunder except as expressly set forth otherwise herein. Tenant shall be solely responsible for, and shall indemnify Landlord against any and all claims, liabilities, damages, losses, costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) relating to charges for gas, electricity, light, heat, water, sewerage and power for protective and security services, for telephone and other communication services, and for all other public and private utility services which shall be used, rendered or supplied upon or in connection with the demised premises or any part thereof at any time during the term of this Lease. Landlord shall not be required to furnish any services, utilities or facilities whatsoever to the demised premises, nor shall Landlord have any duty or obligation to make any alterations or repairs to the demised premises except as expressly provided otherwise herein, and Tenant shall have the full and sole responsibility for the condition, operation, repair, alteration, improvement, replacement, maintenance and management of the demised premises.
5. TAXES. (a) Tenant shall bear, pay and discharge on or before the last day on which payment may be made without penalty or interest, all taxes (including without limitation, any retroactive or "roll back" increase in real estate taxes relating to any periods, whether prior to or during the term of the Lease as a result of the termination or loss of the tax exemption (or partial tax exemption) that was previously enjoyed by the Premises), assessments, water rents, rates and charges, sewer rents, and other governmental impositions and charges of every kind and nature whatsoever, extraordinary as well as ordinary, seen or unforeseen, and each and every installment thereof, which shall or may during the term be charged, laid, levied, assessed, imposed, become due and payable, or lien upon, or arise in
connection with the use, occupancy or possession of, or grow due or payable out of, or for, the demised premises or any part thereof, or any buildings, appurtenances or equipment thereon or therein or any part thereof, or the sidewalks or streets in front of or adjoining the demised premises, and all taxes charged, laid, levied, assessed or imposed in lieu of or in addition to the foregoing under or by virtue of all present or future laws, ordinances, requirements, orders, directions, rules or regulations of the federal, state, county and municipal governments and of all other governmental authorities whatsoever, and all fees and charges of public and governmental authorities for construction, maintenance, occupation or use during the term of any vault, passageway or space in, over or under any sidewalk or street on or adjacent to the demised premises, or for construction, maintenance or use during the term of any building covered hereby within the limits of any street (the foregoing herein collectiveLy called "Impositions"). Tenant shall within twenty (20) days after the time above provided for the payment by Tenant of any such Impositions produce and exhibit to Landlord satisfactory evidence of such payment.
(b) All such Impositions which shall be charged, laid, levied, assessed or imposed for each fiscal period in which the term of this Lease terminates shall be apportioned pro rata between Landlord and Tenant. If Tenant shall pay Impositions for any period of time after the expiration of this Lease, then promptly after the expiration of this Lease, Landlord shall reimburse Tenant for such paid Impositions, prorated for the period occurring after the expiration of this Lease, but Landlord shall be entitled to first offset against or deduct from the amount of such reimbursement all amounts, if any, then owing by Tenant to Landlord. All Impositions arising during the term of this Lease that relate to a fiscal or tax period, any part of which occurs prior to the commencement of the term of this Lease, shall not be prorated, and Tenant shall bear and pay such Impositions in full without reimbursement of any portion thereof by Landlord.
(c) Tenant may, if it shall so desire, protest or contest the validity or amount of any Imposition, in whole or in part, PROVIDED that and so long as:
(i) Tenant shall give written notice ("Election Notice") to Landlord of Tenant's election to contest such impositions as Tenant shall identify in such Election Notice, at least thirty (30) days prior to the last day on which the necessary filing must be made or proceeding must be commenced or other action must be taken in order to validly contest such Impositions; if Tenant shall give an Election Notice, then Tenant shall be obligated to protest or contest the Impositions set forth therein in accordance with the provisions of this paragraph (c); if Tenant shall fail to timely give an Election Notice with respect to any Impositions relating to any fiscal or tax period, then Tenant shall have no right to contest or protest such Impositions, and Landlord shall have the sole right (but not the obligation) to do so;
(ii) the same is done by Tenant at Tenant's sole cost and expense and with due diligence and continuity so as to resolve such protest or contest promptly;
(iii) the demised premises nor any part thereof is or will be in danger of being forfeited or lost by reason of such protest, review or contest;
(iv) unless Tenant actually pays the contested or disputed Imposition under protest, Tenant shall either bond such imposition or deposit with Landlord a sum of money in an amount reasonably satisfactory to Landlord for application towards the cost of curing or removing the same of record and to secure Landlord against any and all losses or damages, costs and expenses, including, without limitation, interest and penalties, arising out of such protest, review or contest or the deferral of Tenant's performance or compliance; any sums so deposited by Tenant with Landlord shall be placed in an interest-bearing account (provided Tenant provides Landlord with appropriate IRS reponing forms and Tenant's tax identification number), with the interest earned thereon to be added to the amount of such security and to be reported as income to Tenant; if, at any time, Landlord determines.
in its reasonable judgment, that said amount on deposit with Landlord is not reasonably sufficient to secure Landlord against all such losses, damages, costs and expenses, then Tenant shall deposit with Landlord a sum of money equal to such insufficiency within ten (10) days after written notice and demand made by Landlord, setting forth the amount of such insufficiency;
(v) Tenant shall thereafter diligently proceed to cure or remove the same from record and in any event prior to the date the demised premises or any part thereof is listed for an in rem action with respect to the non-payment of such Imposition or any Writ or order is issued under which the demised premises or any part thereof may be sold or forfeited;
(vi) such protest or contest shall not subject Landlord to prosecution for a criminal offense or a claim for civil liability in excess of seventy-five (75%) percent of the aforesaid amount on deposit with Landlord;
(vii) Tenant agrees in writing to indemnify and hold harmless Landlord from and against any and all claims, liabilities, damages, losses, costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) arising out of or in connection with such protest or contest, which agreement shall survive the expiration or sooner termination of the Lease, and
(viii) no Event of Default shall be continuing hereunder.
If Tenant or Landlord receives any notice that Tenant or the demised premises, or any part thereof, is in default under or is not in compliance with any of the foregoing, or notice of any proceeding initiated under or with respect to any of the foregoing, such party will promptly furnish a copy of such notice to the other patty. Nothing herein contained, however, shall be so construed as to allow such Imposition to remain unpaid for such length of time as would permit the demised premises, or any part thereof, or the lien thereon created by such Imposition to be sold by a governmental, city or municipal authority for the non-payment of the same, and, if at any time, in the reasonable judgment of Landlord, it shall become necessary or proper to do so to prevent such sale, Landlord, after written notice to Tenant, may pay out or apply the moneys or other security deposited in accordance with this paragraph (c) or so much thereof as may be required to the payment of the challenged Imposition to prevent the sale of the demised premises or any part thereof, or the lien created thereon by such Imposition. If the amount so deposited as aforesaid shall exceed the amount paid by Landlord to satisfy the challenged Imposition as finally fixed and determined, the excess shall he paid to Tenant provided that no default by Tenant under this Lease is continuing, or in case there shall be any deficiency, the amount of such deficiency shall within ten (10) days of written notice and demand by Landlord be paid by Tenant to Landlord. As soon as the contest is resolved, or if Tenant desires to discontinue the contest and to pay the disputed Imposition and so notifies Landlord, and provided that no default by Tenant under this Lease is continuing, Landlord shall release the aforesaid amounts deposited with it and pay same directly to the applicable taxing authority in payment of the challenged Imposition, and if the deposited amount is not sufficient to pay such challenged Imposition in full, Tenant shall pay the deficiency within ten (10) days after demand by Landlord, or if the deposited amount exceeds the amount by the challenged Imposition, Landlord will promptly refund the surplus to Tenant, provided that no Event of Default is continuing. Notwithstanding anything herein contained to the contrary, after the occurrence of an Event of Default, Landlord shall have the right to apply any monies or security deposited with Tenant pursuant to this paragraph to the payment to Landlord of any Rent, damages or other sums owing by Tenant to Landlord.
(d) (i) Provided no Event of Default is continuing, Landlord shall reasonably cooperate with Tenant's reasonable requests in connection with any action or proceeding to contest Impositions that Tenant is permitted to commence pursuant to paragraph (c) above. Neither Landlord nor such owner shall be required to join in any such action or proceeding hereof unless required by law in order to make such action or proceeding effective,
in which event any such action or proceeding may be taken by Tenant in the name of, but without expense to, Landlord.
(ii) Tenant hereby agrees to indemnify and hold harmless Landlord from and against any and all liabilities, damages, losses, costs and expenses (including, without limitation, reasonable attorneys' fees and disbursements) arising out of or in connection with such action or proceeding. The provisions of this subparagraph (d)(ii) shall survive the expiration or earlier termination of this Lease.
(e) Nothing herein contained shall require or be construed to require Tenant to pay any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax, or capital levy that is or may be imposed upon Landlord, its successors or assigns; provided, however, that in any case where a tax may be levied, assessed or imposed upon the income arising from the rent hereunder for the use and occupancy of the demised premises in lieu of or a substitute, in whole or in part, for a real estate tax upon the demised premises, Tenant shall pay the same.
(f) At Landlord's request, Tenant shall deposit with Landlord a sum equal to any accrued real estate taxes assessed or imposed against the demised premises for the current tax year, and thereafter on the first day of each and every month during the term, Tenant shall deposit with Landlord a sum equal to one-twelfth (1/12th) of the Impositions assessed or imposed against the demised premises for the current or ensuing fiscal year, as the case may be, so that as each installment of Impositions shall first become due and payable, Tenant shall have deposited with Landlord a sum sufficient to pay the same, provided that Tenant shall be required to make such deposits only if and as long as Landlord is required to make similar deposits with the holder of any mortgage on the demised premises. All such deposits shall be received and held by Landlord in trust and shall be deposited by Landlord in a separate special bank account (hereinafter referred to as the "Tax Account"). As and when any such Impositions become due and payable, Landlord shall promptly pay the same from the Tax Account and shall promptly forward to Tenant receipted bills or other satisfactory evidence showing such payment. In the event that the amount of any Impositions assessed or imposed against the demised premises has not been definitely ascertained at the time when any such monthly deposit is required to be made herein. Tenant shall make such deposit based upon the amount of the Impositions as assessed or imposed against the demised premises for the preceding year, subject to adjustment as and when the amount of such Impositions is ascertained. If Tenant shall have made the deposits herein provided for, and if Landlord shall have failed to pay any Impositions prior to the time when any interest or penalty would accrue thereon, Tenant may, at its option, pay any such Impositions which Landlord shall have so failed to pay, whether with any interest or penalties thereon, if any, and deduct the amount so paid from the next succeeding aforesaid deposits which would otherwise be due and payable by Tenant to Landlord, and, in addition to any other remedies available to Tenant, Tenant shall have recourse against all moneys on deposit in the Tax Account until Tenant shall have been fully reimbursed for any such expenditure. Notwithstanding anything herein and contained to the contrary, in the event that Tenant shall be in default under this Lease beyond any applicable period of notice or grace herein provided for the curing of such default by Tenant, Landlord shall have the right to use and apply any monies in the Tax Account towards the payment to Landlord of any Rent, damages or other sums owing hereunder by Tenant to Landlord.
6. MORTGAGES, ASSIGNMENT, SUBLETTING. (a) Except as expressly provided otherwise herein, neither Tenant, nor Tenant's successors or assigns, shall assign, mortgage, pledge, hypothecate or encumber this Lease, in whole or in part, or sublet the demised premises, in whole or in part, or permit the same to be used or occupied by others, nor shall this Lease be assigned or transferred by operation of law, without the prior consent in writing of Landlord in each instance. If this Lease be assigned or transferred, or if all or any part of the demised premises be sublet or occupied by anybody other than Tenant, Landlord may, after default by Tenant, collect rent from the assignee, transferee, subtenant or occupant, and apply the net amount collected to the rent reserved herein, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of any agreement, term, covenant or condition hereof, or the acceptance of the assignee, transferee, subtenant or occupant as tenant, or a release of Tenant from the performance or further performance by Tenant of the agreements, terms, covenants and conditions hereof, and Tenant shall continue liable hereunder in accordance with the agreements, terms, covenants and conditions hereof. The consent by Landlord to an assignment, mortgage, pledge, encumbrance, transfer at subletting shall not in any way be construed to relieve Tenant from obtaining the express consent in writing of Landlord to any further assignment, mortgage, pledge, encumbrance, transfer or subletting. In no event shall any permitted subtenant assign or encumber its sublease or further sublet all or any portion of its sublet space, or otherwise suffer or permit such sublet space or any part thereof to be used or occupied by others, without Landlord's prior written consent in each instance. If any amendment or modification of this Lease is entered into without the consent of Tenant named herein subsequent to an assignment of this Lease, the liability hereunder of the Tenant named herein shall continue but only to the same extent as if such amendment or modification had not been made.
(b) (i) If Tenant shall at any time or times during the term of this
Lease desire to assign this Lease or sublet all or part of the demised premises
(other than a sublet or assignment, for which, under the provisions of paragraph
(k) of this Article, Landlord's consent is not required), Tenant shall give
written notice thereof to Landlord, which notice shall be accompanied by (x) a
conformed or photostatic copy of the proposed assignment or sublease, the
effective or commencement date of which shall be not less than thirty (30) nor
more than one hundred-eighty (180) days after the giving of such notice, (y) a
statement setting forth in reasonable detail the identity of the proposed
assignee or subtenant, the nature of its business and its proposed use of the
demised premises, and (c) current financial information with respect to the
proposed assignee or subtenant, including, without limitation, its most recent
financial report. Such notice shall bc deemed an offer from Tenant to Landlord
whereby Landlord (or Landlord's designee) may, at its option ("Recapture
Option"), either (1) sublease such space (hereinafter referred to as the
"Leaseback Space") from Tenant upon the terms and conditions hereinafter set
forth (if the proposed transaction is a sublease of (x) less than all of the
demised premises or (y) all of the demised premises for a term ending earlier
than the day immediately preceding the date of the expiration of the term of
this Lease), (2) terminate this Lease (if the proposed transaction is (x) an
assignment of this Lease or (y) a sublease of eighty (80%) percent or more of
the demised premises for a term ending not more than one year before the day
immediately preceding the date of the expiration of the term of this Lease, or
(3) terminate this Lease with respect to the Leaseback Space only (if the
proposed transaction is a sublease of less than all of the demised premises for
a term ending not more than one year before the day immediately preceding the
date of the expiration of the term of this Lease). Said Recapture Option may be
exercised by Landlord by notice to Tenant at any time within thirty (30) days
after such notice has been given by Tenant to Landlord; and during such thirty
(30) day period Tenant shall not assign this Lease nor sublet such space to any
person or party.
(ii) If Landlord exercises its Recapture Option to terminate this Lease, then, this Lease shall end and expire on the date that the proposed assignment or sublease was to be effective or commence, as the case may be, and the Rent shall be paid and apportioned to such date.
(iii) If Landlord exercises its Recapture Option to terminate
this Lease with respect to the Leaseback Space only, then, (x) this Lease shall
end and expire with respect to the Leaseback Space only on the date that the
proposed sublease was to commence; (y) from and after such date, the Rent shall
be adjusted, based upon the proportion that the rentable area of the demised
premises remaining bears to the total rentable area of the demised premises; and
(z) Landlord, at its sole cost and expense, shall separate the Leaseback Space
from the balance of the demised premises and comply with any laws and
requirements of any public authorities relating to such separation, and Tenant
shall cooperate with Landlord in connection therewith and afford Landlord and
its contractors such access to the demised premises as they shall reasonably
require from time to time.
(iv) If Landlord exercises its Recapture Option to sublet the Leaseback Space, such sublease shall be made, at Landlord's option, to Landlord or its designee (as subtenant) and shall be at the lower of (x) the rental rate per rentable square foot of fixed minimum rent and additional rent payable pursuant to this Lease during the term of such sublease or (y) the rentals set forth in the proposed sublease, and shall be for the same term as that of the proposed subletting, and such sublease shall:
(1) be expressly subject to all of the covenants, agreements, terms, provisions and conditions of this Lease except such as are irrelevant or inapplicable, and except as otherwise expressly set forth to the contrary in this paragraph;
(2) provide that if the subtenant under such sublease shall not pay to Tenant any rent or other sum thereunder as and when the same becomes due and payable to Tenant then such subtenant shall not be subject to any late charge or default interest or other liability by reason thereof nor shall Tenant have any right to terminate the sublease or otherwise dispossess the subtenant by reason of such non-payment, but Tenant shall have the right to deduct the unpaid sum from the Rents due and becoming due to Landlord pursuant to this Lease;
(3) give the subtenant thereunder the unqualified and unrestricted right, without Tenant's permission, to assign such sublease or any interest therein and/or to sublet the Leaseback Space or any part or parts of the Leaseback Space and to make any and all changes, alterations, and improvements in the space covered by such sublease as such subtenant may desire in its sole discretion, provided that such changes, alterations or improvements do not unreasonably interfere with the use by Tenant of the balance of the demised premises;
(4) provide that any assignee or further subtenant or undertenant of the subtenant thereunder, may, at the election of Landlord, be permitted to make any Alterations in or to the Leaseback Space or any part thereof and shall also provide in substance that any such Alterations in or to the Leaseback Space made by any party may be removed, in whole or in part, prior to or upon the expiration or other termination of such sublease provided that such subtenant shall repair any damage and injury to that portion of the Leaseback Space caused by such removal; and
(5) provide that (v) the parties to such sublease expressly negate any intention that any estate created under such sublease be merged with any other estate held by either of said parties, (w) any assignment or subletting by Landlord or its designee (as the subtenant) may be for any lawful purpose or purposes that Landlord shall deem suitable or appropriate, (x) Tenant, at Tenant's expense, shall and will at all times provide and permit reasonably appropriate means of ingress to and egress from the Leaseback Space so sublet by Tenant to Landlord or its designee, (y) Landlord, at Landlord's expense, shall make such alterations as may be required or deemed necessary by Landlord to physically separate the Leaseback Space from the balance of the demised premises, and to comply with any laws and requirements of public authorities relating to such separation and Tenant shall cooperate with Landlord and its contractors in connection therewith, and (z) that at the expiration of the term of such sublease, Tenant will accept the space covered by such sublease in its then existing condition, but Tenant shall have no obligation to restore such space to the condition in which it existed immediately prior to its being subleased by Landlord or its designee but only to the condition in which such space existed upon the expiration of the term of such sublease.
(v) Performance by Landlord or its designee, as subtenant, under a sublease of the Leaseback Space shall be deemed performance by Tenant of any similar obligation under this Lease, and any default under any such sublease shall not give rise to a default under a similar obligation contained in this Lease, nor shall Tenant be deemed to be in default hereunder if such default is occasioned by or arises from any act or omission of the subtenant under such sublease or is occasioned by or arises from any act or omission of any occupant holding under or pursuant to any such sublease. Tenant shall have no obligation, at the
expiration on earlier termination of the term of this Lease, to remove any alteration, installation or improvement made in the Leaseback Space by Landlord.
(c) In the event Landlord does not exercise its Recapture Option, and provided that no Event of Default is continuing, Landlord's consent to the proposed assignment or sublease shall not be unreasonably withheld or delayed, provided and upon condition that:
(i) Tenant shall have complied with the provisions of paragraph (b) of this Article and Landlord shall not have exercised its Recapture Option within the time permitted therefor;
(ii) The form of the proposed sublease shall be in form reasonable satisfactory to Landlord and shall comply with the applicable provisions of this Article;
(iii) There shall not be more than two (2) subtenants of the demised premises;
(iv) The purpose for which the proposed assignee or sublessee will use the demised premises is permitted by this Lease; and
(v) The proposed assignee or sublessee is not entitled to sovereign or diplomatic immunity and is subject to the jurisdiction of the courts of the State of New York.
(d) Tenant shall indemnify, defend and hold harmless Landlord against
and from any and all losses, liabilities, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
resulting from any claims that may be made against Landlord by the proposed
assignee or sublessee by reason of Landlord's failure to consent to any
assignment or subletting for which Tenant requests Landlord's consent or by any
brokers or other persons claiming a commission or similar compensation in
connection with and such proposed assignment or subletting.
(e) Unless Landlord exercises its Recapture Option in respect if any assignment or subletting proposed by Tenant, Tenant shall reimburse Landlord within ten (10) days after Landlord's written demand for all reasonable costs that may be incurred by Landlord in connection with any proposed assignment or sublease, including, without limitation, the costs of making investigations as to the acceptability of the proposed assignee or subtenant, and legal costs incurred in connection with the granting of any requested consent, and Tenant's payment to Landlord of the aforesaid costs shall be an additional condition to obtaining Landlord's consent to such proposed assignment or sublease.
(f) In the event that (i) Landlord fails to exercise its Recapture Option and consents to a proposed assignment or sublease, and (ii) Tenant fails to execute and deliver the assignment or sublease to which Landlord consented within 90 days after the giving of such consent, then, Tenant shall again comply with all of the provisions and conditions of paragraph (b) of this Article before assigning this Lease or subletting all or part of the demised premises (other than a subletting or assignment permitted without Landlord's consent under paragraph (k) of this Article).
(g) With respect to each and every sublease or subletting consented to by Landlord or for which Tenant seeks Landlord's consent or which is otherwise permitted under the provisions of this Lease, it is further agreed:
(i) no subletting shall be for a term ending later than one day prior to the expiration date of this Lease;
(ii) no sublease shall be valid, and no subtenant shall take possession of the demised premises or any part thereof, until an executed counterpart of such sublease has been delivered to Landlord;
(iii) each sublease shall provide that it is subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and that in the event of termination, re-entry or dispossess by Landlord under this Lease Landlord may, at its option, take over all of the right, title and interest of Tenant, as sublessor, under such sublease, and such subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not (i) be liable for any previous act or omission of Tenant under such sublease, (ii) be subject to any offset, not expressly provided in such sublease, which theretofore accrued to such subtenant against Tenant, or (iii) be bound by any previous modification of such sublease or by any previous prepayment of more than one month's rent; and
(iv) the space covered by any sublease, if less than all of the demised premises, shall be regular in shape and shall have separate entrance through the exterior of the building that is not shared or used in common with any other space in the building not demised under such sublease.
(h) If the Landlord shall give its consent to any assignment of this Lease or to any sublease (other than an assignment or sublease, for which, under the provisions of paragraph (k) of this Article, Landlord's consent is not required), Tenant shall in consideration therefor, pay to Landlord, as additional rent:
(i) in the case of an assignment, an amount equal to fifty (50%) percent of the amount by which (x) all sums and other consideration paid to Tenant by the assignee for or by reason of such assignment (including, but not limited to, sums paid for the sale of Tenant's fixtures, leasehold improvements, equipment, furniture, furnishings or other personal property, less, in the case of a sale thereof, the then net unamortized or undepreciated cost thereof, as shown on Tenant's books and records) exceeds (y) the reasonable attorneys' fees and brokerage commissions, if any, incurred and paid by Tenant in connection with such assignment; and
(ii) in the case of a subletting, (x) fifty (50%) percent of any and all rents, additional charges and other consideration payable to Tenant by the subtenant which is in excess of the fixed annual rent and additional rent accruing during the term of the sublease in respect of the subleased space pursuant to the terms of this Lease (for this purpose, the annual fixed rent and additional rent payable under this Lease in respect of the subleased space shall be determined by multiplying the annual fixed and additional rent payable pursuant to this Lease in respect of the entire demised premises by a fraction, the numerator of which is the leasable square foot area of the subleased space, and the denominator of which shall be the leasable square foot area of the entire demised premises); plus (y) fifty (50%) percent of all sums paid for the sale or rental of Tenant's fixtures leasehold improvements, equipment, furniture or other personal property, less, in the case of the sale thereof, fifty (50%) percent of the then net unamortized or undepreciated cost thereof as shown on Tenant's books and records; less (z) the reasonable attorneys' fees and brokerage commissions, if any, incurred and paid by Tenant in connection with such subletting. The sums payable to Landlord under this Paragraph 6(a)(ii) shall be paid to Landlord as and when payable by the subtenant to Tenant.
Together with any request made by Tenant for Landlord's consent to any proposed assignment of this Lease or subletting of all or any part of the demised premises, Tenant shall submit to Landlord a fully-executed counterpart of the assignment or the sublease, as the case may be, and all agreements or other documents, if any, in modification thereof or relating thereto, together with a written certification to Landlord executed by an officer of Tenant, certifying to Landlord that such submitted documents constitute the entire agreement between Tenant and the prospective assignee or subtenant, as the case may be, and that no
consideration is required to be paid or furnished to Tenant by such assignee or subtenant other than what is expressly shown in such documents submitted to Landlord.
(i) Any assignment whether made with Landlord's consent pursuant to or without Landlord's consent pursuant to paragraph (k) of this Article, shall be made only if, and shall not be effective until, the assignee shall execute, acknowledge and deliver to Landlord an agreement in form and substance reasonably satisfactory to Landlord whereby the assignee shall assume the obligations of this Lease on the part of Tenant to be performed or observed from and after the effective date of the assignment, and whereby the assignee shall agree that the provisions in this Article shall, notwithstanding such assignment or transfer, continue to be binding upon it in respect of all future assignments and transfers. The original named Tenant covenants that, notwithstanding any assignment or transfer, whether or not in violation of the provisions of this Lease, and notwithstanding the acceptance of Rent by Landlord from an assignee, transferee, or any other party, the original named Tenant shall remain fully liable for the payment of the Rent and for the other obligations of this Lease on the part of Tenant to be performed or observed.
(j) The joint and several liability of Tenant and any immediate or remote successor in interest of Tenant and the due performance of the obligations of this Lease on Tenant's part to be performed or observed shall not be discharged, released or impaired in any respect by any agreement or stipulation made by Landlord extending the time of, or modifying any of the obligations or provisions of this Lease, or by any waiver or failure of Landlord to enforce any of the obligations or provisions of this Lease; provided, however, that it, after any assignment of the Tenant's interest in this Lease Landlord and the then Tenant under this Lease shall enter into a modification or amendment to this Lease, which amendment or modification increases or otherwise changes any of the obligations of the Tenant under this Lease, the liability hereunder of the Tenant named herein and any party who then is or was at any time an assignor of the Tenant's interest in this Lease shall continue but only to the same extent as if such amendment or modification had not been made.
(k) Notwithstanding anything to the contrary contained in this Lease, Tenant may, without the consent or approval of Landlord, but on fifteen (15) days prior notice to Landlord accompanied by all information reasonably requested by Landlord with respect to the transaction, (i) assign this Lease or sublet all or any part of the demised premises to any corporation or other business entity which is controlled by, controlling or under common control with Tenant; or (ii) assign or transfer its interest in this Lease to any corporation or other business entity into which or with which Tenant is merged or consolidated, or any corporation or other business entity acquiring the leasehold estate created under this Lease and all or substantially all of the stock or other property of Tenant and assuming all or substantially all of the liabilities of Tenant (any corporation or other business entity resulting from any of the transactions described in this clause (ii) is herein referred to as a "Successor Entity"), provided that the net worth of the Successor Entity (as determined in accordance with generally accepted accounting principles) shall be at least equal to the net worth of Tenant (as determined in accordance with generally accepted accounting principles) immediately prior to such merger, consolidation or acquisition, and proof reasonably satisfactory to Landlord of such net worth shall have been delivered to Landlord at least ten (10) days prior to the effective date of any such transaction.
(l) Subject to the provisions of paragraph (k) of this Article, a transfer, whether directly or indirectly of control of the shares of Tenant (if Tenant is a corporation) or a transfer, whether directly or indirectly, of a majority of the total equity or ownership interest in Tenant (if Tenant is an entity other than a corporation) shall be deemed an assignment of this Lease and shall be subject to all of the provisions hereof.
(m) "Control", "controlling", "controlled by" or word(s) of similar import, as used in this Article 6, means the power to direct and control the management policies of an entity by ownership of voting shares, by contract or otherwise.
7. ALTERATIONS. (a) Tenant shall not make any alterations, rebuilding, replacements, changes, additions or improvements (collectively, "Alterations") in or to the demised premises or any portion thereof without the prior written consent of Landlord in each instance, except that (i) Tenant may make any non-structural Alteration costing less than $50,000 that does not affect any of the service systems of the buildings or improvements on the demised premises, provided that no Event of Default is continuing and Tenant gives Landlord at least ten (10) days prior written notice, describing such proposed Alteration and including the plans and specifications therefor, and a written estimate of the cost thereof from Tenant's contractor, architect or engineer (the costs of all Alterations that are intended as part of the same project or job or that are commenced within any 12-month period shall be aggregated for the foregoing purpose); and (ii) provided no Event of Default is continuing, Landlord will not unreasonably withhold or delay its consent to any other Alterations proposed by Tenant, subject to compliance with all of the other terms, conditions and requirements set forth in this Article 7. Any and all Alterations in and to the demised premises or any portion thereof, whether or not requiring Landlord's consent, shall be completed at Tenant's sole cost and expense and shall be subject, in any event, to the following conditions and requirements:
(i) that the same shall be performed in a first-class workmanlike manner, and shall not weaken or impair the structural strength, or lessen the value, of any such buildings as shall be on the demised premises at the time, or change the purposes for which any such buildings may be used or materially change the exterior appearance of any such buildings;
(ii) that the same shall be made according to plans and specifications therefor, which, shall be first submitted to and approved in writing by Landlord (unless, pursuant to the express terms of this Article, Landlord's approval is not required), but Landlord's approval thereof shall not constitute Landlord's representation or agreement that said plans or specifications or the work shown thereon are in compliance with the requirements of law;
(iii) that before the commencement of any such work such plans and specifications shall be filed with and approved by all governmental departments or authorities having jurisdiction, and any public utility company having an interest therein, and all such work shall be done subject to and in accordance with the requirements of law and local regulations, of all governmental departments or authorities having jurisdiction and of such public utility company;
(iv) that before the commencement of any such work Tenant shall pay the amount of any increase in premiums on insurance policies provided for under Article 9(a) on account of endorsements to be made thereon covering the risk during the course of such work, and in the case of any Alterations whose cost exceeds $200,000.00 (and for this purpose, the costs of all Alterations that are intended as part of the same project or job or that are commenced within any 12-month period shall be aggregated) Tenant shall in addition, at Tenant's expense, deliver to Landlord performance and labor and material payment bonds issued by a surety company acceptable to Landlord, each in an amount equal to the estimated cost of such work, guaranteeing the completion of such work, free and clear of all liens, encumbrances, chattel mortgages and conditional bills of sale, according to said plans and specifications therefor;
(v) that no Alterations shall change the footprint of any building on the demised premises or increase, reduce or otherwise change the gross floor area or cubic content thereof (and Landlord shall not be required to consent to any such Alteration); and
(vi) that Landlord shall not be required to respond to or consider any request by Tenant for Landlord's consent to any Alterations unless such request shall be in writing, shall set forth a reasonably detailed description of the proposed Alterations
and shall be accompanied by plans and specifications therefor and a reasonably detailed written estimate of the cost thereof from Tenant's contractor, architect or engineer.
(b) Landlord may condition its consent to or approval of any material Alterations proposed by Tenant to Tenant's executing and delivering to Landlord an amendment to this Lease, in form and substance reasonably satisfactory to Landlord, pursuant to which Tenant agrees to remove such Alterations prior to the expiration or sooner termination of the term of this Lease and to repair all damage to the demised premises caused by such removal.
(c) Except as provided in paragraph (b) of this Article, all buildings, alterations, rebuildings, replacements, changes, additions, improvements, equipment and appurtenances on or in the demised premises at the commencement of the term, and which may be erected, installed or affixed on or in the demised premises during the term, are and shall be deemed to be and immediately become part of the realty and the sole and absolute property of Landlord and shall be deemed to be part of the demised premises, except that all movable trade fixtures installed by Tenant for Tenant's use in the demised premises which are not part of or used in connection with the maintenance or operation of any of the buildings or improvements on the demised premises or any of the utility or service systems of such building or improvements shall be and remain the property of Tenant, but Tenant shall repair all damage to the demised premises caused by the installation or removal of any such trade fixtures.
8. Subject to the provisions of Articles 12 and 13 below, Tenant shall, at all times during the term, and at its own cost and expense, keep and maintain in thorough repair and in good and safe order and condition, all buildings and improvements on the demised premises at the commencement of the term and thereafter erected on the demised premises, or forming part thereof, and their full equipment and appurtenances, both inside and outside, structural and non-structural, extraordinary and ordinary, seen or unforeseen, howsoever the necessity for repairs may occur, and whether or not necessitated by wear, tear or defects, latent or otherwise; and shall use all reasonable precaution to prevent waste, damage or injury. Tenant shall also, at its own cost and expense, keep and maintain in thorough repair and in good and safe order and condition, and free from dirt, snow, ice, rubbish and other obstructions or encumbrances, the sidewalks, areas, coalchutes, sidewalk hoists, railings, gutters and curbs in front of and adjacent to the demised premises. Without limiting the generality of the obligations of Tenant under this paragraph, Tenant shall keep the demised premises and the roof thereof free of leaks.
(b) Landlord shall in no event be required to make any alterations, rebuildings, replacements, changes, additions, improvements or repairs during the term, except and only to the extent caused by the negligence or wrongful acts of Landlord.
9. LIENS. Tenant shall have no power to do any act or make any contract which may create or be the foundation for any lien, mortgage or other encumbrance upon the reversion or other estate of Landlord, or upon any interest of Landlord in the demised premises or in the buildings or improvements thereon; it being agreed that should Tenant cause any alterations, rebuildings, replacements, changes, additions, improvements or repairs to be made to the demised premises, or cause any labor to be performed or material to be furnished therein, thereon or thereto, neither Landlord nor the demised premises shall under any circumstances be liable for the payment of any expense incurred or for the value of any work done or material furnished, but all such alterations, rebuildings, replacements, changes, additions, improvements and repairs, and labor and material, shall be made, furnished and performed at Tenant's expense, and Tenant shall be solely and wholly responsible to contractors, laborers and materialmen furnishing and performing such labor and material.
If, because of any act or omission (or alleged act or omission) of Tenant, any mechanic's or other lien, charge or order for the payment of money shall be filed against the demised premises or any buildings or improvements thereon, or against Landlord or any
conditional bill of sale or chattel mortgage shall be filed for or affecting any equipment or any materials used in the construction or alteration of, or installed in, any such building or improvement (whether or not such lien, charge or order, conditional bill or sale or chattel mortgage is valid or enforceable as such), Tenant shall, at its own cost and expense, cause the same to be cancelled and discharged of record or bonded within thirty (30) days after the date of filing thereof.
10. LEGAL REQUIREMENTS. (a) During the term of this Lease, Tenant shall, at its own cost and expense, promptly observe and comply with, all present and future laws, ordinances, requirements, orders, directions, rules and regulations of the federal, state, county and municipal governments and of all other governmental authorities having or claiming jurisdiction over the demised premises or appurtenances or any part thereof, and of all their respective departments, bureaus and officials, and of the insurance underwriting board or insurance inspection bureau having or claiming jurisdiction, or any other body exercising similar functions, and of all insurance companies issuing policies covering the demised premises or any part thereof, whether such laws, ordinances, requirements, orders, directives, rules or regulations relate to structural alterations, changes, additions, improvements, replacements or repairs, either inside or outside, extraordinary or ordinary, seen or unforeseen, or otherwise, to or in and about the demised premises, or any building forming a part thereof, or to any vaults, passageways, or privileges appurtenant thereto or connected with the enjoyment thereof or to alterations, changes, additions, improvements, replacements or repairs incident to or as a result of any use or occupation thereof, or otherwise, including, without limitation, the removal of any encroachment on the street or on adjoining premises by any building on the demised premises, and whether the same are in force at the commencement of the term or may in the future be passed, enacted or directed.
(b) Without limiting the generality of the foregoing:
(1) Tenant shall procure each and every permit, license, certificate or other authorization required in connection with the lawful and proper use of the demised premises or required in connection with any building or improvement now or hereafter erected thereon; and
(2) (i) Tenant agrees that the demised premises shall be
occupied, operated and maintained in compliance with all Environmental Laws (as
hereinafter defined); Tenant shall at all times maintain or cause to be
maintained in full force and effect, all necessary permits, licenses, approvals
and other authorizations required under the Environmental Laws for the demised
premises and the use and/or intended use thereof; Tenant shall provide the
Landlord with a copy of any notice of any pending or threatened proceeding or
liability, and any and all information, reports or correspondence concerning the
demised premises (or any portion thereof) which relates to pollution or
protection of the environment or studies thereof or which otherwise relates to
Hazardous Materials (as hereinafter defined) or Environmental Laws within three
(3) business days after receipt thereof; Tenant shall neither use the demised
premises (or any part thereof) nor permit the demised premises (or any part
thereof) to contain or to be used to produce, handle, transfer, process, refine,
manufacture, generate, treat, store or dispose of any Hazardous Materials,
provided Tenant may keep and/or use Hazardous Materials in or on the demised
premises if such use is in the ordinary course of business of operating and
maintaining a facility comparable to the demised premises and is in compliance
with applicable Environmental Laws and does not create a risk that Tenant, the
demised premises and/or any adjacent premises or the use of the demised premises
and/or any adjacent premises will or might fail to comply with applicable
Environmental Laws; Tenant will have all refuse, trash and solid or liquid
wastes (other than sewage) collected from the demised premises on a regular
basis by a commercial waste transporter in accordance with legal requirements
(including, without limitation, Environmental Laws).
(ii) Tenant agrees to indemnify, defend and hold the Landlord harmless of, from and against any and all liabilities (including, without limitation,
all foreseeable and unforeseeable consequential damages), losses, fines, liens, encumbrances, penalties, fees, expenses, damages, costs, claims, causes of action, judgments and/or other charges of whatsoever kind or nature and any and all liability under the Environmental Laws and all future laws in respect of Hazardous Materials (including, without limitation, attorneys' fees and expenses, the cost of any required or necessary repair, clean-up, encapsulation, removal, remediation, treatment or detoxification and the preparation of any closure or other required plans) and any additional costs required to take necessary precautions to protect against the discharge, presence, release or disposal, or threat thereof, of Hazardous Materials in, on, under, at or in connection with or emanating from or through, or in any way affecting, the demised premises or other premises or waterways on or adjacent to the demised premises incurred by the Landlord and/or in respect of which the Landlord may be subject and directly or indirectly arising out of or in connection with (i) the use, presence, generation, treatment, storage, discharge, disposal or release (or threat thereof) by Tenant or any of the subtenants, undertenants, agents, servants, employees, invitees, contractors or affiliates of Tenant (collectively, "Tenant Parties" and individually, a "Tenant Party") of Hazardous Materials in, on, under, at or in connection with or emanating from or through the demised premises or other premises or waterways on or adjacent to the demised premises or otherwise arising out of any environmental condition created or caused by Tenant or any Tenant Party, at anytime, whether past or present or future, and/or (ii) any claims, liens or other matters arising out of or in connection with any violation or alleged violation by Tenant or any Tenant Party of any Environmental Law(s) relating to the demised premises or Tenant. The obligations of Tenant under this Article shall be effective notwithstanding any lack of knowledge by Tenant of any such presence, use, generation, treatment, storage or disposal of Hazardous Materials.
(iii) Tenant agrees to immediately notify Landlord and any other person and/or, governmental or quasi-governmental authority that is required to be notified pursuant to any applicable law, at such time as Tenant becomes aware of any use, generation, treatment, storage, disposal, production, handling, processing or transfer of any Hazardous Materials in, on, about or otherwise relating to or affecting the demised premises that fails or would fail or could fail to comply with all applicable Environmental Laws, and shall immediately notify Landlord and such other persons and authorities at such time as an environmental investigation or clean-up proceeding of any kind is instituted by any person or entity which relates to or in any way affects the demised premises. Tenant agrees to promptly conduct and complete all investigations, studies, sampling, and testing and all remedial removal and other actions necessary to clean up and remove all Hazardous Materials in, or, about or otherwise relating to or affecting the demised premises to the reasonable satisfaction of Landlord and in accordance with all applicable Environmental Laws, and shall fully comply with and assist in any such environmental investigation and/or clean-up proceeding. Tenant shall immediately deliver to Landlord true, complete and accurate copies of all environmental reports, audits, surveys and notices pertaining to Hazardous Materials and/or compliance with Environmental Laws which may hereafter be conducted with respect to or in any way affecting the demised premises.
(iv) As used herein, "Environmental Laws" means collectively all current and future federal, state and local environmental laws, common laws, statutes, rules and regulations applicable to the demised premises or the use thereof regulating, relating to, or imposing liability or standards of conduct concerning any hazardous, toxic, or dangerous waste, substance or material, any and all rules and regulations promulgated under any of the foregoing, and any permits, licenses, authorizations, variances, consents, approvals, directives or requirements of, and any agreements with, any governments, departments, commissions, boards, courts, authorities, agencies, officials and officers, now or hereafter in effect or applicable to the demised premises, and "Hazardous Materials" means hazardous waste, hazardous substances, contaminate, hazardous materials, pollutants or toxic substances, including, but not limited to, asbestos, polychlorinate biphenols (PCBs), urea formaldehyde, petroleum containing substances, radioactive materials and explosives, as such terms are defined pursuant to any Environmental Laws.
(c) The provisions of this Article shall survive the expiration or sooner termination of this Lease.
11. INSURANCE. (a) During the term Tenant, at its own cost and expense, shall:
(1) Keep all buildings and improvements and equipment on, in or appurtenant to the demised premises at the commencement of the term and thereafter erected thereon or therein, including all alterations, rebuildings, replacements, changes, additions and improvements, insured against loss or damage by fire, with all standard extended coverage as may be usually required by prudent institutional mortgage lenders on similar premises (and against loss or damage due to war or nuclear action, if such insurance shall be available and required by any mortgagee of Landlord) in an amount sufficient from time to time, in Landlord's reasonable judgment to prevent Landlord and Tenant from becoming co-insurers under provisions of applicable policies of insurance but in any event in an amount not less than the full insurable value thereof (I.E., replacement value), excluding the cost of excavation and of foundations below the level of the lowest basement floor or, if there is no basement, below the level of the ground.
(2) Provide and keep in force insurance against liability for bodily injury and property damage and boiler and machinery insurance, all such insurance to be in such amounts and in such forms of policies as may from time to time be reasonably required by Landlord.
(3) Provide and keep in force rent insurance (and/or, as the case may require, use and occupancy insurance) in an amount not less than the annual net rent plus the estimated annual taxes, water charges, sewer rents and installments of assessments and the annual premiums for the insurance required by this Article.
(4) If a sprinkler system shall be located in any building, or portion thereof, on the demised premises, provide and keep in force sprinkler leakage insurance in amounts and forms reasonably satisfactory to Landlord.
(5) Provide and keep in force such other insurance and in such amounts as may from time to time be reasonably required by Landlord against such other insurable hazards as at the time in question are commonly insured against in the case of premises similarly situated.
(b) All insurance provided by Tenant as required by this Article shall be carried in favor of Landlord and Tenant, as their respective interests may appear, and, in the case of insurance against damage to the demised premises by fire or other casualty, shall provide that loss, if any, shall be adjusted with and payable to Landlord. If requested by Landlord, such insurance against fire or other casualty shall include the interest of the holder of any mortgage on the fee title interest in the demised premises and shall provide that loss, if any, shall be payable to such holder under a standard mortgagee clause. Rent insurance and use and occupancy insurance may be carried in favor of Tenant but the proceeds thereof are hereby assigned to Landlord to be held by Landlord as security for the payment of the rent and additional rent hereunder until restoration of the demised premises. All such insurance shall be taken in such responsible companies as Landlord shall reasonably approve and the policies therefor shall at all times be held by Landlord or, when appropriate, by the holder of any such mortgage, in which case copies of the policies or certificates of such insurance shall be delivered by Tenant to Landlord. All such policies shall require thirty (30) days' notice by registered mail to Landlord (and each mortgagee of Landlord to which losses may be payable under any such policy) of any cancellation thereof or change affecting Landlord's coverage thereunder.
(c) Tenant shall procure policies for all such insurance for periods of not less than one (1) year and shall deliver to Landlord such policies with evidence of the
payment of premiums thereon, and shall procure renewal thereof from time to time at least thirty (30) days before the expiration thereof.
(d) Tenant shall not violate or permit to be violated any of the conditions or provisions of any such policy, and Tenant shall so perform and satisfy the requirements of the companies writing such policies so that at all times companies of good standing, reasonably satisfactory to Landlord or any mortgagee designated by Landlord, shall be willing to write and/or continue such insurance.
(e) Tenant and Landlord shall cooperate in connection with the collection of any insurance moneys that may be due in the event of loss, and Tenant shall execute and deliver to Landlord such proofs of loss and other instruments which may be required for the purpose of obtaining the recovery of any such insurance moneys.
(f) Tenant agrees to have included in each of its insurance policies a waiver of the insurer's right of subrogation against the Landlord during the term of this Lease and Tenant hereby releases Landlord with respect to any claim (including a claim for negligence) which it might otherwise have against the Landlord for loss, damage or destruction with respect to its property occurring during the term of this Lease to the extent to which it is, or is required to be, insured under a policy or policies containing a waiver of subrogation.
12. DAMAGE OR DESTRUCTION. (a) If, during the term, the buildings, improvements or the equipment on, in or appurtenant to the demised premises at the commencement of the term or thereafter erected thereon or therein shall be destroyed or damaged in whole or in part by fire or other cause, Provided that no Event of Default is continuing and Landlord hereby agreeing to exercise reasonable diligence to collect such proceeds and Tenant hereby agreeing to cooperate with Landlord in connection therewith), subject to the other terms and conditions of this Article, (less Landlord's reasonable collection costs), and if such net insurance proceeds are not, in Landlord's reasonable judgment, sufficient to pay the entire cost of such repairs and restoration (including all hard and soft costs) Landlord may, by written notice to Tenant ("Landlord's Election Notice"), elect either to (i) complete the repair and restoration and pay for any costs therefor in excess of the insurance proceeds collected by Landlord, or (ii) terminate this Lease as of the date which is twenty (20) days after the giving of such notice by Landlord. Landlord may give Landlord's Election Notice to Tenant not later than thirty (30) days after Landlord's collection of the insurance proceeds with respect to the casualty. If, pursuant to said notice, Landlord elects to terminate this Lease as aforesaid, Tenant may, by notice ("Tenant's Election Notice") given by Tenant to Landlord not later than the expiration of the aforesaid twenty (20) day period, elect to continue this Lease in full force and effect, and if Tenant shall give such notice to Landlord, Landlord's aforesaid notice of termination shall be deemed of no effect and this Lease shall remain in force and effect in accordance with its terms, and Tenant shall make all repairs and restorations to the demised premises. All work performed by Tenant in connection with such repairs and reStorations shall he deemed Alterations for purposes of this Lease, Tenant shall comply with all of the provisions of Article 6 and all of the other terms and provisions of this Lease relating to Tenant's performance of Alterations. Tenant shall complete such restoration and repairs with diligence and in a good and workmanlike manner. Upon Tenant's completion of such repairs and restorations so that the demised premises shall be in substantially the same condition as they existed immediately prior to the occurrence of the casualty and otherwise in condition reasonably satisfactory to Landlord, and provided that (i) Tenant shall have delivered to Landlord documentary proof, reasonably satisfactory to Landlord, that all contractors, subcontractors, vendors, laborers and other persons or parties furnishing work, labor or materials to or for the benefit of the demised premises have been paid in full, (ii) no mechanic's or similar liens have been filed against the
demised premises by reason of any such work, labor or materials, which liens remain undischarged of record, (iii) a valid certificate of occupancy has been issued and remains in effect with respect to the demised premises, and (iv) no default by Tenant under this Lease is continuing, then Landlord shall deliver to Tenant any insurance proceeds theretofore received by Landlord with respect to the casualty damage and not theretofore expended by Landlord in connection with the repair or restoration of the demised premises.
(b) Notwithstanding the foregoing provisions of this Article, if, within forty-five (45) days after the date of the damage to the demised premises, Landlord delivers to Tenant a statement from Landlord's independent contractor, engineer or architect, stating that such contractor's, architect's or engineer's reasonable estimate of the time reasonably required to complete the repair and restoration of the demised premises (such estimate shall be on the basis of not using any overtime or premium-pay labor), and if such estimate of time exceeds twelve (12) months, then Landlord shall have the right to terminate this Lease by notice given to Tenant concurrently with the delivery to Tenant of such statement of such contractor, architect or engineer, and if Landlord shall give such notice, the term of this Lease shall terminate and expire on the date which is twenty (20) days after the giving of such notice; provided, however, that if within such twenty (20) day period, Tenant gives to Landlord a Tenant's Election Notice pursuant to paragraph (a) above pursuant to which Tenant elects to repair and restore the damage to the demised premises, then Landlord's aforesaid notice of termination shall be of no force or effect and this Lease shall remain in force and effect in accordance with its terms and Tenant shall proceed with due diligence to make all repairs and restorations to the demised premises in the manner required by the provisions of paragraph (a) of this Article, and shall be entitled to the delivery of the insurance proceeds collected by Landlord on the same terms and conditions as set forth above in said paragraph (a) of this Article.
(c) If, pursuant to the foregoing provisions of this Article, Landlord
is required to repair and restore the demised premises after a casualty thereto,
and such repairs and restorations shall not have been completed within twelve
(12) months after the date by which Landlord shall have collected all of the
insurance proceeds of such casualty, plus the number of days, if any, that
performance of such repair and restoration work shall be prevented or delayed by
reason of strikes, lock-outs, labor strife, fire or other casualty,
condemnation, acts of god, shortages or unavailability of materials or any other
cause or reason, whether similar of dissimilar to the foregoing, beyond the
reasonable control of Landlord, then Tenant may give written notice to Landlord,
stating Tenant's intention to terminate this Lease, and if such repair and
restoration shall not have been substantially completed within ten (10) days
after the giving of such notice, this Lease shall terminate and expire on the
tenth (10th) day after the giving of such notice, with the same force and effect
as if that day were the date herein finally fixed for the expiration of the term
hereof.
(d) In no event shall Landlord be required to repair, restore or pay the cost of repairing or restoring any damage to Tenant's trade fixtures or other equipment, and Tenant shall repair, restore and/or replace such trade fixtures and equipment at Tenant's sole cost and expense.
(e) No damage or destruction to the demised premises or any part thereof shall entitle Tenant to any reduction or abatement of any of the Rents payable under this Lease, and Tenant shall continue to pay all Rent due and becoming due pursuant to this Lease notwithstanding that the demised premises or any portion thereof may be untenantable or not useable by Tenant by reason of any such damage or destruction.
13. CONDEMNATION. (a) If the whole or substantially all of the demised premises shall be taken or condemned by any competent authority for any public or quasi-public use or purpose, then and in that event this Lease and the term hereof shall cease and terminate as of the date upon which title shall vest in such authority and the rent reserved hereunder shall be apportioned and paid up to said date. For purposes of this Article 13, "substantially all of the demised premises" shall mean (i) fifty (50%) percent or more of the
leasable floor area of the demised premises, or (ii) any smaller portion of the demised premises that has been taken, if Tenant cannot reasonably operate its business in the remainder of the demised premises.
(b) If less than substantially all of the demised premises shall be so taken or condemned, this Lease and the term hereof shall not cease or terminate, but the rent payable hereunder after the date on which Tenant shall be required to surrender possession of the part of the demised premises so taken or condemned shall be reduced pro-rata, in proportion to the square foot area of the improvements at the demised premises so taken or condemned.
(c) In the event of any such taking or condemnation, in whole or in part, the entire award shall belong to Landlord without any deduction therefrom for the value of the unexpired term of this Lease, or for any other estate or interest in the demised premises now or hereafter vested in Tenant, and Tenant hereby assigns to Landlord all of its right, title and interest in and to any and all such award or awards with any and all rights, estate and interest of Tenant now existing or hereafter arising in and to the same or any part thereof. Tenant shall be entitled to make a claim for a separate award in any such condemnation proceeding for the value of Tenant's trade fixtures, personal property and equipment, provided that such award shall not reduce any award be payable to Landlord in respect of the demised premises.
(d) In the event of a taking of less than substantially all of the
demised premises, however, Landlord shall, after receipt of the condemnation
award, promptly proceed to restore the remainder of any building on the demised
premises affected thereby to a complete, independent and self-contained
architectural unit. The balance of such separate award or allocated amount not
so used shall belong to and be retained by Landlord as its own property.
Notwithstanding the foregoing, if, in the reasonable judgment of Landlord, based
on construction cost estimate(s) of Landlord's Contractor, architect or
engineer, the award received in respect of such taking is not sufficient to
complete the restoration of the portion of the demised premises that has not
been so taken, Landlord, within thirty (30) days after its receipt of the
condemnation award, may give written notice to Tenant terminating this Lease, in
which case, this Lease shall terminate on the twentieth (20th) day following the
giving of such notice by Landlord; provided, however, that if within said twenty
(20) day period, Tenant gives Landlord notice, stating that Tenant will restore
the remainder of the building on the demised premises to a complete, independent
and self-contained architectural unit, then Landlord's aforesaid notice of
termination shall have no force or effect, Tenant shall promptly proceed with
such restoration and complete same with due diligence, such restoration shall be
deemed an Alteration and Tenant in connection with its performance of such
restoration work, shall comply with all the provisions of Article 6 and
elsewhere in this Lease relating to the performance of Alterations. Upon the
completion of such restoration of Tenant, and provided there is no default by
Tenant continuing under this Lease and Tenant shall have caused to have been
satisfied all conditions set forth in paragraph (a) of Article 13 hereof as
would be required to be satisfied to entitle Tenant to receive casualty
insurance proceeds had such restoration work been work performed by Tenant to
restore any damage or destruction caused by casualty to the demised premises,
then Landlord shall pay to Tenant the lesser of (i) the condemnation award
received by Landlord in respect of such taking or (ii) the reasonable costs
incurred by Tenant in connection with making such restoration and repair to the
portion of the demised premises that were not so taken as documented by Tenant
to Landlord's reasonable satisfaction; the balance of any such condemnation
award not so required to be paid to Tenant shall be retained by Landlord as
Landlord's own property.
(e) In case of any governmental action, not resulting in the taking or condemnation of any portion of the demised premises but creating a right to compensation therefor, such as, without limitation, the changing of the grade of any street upon which the demised premises abut, or if less than a fee title to all or any portion of the demised premises shall be taken or condemned by any federal, state, municipal or governmental authority for temporary use or occupancy, this Lease shall continue in full force and effect without reduction
or abatement of rent, and the rights of Landlord and Tenant shall be unaffected by the other provisions of this Article 13 and shall be governed by applicable law.
(f) If, during the last year of the term of this Lease, twenty-five (25%) percent or more of the gross floor area of the improvements at the demised premises are damaged by fire or any casualty or taken by condemnation or the exercise of the power of eminent domain, then Landlord and Tenant shall each have the right and option to terminate this Lease by giving written notice to the other of such termination within thirty (30) days after the date of such damage casualty, condemnation or taking. If either party shall terminate this Lease pursuant to the foregoing provisions of this paragraph, this Lease shall expire and come to an end on the date of the giving of such notice by such party, as if said date were the date herein finally fixed for the expiration of the term hereof, and all of the casualty insurance proceeds or condemnation award, as the case may be, shall be paid to and belong to Landlord.
14. SUBORDINATION. (a) Subject to the provisions of paragraph (b) of this Article, this Lease and all rights of Tenant hereunder are and shall be subject and subordinate to the lien of any and all mortgage or mortgages which may now or hereafter affect the demised premises, or any part thereof and to any and all renewals, modifications, consolidations, replacements and extensions of any such mortgage or mortgages. Tenant shall, within twenty (20) days after demand of Landlord, at any time or times, execute, acknowledge and deliver to Landlord, without expense to Landlord, any and all instruments that may be necessary or proper to subordinate this Lease and all rights hereunder to the lien of any such mortgage or mortgages and each such renewal, modification, consolidation, replacement and extension. If, in connection with obtaining financing or refinancing for Landlord's fee interest the demised premises, a banking, insurance or other institutional lender shall request reasonable modifications to this Lease as a condition to such financing or refinancing, Tenant will not unreasonably withhold, delay or defer its written consent thereto, provided that such modifications do not increase the Rents or materially increase the other obligations of Tenant hereunder or materially adversely affect the leasehold interest hereby created.
(b) Notwithstanding the provisions of paragraph (a) of this Article, the foregoing subordination of this Lease to the lien of any mortgage on the demised premises, which mortgage is first created by Landlord on or after the date of this Lease, is conditional upon the holder of such mortgage executing and delivering to Tenant a subordination, non-disturbance and attornment agreement with respect to this Lease in form and substance reasonably satisfactory to such then holder and Tenant (an "SNDA"). Tenant shall promptly execute and deliver to Landlord and such holder any SNDA.
(c) If, at any time prior to the termination of this Lease, the holder
of any mortgage on the demised premises, or any person, or the successors or
assigns of such holder or such person (such holder and any such person or such
successor or assign being herein collectively referred to as "SUCCESSOR LESSOR")
shall succeed to the rights of Landlord under this Lease through possession or
foreclosure or otherwise, Tenant agrees, at the election and upon request of any
such Successor Lessor, to fully and completely attorn, from time to time, to and
recognize any such Successor Lessor, as Tenant's landlord under this Lease upon
the then executory terms of this Lease; provided such Successor Lessor shall
agree in writing to accept Tenant's attornment. The foregoing provisions of this
Section shall inure to the benefit of any such Successor Lessor, shall apply
notwithstanding that, as a matter of law, this Lease may terminate upon the
foreclosure of or other sale made pursuant to any mortgage, shall be
self-operative upon any such demand, and no further instrument shall be required
to give effect to said provisions. Tenant, however, upon demand of any such
Successor Lessor agrees to execute, from time to time, instruments to evidence
and confirm the foregoing provisions of this Section, reasonably satisfactory to
any such Successor Lessor and Tenant acknowledging such attornment. Upon such
attornment, this Lease shall continue in full force and effect as a direct lease
between such Successor Lessor and Tenant upon all of the then executory terms of
this Lease, except that such Successor Lessor shall not be (i) liable for any
previous act or omission or negligence of Landlord under this Lease; (ii)
subject to any counterclaim, defense or offset, not expressly provided for in
this Lease and asserted with
reasonable promptness, which theretofore shall have accrued in favor of Tenant against Landlord; (iii) obligated to perform any alterations, improvements or other work at the demised premises; (iv) bound by any previous modification or amendment of this Lease or by any previous prepayment of more than one month's rent, unless such modification of prepayment shall have been approved in writing by the mortgagee or other person through or by reason of which the Successor Lessor shall have succeeded to the rights of Landlord under this Lease. Nothing contained in this Section shall be construed to impair any right otherwise exercisable by the holder of any mortgage in the demised premises.
(d) If any act or omission by Landlord would give Tenant the right
immediately or after lapse of time, to cancel or terminate this Lease or to
claim a partial or total eviction, Tenant will not exercise any such right until
(i) it has given written notice of such act or omission to the holder of each
mortgage on the demised premises whose name and address shall have previously
been furnished to Tenant, by delivering notice of such act or omission addressed
to each such holder at its last address so furnished, and (ii) a reasonable
period for remedying such act or omission shall have elapsed following such
giving of notice and following the time when such holder shall have become
entitled under the mortgage held by it to remedy the same (which shall in no
event be less than the period to which Landlord would be entitled under this
Lease to effect such remedy), provided such holder shall, with reasonable
diligence, give Tenant notice of intention to, and commence and continue to
remedy such act or omission or to cause the same to be remedied.
15. ACCESS. Tenant shall permit Landlord or its agents to enter the demised premises at all reasonable hours for the purpose of inspection, or of making repairs that Tenant may neglect or refuse to make in accordance with the agreements, terms, covenants and conditions hereof, and also for the purpose of showing the demised premises to persons wishing to purchase the same or to make a mortgage loan on the same and, at any time within one year prior to the expiration of the term, to persons wishing to rent the same; and Tenant shall within six (6) months prior to the expiration of the term permit the usual notices of "To Let", "For Rent" and "For Sale" to be placed on the demised premises and to remain thereon without hindrance or molestation.
16. PERMITTED USE. Tenant shall use the demised premises for storage and warehouse use and for any other uses permitted by applicable laws and for no other purpose, and, in any event, Tenant shall not use or occupy, nor permit or suffer, the demised premises or any part thereof to be used or occupied for any unlawful or illegal business, use or purpose, nor in such manner as to constitute a nuisance of any kind, nor for any purpose or in any way in violation of the certificate of occupancy for the demised premises or any present or future governmental laws, ordinances, requirements, orders, directions, rules or regulations or the requirements of any insurance company issuing any policy of insurance with respect to the demised premises. Tenant shall immediately upon the discovery of any such unlawful, illegal, disreputable or extrahazardous use take all necessary steps, legal and equitable, to compel the discontinuance of such use and to oust and remove any subtenants, occupants or other persons guilty of such unlawful, illegal, disreputable or extrahazardous use.
17. INDEMNITY. Tenant shall indemnify and save harmless Landlord against and from all costs, expenses, liabilities, losses, damages, injunctions, suits, actions, fines, penalties, claims and demands of every kind or nature, including reasonable counsel fees, by or on behalf of any person, party or governmental authority whatsoever arising out of (a) any failure by Tenant to perform any of the agreements, terms, covenants or conditions of this Lease on Tenant's part to be performed, (b) any accident, injury, damage or occurrence which shall happen in or about the demised premises or appurtenances or on or under the streets, sidewalks, curbs or vaults in front of or adjacent thereto, however occurring, and any matter or thing growing out of the condition, occupation, maintenance, alteration, repair, use or operation of the demised premises or any part thereof, and/or of the streets, sidewalks, curbs or vaults adjacent thereto during the term, (c) failure by Tenant or any Tenant Party to comply with any laws, ordinances, requirements, orders, directions, rules or regulations of any federal, state, county or city governmental authority, or (d) any mechanic's lien, conditional
bill of sale or chattel mortgage filed against the demised premises or any equipment therein or any materials used in the construction or alteration of any building or improvement thereon.
18. EVENTS OF DEFAULT. (a) Each of the following events shall constitute an "Event of Default":
(1) If Tenant, or any successor or assignee of Tenant shall file a petition in bankruptcy or insolvency or for reorganization or arrangement under the bankruptcy laws of the United States or any insolvency act of any state or shall voluntarily take advantage of any such law or act by answer or otherwise or shall be dissolved (if Tenant or such successor or assignee be a corporation) or shall make an assignment of all or a substantial portion of Tenant's property for the benefit of creditors.
(2) If involuntary proceedings under any such bankruptcy law or insolvency act or for the dissolution of a corporation shall be instituted against Tenant (or such successor or assignee), or if a receiver or trustee shall be appointed of all or substantially all of the property of Tenant (or such successor or assignee) and such proceedings shall not be dismissed or such receivership or trusteeship vacated within sixty (60) days after such institution or appointment.
(3) If Tenant shall fail to pay Landlord any Rent that has
become due and payable, and Tenant shall not pay the same to Landlord within ten
(10) days after written notice of such failure shall have been given to Tenant
(for this purpose, such notice may be sent to Tenant by telecopier transmission
or in any other manner permitted under Article 25 hereof).
(4) If Tenant shall assign this Lease or sublet all or any part of the demised premises except as expressly permitted by this Lease or otherwise consented to by Landlord in writing.
(5) If Tenant shall abandon the demised premises.
(6) If this Lease or the estate of Tenant hereunder shall be transferred to or shall pass to or devolve upon any other person or party, by operation of law or otherwise, except in a manner herein permitted.
(7) If Tenant shall fail to perform any of the other agreements, terms, covenants or conditions hereof on Tenant's part to be performed, and such non-performance shall continue for a period within which performance is required to be made by specific provision of this Lease, or if no such period is so provided for a period of thirty (30) days after notice thereof by Landlord to Tenant or, if such performance cannot be reasonably had within such thirty-day period, Tenant shall not in good faith have commenced such performance within such thirty-day period and shall not thereafter diligently proceed therewith to completion.
19. DAMAGES AND REMEDIES. (a) This Lease and the term and estate hereby granted are subject to the limitation that whenever an Event of Default shall occur, regardless of and notwithstanding the fact that Landlord has or may have some other remedy under this Lease or by virtue hereof, or in law or in equity, Landlord may give to Tenant a notice (the "Termination Notice") of intention to end the term of this Lease specifying a day not less than five (5) days thereafter and, upon the giving of the Termination Notice, this Lease and the term and estate hereby granted shall expire and terminate upon the day so specified in the Termination Notice as fully and completely and with the same force and effect as if the day so specified were the date herein set forth the expiration of the term of this Lease, and all rights of Tenant under this Lease shall expire and terminate, but Tenant shall remain liable for damages as hereinafter provided. From and after the date upon which Landlord shall be entitled to give a Termination Notice, Landlord, without further notice, may re-enter, possess and repossess itself of the demised premises.
(b) It is covenanted and agreed by Tenant that in the event of the expiration or termination of this Lease or re-entry by Landlord, under any of the provisions of this Article or pursuant to law, by reason of any Event of Default hereunder, Tenant will pay to Landlord, as damages with respect to this Lease, at the election of Landlord:
(i) a sum which at the time of such termination of this Lease or at the time of any re-entry by Landlord, as the case may be, represents the then present value (employing a discount rate equal to the then current rate of United States Treasury bills having a term that most closely approximates the then remaining term of this Lease) of the excess, if any, of:
(A) the aggregate Rent which would have been payable by Tenant for the period commencing with such earlier termination of this Lease or the date of any such re-entry, as the case may be, and ending with the date hereinabove set for the expiration of the full term hereby granted, had this Lease not so terminated or had Landlord not so reentered the Property
over
(B) the rental value of the demised premises for the same period; or
(ii) sums equal to the aggregate Rent and other sums which would have been payable by Tenant had this Lease not so terminated, or had Landlord not so re-entered the demised premises, payable upon the rent days specified herein following such termination or such re-entry and until the date hereinabove set for the expiration of the full term hereby granted; PROVIDED, HOWEVER, that if the demised premises shall be leased or re-let during said period, Landlord shall credit Tenant with the net rents, if any, received by Landlord from such leasing or re-letting, such net rents to be determined by first deducting from the gross rents as and when received by Landlord from such leasing or re-letting the expenses incurred or paid by Landlord in terminating this Lease or of re-entering the demised premises and of securing possession thereof, as well as the expenses of leasing and re-letting, including altering and preparing any portion of the demised premises for new tenant(s), brokers' commissions, any other tenant incentives (including assumption of lease obligations) and all other expenses properly chargeable against the demised premises and the rental therefrom; but in no event shall Tenant be entitled to receive any excess of such net rents over the Rent and other sums payable by Tenant to Landlord hereunder.
(c) Suit or suits for the recovery of any and all damages, or any installments thereof, provided for hereunder may be brought by Landlord from time to time at its election, and nothing contained herein shall be deemed to require Landlord to postpone suit until the date when the term of this Lease would have expired if it had not been terminated under the provisions of this Article, or under any provisions of law, or had Landlord not re-entered the demised premises.
(d) Nothing herein contained shall be construed as limiting or precluding the exercise by Landlord of any other remedies or the recovery by Landlord against Tenant of any sums or damages to which Landlord may lawfully be entitled in any case other than those particularly provided for in this Lease.
(e) Landlord shall be entitled to recover from Tenant each monthly deficiency as the same shall arise and no suit to collect the amount of the deficiency for any month shall prejudice Landlord's right to collect the deficiency for any subsequent month by a similar proceeding. Alternatively, suit or suits for the recovery of such deficiencies may be brought by Landlord from time to time at its election.
(f) Tenant, for Tenant, and on behalf of any and all persons or parties claiming through or under Tenant, including creditors of all kinds, does hereby waive and surrender all right and privilege which they or any of them might have under or by reason of any present or future law, to redeem the demised premises or to have a continuance of this Lease for the term hereby demised after being dispossessed or ejected therefrom by process of law or under the terms of this Lease or after the termination of this Lease as herein provided.
(g) In the event of a breach or threatened breach on the part of Tenant with respect to any of the covenants or agreements on the part of or on behalf of Tenant to be kept, observed or performed, Landlord shall also have the right to seek an injunction or other equitable relief.
(h) If an order for relief is entered or if any stay of proceeding or other act becomes effective in favor of Tenant or Tenant's interest in this Lease in any proceeding commenced by or against Tenant under the present or any future United States Bankruptcy Code or in a proceeding which is commenced by or against Tenant seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any other present or future applicable federal, state or other bankruptcy or insolvency statute or law, Landlord shall be entitled to invoke any and all rights and remedies available to it under such bankruptcy or insolvency code, statute or law of this Lease, including such rights and remedies as may be necessary to adequately protect Landlord's right, title and interest in and to the demised premises or any part thereof and adequately assure the complete and continuous future performance of Tenant's obligations under this Lease. Adequate protection of Landlord's right, title and interest in and to the demised premises, and adequate assurance of the complete and continuous future performance of Tenant's obligations under this Lease, shall include all of the following requirements:
(i) that Tenant shall comply with all of its obligations under this Lease;
(ii) that Tenant shall continue to use the demised premises only in the manner permitted by this Lease; and
(iii) that if Tenant's trustee, Tenant or Tenant as debtor-in-
possession assumes this Lease and proposes to assign it (pursuant to
Title 11 U.S.C. Section 365, as it may be amended) to any party who has
made a bona fide offer therefor, the notice of such proposed
assignment, giving (x) the name and address of such party, (y) all of
the terms and conditions of such offer, and (z) the adequate assurance
to be provided Landlord to assure such party's future performance under
this Lease, including the assurances referred to in Title 11 U.S.C.
Section 365(b)(3), as it may be amended, and such other assurances as
Landlord may reasonably require, shall be given to Landlord by the
trustee, Tenant or Tenant as debtor-in-possession of such offer, but in
any event no later than ten (10) days before the date that the trustee,
Tenant or Tenant as debtor-in-possession shall make application to a
court of competent jurisdiction for authority and approval to enter
into such assignment, and Landlord or Landlord's designee shall
thereupon have the prior right and option, to be exercised by notice to
the trustee, Tenant and Tenant as debtor-in-possession, given at any
time before the effective date of such proposed assignment, to accept
an assignment of this Lease upon the same terms and conditions and for
the same consideration, if any, as the bona fide offer made by such
party, less any brokerage commissions which may be payable out of the
consideration to be paid by such party for the assignment of this
Lease. Landlord shall have no obligation to pay such brokerage
commissions. If Tenant attempts to arrange such an assignment of this
Lease, then as an element of the required adequate assurance to
Landlord, and as a further condition to Tenant's right to make such an
assignment, Tenant's agreement(s) with brokers shall, to Landlord's
reasonable satisfaction, provide that Landlord shall
have no obligation to pay a brokerage commission if Landlord exercises Landlord's rights under this subparagraph (h).
(i) Landlord shall in no event be responsible or liable for any failure to relet the demised premises or any part thereof, or any failure to collect any rent due upon a reletting, or otherwise be obligated to mitigate or minimize damages.
(j) Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain as damages incident to a termination of this Lease, in any bankruptcy, reorganization or other court proceedings, the maximum amount allowed by any statute or rule of law ln effect when such damages are to be proved.
(k) No waiver by Landlord of any breach by Tenant or any of Tenant's obligations, agreements or covenants herein shall be a waiver of any subsequent breach or of any obligation, agreement or covenant, nor shall any forbearance by Landlord to seek a remedy for any breach by Tenant be a waiver by Landlord or any rights and remedies with respect to such or any subsequent breach.
(l) No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy provided herein or by law, including without limitation consequential damages, but each shall be cumulative and in addition to every other right of remedy given herein or now or hereafter existing at law or in equity or by statute.
20. NO WAIVER. No Waiver by either party hereto of any covenant or condition or of the breach of any covenant or condition of this Lease shall be taken to constitute a waiver of any subsequent breach of such covenant or condition nor to justify or authorize the nonobservance on any other occasion of the same or of any other covenant or condition hereof, nor shall the acceptance of rent by Landlord at any time when Tenant is in default under any covenant or condition hereof be construed as a waiver of such default or of Landlord's right to terminate this Lease on account of such default, nor shall any waiver or indulgence granted by Landlord to Tenant be taken as an estoppel against Landlord, it being expressly understood that if at any time Tenant shall be in default in any of its covenants or conditions hereunder an acceptance by Landlord or rental during the continuance of such default or the failure on the part of Landlord promptly to avail itself of such rights or remedies as Landlord may have, shall not be construed as a waiver of such default, but Landlord may at any time thereafter, if such default continues, terminate this Lease or assert any other rights or remedies available to it on account of such default in the manner hereinbefore provided.
21. AS-IS. At the commencement of the term, Tenant shall accept the demised premises, including the buildings and improvements and any equipment on or in the demised premises in their existing condition and state of repair, and Tenant covenants that no representations, statements, or warranties, express or implied, have been made by or on behalf of Landlord with respect thereof, in respect of their condition, or the use or occupation that may be made thereof, and that Landlord shall in no event whatsoever be liable for any defects (latent or otherwise) therein.
22. CONDITION UPON EXPIRATION OF TERM. Tenant shall, on the last day of the term, or upon the sooner termination of the term, peaceably and quietly surrender and deliver the demised premises to Landlord free of subtenancies, broom-clean, including all buildings, replacements, changes, additions and improvements constructed, erected, added or placed by Tenant thereon, with all equipment in or appurtenant thereto, except all movable trade fixtures installed by Tenant, in good condition and repair, reasonable wear and tear excepted. Any trade fixtures or personal property not used in connection with the operation of the demised premises and belonging to Tenant or to any subtenant, if not removed at such termination and if Landlord shall so elect, shall be deemed abandoned and become the property of Landlord without any payment or offset therefor. If Landlord shall not so elect, Landlord may remove such fixtures or property from the demised premises and store them at Tenant's
risk and expense. Tenant shall repair and restore, and save Landlord harmless from, all damage to the demised premises caused by the removal therefrom, whether by Tenant or by Landlord, of all such trade fixtures and personal property.
23. QUIET ENJOYMENT. Landlord covenants that, so long as Tenant shall faithfully perform the agreements, terms, covenants and conditions hereof, Tenant shall and may peaceably and quietly have, hold and enjoy the demised premises for the term hereby granted, subject to and in accordance with the terms and conditions of this Lease.
24. TENANT CERTIFICATION. (a) Tenant shall, without charge, at any time and from time to time hereafter, within twenty (20) days after written request by Landlord, certify by a written instrument duly executed to Landlord and any mortgagee or purchaser, or proposed mortgagee or proposed purchaser, or any other person, firm or corporation specified by Landlord, (i) whether or not this Lease is in full force and effect, (ii) that this Lease has not been modified, or if there have been modifications, identifying each modification, (iii) that Tenant has no offsets, claims or defenses to the enforcement of any of Tenant's obligations under this Lease or if Tenant has any, identifying all of the same with reasonable particularity, (iv) that to Tenant's knowledge, Landlord is not in default of any of Landlord's obligations under this Lease, or if so, identifying all such defaults of which Tenant has knowledge, and (v) as to any other matters which may be reasonably requested by Landlord.
(b) Provided that no default by Tenant under this Lease is continuing, Landlord shall, without charge, at any time and from time to time hereafter (but not more than two times in any twelve month period), within twenty (20) days after written request of Tenant, certify by a written instrument duly executed to Tenant or to any lender, purchaser or proposed lender or purchaser, or any other person, firm or entity specified by Tenant, (i) whether or not this Lease is in full force and effect, (ii) that this Lease has not been modified, or if there have been modifications, identifying each modification, (iii) that to Landlord's knowledge, Tenant is not in default of any of Tenant's obligations under this Lease, of if Landlord knows of any such defaults, identifying the defaults of which Landlord has knowledge.
25. NOTICES. Whenever it is provided herein that notice, demand, request or other communication shall or may be given to or served upon either of the parties by the other, and whenever either of the parties shalt desire to give or serve upon the other any notice, demand, request or other communication with respect hereto or the demised premises, each such notice, demand, request or other communication shall be in writing and, any law or statute to the contrary notwithstanding, shall be effective for any purpose if given or served as follows:
(a) If by Landlord, by sending the same by Federal Express, UPS, Express Mail or other reputable overnight courier (a "Courier") or by mailing the same to Tenant by certified or registered mail, postage prepaid, return receipt requested, addressed to Tenant at the demised premises or at such other address as Tenant may from time to time designate by notice given to Landlord by certified or registered mail or by Courier.
(b) If by Tenant, by sending it by Courier or by mailing the same to Landlord by certified or registered mail, postage prepaid, return receipt requested, addressed to Landlord at Landlord's address specified at the head of this Lease, or at such other address as Landlord may from time to time designate by notice given to Tenant by certified or registered mail or by Courier.
Every notice, demand, request or other communication hereunder sent by certified or registered mail shall be deemed to have been duly given or served three (3) business days after the date that the same shall be deposited in the United States mails, postage prepaid, in the manner aforesaid. Every notice, demand, request or other communication hereunder sent by Courier shall be deemed to have been duly given or served on the first (1st) business day following the delivery of same to the Courier. Nothing herein
contained, however, shall be construed to preclude personal service of any notice, demand, request or other communication in the same manner that personal service of a summons or other legal process may be made.
26. CERTAIN DEFINITIONS. The term "Landlord" as used herein shall mean only the owner for the time being in fee of the demised premises, or the owner of the leasehold estate created by an underlying lease, or the mortgagee of the fee or of such underlying lease, in possession for the time being of the demised premises, so that in the event of any sale or sales of the demised premises, or of the making of any such underlying lease, or of any transfer or assignment or other conveyance of such underlying lease and the leasehold estate thereby created, the seller, lessor, transferor or assignor shall be and hereby is entirely freed and relieved of all agreements, covenants and obligations of Landlord hereunder which accrue from and after the date of the transfer and it shall be deemed and construed without further agreement between the parties or their successors in interest or between the parties and the purchaser, lessee, transferee or assignee on any such sale, leasing, transfer or assignment that such purchaser, lessee, transferee or assignee has assumed and agreed to carry out any and all agreements, covenants and obligations of Landlord hereunder which accrue subsequent to the date of the transfer.
The word "equipment" as used herein, shall, among other things, include, but shall not be limited to, all machinery, engines, dynamos, boilers, elevators, electrical refrigerators, air-conditioning compressors, ducts, units and equipment, heating and hot water systems, pipes, plumbing, wiring, gas, steam, water and electrical fittings, ranges and radiators, used in the operation of the demised premises.
The words "re-enter" and "re-entry" as used herein shall not be restricted to their technical legal meaning.
The use herein of the neuter pronoun in any reference to Landlord or Tenant shall be deemed to include any individual Landlord or Tenant, and the use herein of the words "successors and assigns" or "successors or assigns" of Landlord and Tenant shall be deemed to include the heirs, legal representatives and assigns of any individual Landlord or Tenant.
27. NON-RECOURSE. Notwithstanding anything contained in this Lease to the contrary, Tenant shall look solely to the estate and property of Landlord in the demised premises for the satisfaction of Tenant's remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of the Lease to be observed and/or performed by Landlord, and no other property or assets of Landlord or any of the partners, shareholders, officers, directors, members, managers, or principals of Landlord shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies.
28. TENANT'S OPTION TO RENEW. (a) Subject to the terms and conditions of this Article, Tenant shall have one (1) option to renew the term of this Lease (such option herein called the "Renewal Option") for a term (the "Renewal Term") of ten (10) years. Subject to the provisions of this Article, the Renewal Term shall commence on the day ("Renewal Term Commencement Date") immediately following the Expiration Date, and end on the day immediately preceding the tenth (10th) anniversary of the Renewal Term Commencement Date. In order for Tenant to effectively exercise the Renewal Option, all of the following conditions must be satisfied (it being understood and agreed that the Renewal Option shall be available to Tenant unless all such conditions are satisfied):
(i) Tenant shall not be in default under any of the provisions of this Lease beyond any applicable notice and/or cure period herein provided, both as of the time of the exercise of the Renewal Option and as of the time of the commencement date of the Renewal Term;
(ii) Tenant shall have given written notice to Landlord exercising the Renewal Option not later than the date which is nine (9) months prior to the commencement date of the Renewal Term and not earlier than the date which is eighteen (18) months prior to such commencement date;
(iii) this Lease remains in full force and effect as of the day immediately preceding the commencement date of the Renewal Term; and
(iv) Tenant shall be in actual occupancy of at least fifty (50%) percent of the gross floor area of the improvements at the demised premises, both as of the time of the exercise of the Renewal Option and as of the time of the commencement of the Renewal Term.
If Tenant shall timely and effectively exercise the Renewal Option, this Lease, subject to the provisions of this Article, shall automatically be extended for the Renewal Term with the same force and effect as if such Renewal Term had been originally included in the term of this Lease, and such renewal shall be upon all of the same terms and conditions contained in this Lease, as the same shall have been modified or amended in writing, except that (i) the fixed minimum rent for the Renewal Term shall be (x) $560,000.00 per annum, payable in the manner provided in this Lease for the payment of fixed minimum rent, for the period commencing on the Renewal Term Commencement Date and ending on the last day of the calendar month in which falls the fifth (5th) anniversary of the Renewal Term Commencement Date, and (y) $640,000.00 per annum, payable in the manner provided in this Lease for the payment of fixed minimum rent, for the period commencing on the first day of the calendar month immediately following the calendar month in which falls such fifth (5th) anniversary and ending on the last day of the Renewal Term, and (ii) Tenant shall have no right to renew the term of this Lease for any period beyond the Renewal Term
29. LANDLORD'S RIGHT TO PERFORM. If Tenant shall fail to pay any Rent or make any other payment required to be made under this Lease or shall default in the performance of any other obligations of Tenant herein contained, Landlord, without being under any obligation to do so and without thereby waiving such default, may make such payment and/or remedy such other default for the account and at the expense of Tenant (a) immediately and without notice in the case of any failure to pay any amount due a third party, if such failure would result in the creation of a lien on the Landlord's interest in the demised premises or any part thereof or any loss or impairment of Landlord's estate hereunder or in and to the demised premises or any failure to perform any of Tenant's obligations hereunder which creates an emergency situation; or (b) in any other case, if Tenant shall fail to make such payment or remedy such default within the applicable period of notice and/or grace, if any, provided in this Lease. Bills for any expenses incurred by Landlord in connection therewith, and bills for all costs, expenses and disbursements of every kind and nature whatsoever, including counsel fees, involved in collection or endeavoring to collect any rent or other sums due hereunder, or any part thereof, or involved in enforcing or endeavoring to enforce any right against Tenant under or in connection with this Lease, or pursuant to law, including any such cost, expense and disbursement involved in instituting and prosecuting summary or other legal proceedings, as well as bills for any property, material, labor or services provided, furnished or rendered, or caused to be, by Landlord to Tenant, with respect to the demised premises or equipment used in connection therewith (together with interest at three (3%) percent plus the prime rate of interest being charged from time to time by the Chase Manhattan Bank or its successor, from the respective dates of Landlord's making of each such payment or incurring of each such cost or expense), may be sent by Landlord to Tenant monthly, or immediately, at Landlord's option, and shall be due and payable in accordance with the terms of said bills and if not paid within ten (10) days after written demand made by Landlord, the amount thereof shall immediately become due and payable as additional rent under this Lease. Landlord may restrain any breach or threatened breach of any of any of Tenant's obligations under this Lease, but the mention herein of any particular remedy shall not preclude Landlord from any other remedy it might have either in law or in equity. Any right or remedy of Landlord in this Lease specified and any other right or remedy that
Landlord may have at law, in equity or otherwise, upon breach of any of Tenant's obligations under this Lease shall be distinct, separate and cumulative rights or remedies, and no one of them, whether exercised by Landlord or not, shall be deemed to be in exclusion of any other,
30. HOLDOVER. (a) If the demised premises are not surrendered by Tenant upon the expiration or sooner termination of this Lease, Tenant hereby indemnifies Landlord and holds Landlord harmless from and against any and all claims, losses, damages, liabilities, costs and expenses (including, without limitation, attorneys' fees and disbursements) asserted against, suffered or incurred by Landlord and arising out of or in connection with the delay by Tenant in so surrendering the Demised Premises including, without limitation, all claims made by any succeeding tenant or prospective tenant founded upon such delay.
(b) In the event Tenant or any party claiming under or through Tenant remains in possession of the demised premises after the expiration or sooner termination of this Lease without the execution of a new lease between Landlord and Tenant relating to the demised premises, Tenant, at the option of Landlord, shall be deemed to be occupying the demised premises (i) as a tenant from month-to-month, at a monthly rental equal to the greater of (x) the then fair market monthly fixed minimum rent for the demised premises, or (y) two (2) times the monthly fixed minimum rent in effect upon the expiration of the term of this Lease, plus, in the case of each of the preceding clause (x) and (y), all of the additional rents payable hereunder, and (ii) subject to all of the other terms and conditions of this Lease insofar as the same are applicable to a month-to-month tenancy.
(c) Tenant expressly waives, for itself and for any party claiming under or through Tenant, any and all rights that Tenant or any such party may have under the provisions of Section 2201 of the New York Civil Practice Law and Rules and of any similar or successor law of similar import then in force, in connection with any holdover proceedings that Landlord may institute to enforce any of the provisions of this Article 30 or any of the other provisions of this Lease.
31. MISCELLANEOUS. (a) Tenant is and shall be in exclusive control and possession of the demised premises as provided herein, and Landlord shall not, in any event whatsoever, be liable for any injury or damage to any property or to any person happening on or about the demised premises, nor any injury or damage to any property of Tenant, or of any other person contained therein unless and only to the extent caused by the negligence or wrongful acts of Landlord. The provisions hereof permitting Landlord to enter and inspect the demised premises are made for the purpose of enabling Landlord to be informed as to whether Tenant is complying with the agreements, terms, covenants and conditions hereof, and to do such acts if Tenant shall fail to do.
(b) Except as expressly provided otherwise herein, no abatement, diminution or reduction of rent, charges or other compensation shall be claimed by or allowed to Tenant, or any persons claiming under it, under any circumstances, whether for inconvenience, discomfort, interruption of business, or otherwise, arising from the making of alterations, changes, additions, improvements or repairs to any buildings now on or which may hereafter be erected on the demised premises, by virtue or because of any present or future governmental laws, ordinances, requirements, orders, directions, rules or regulations or by virtue or arising from, and during, the restoration of the demised premises after the destruction or damage thereof by fire or other cause or the taking or condemnation of a portion only of the demised premises (except as provided in Article 13) or arising from any other cause or reason.
(c) This Lease contains the entire agreement between the parties and cannot be changed or terminated orally, but only by an instrument in writing executed by the parties.
(d) This Lease shall be governed by and construed in accordance with the laws of the State of New York.
(e) It is mutually agreed by and between Landlord and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, Tenant's use or occupancy of the demised premises, and/or claim of injury or damage.
(f) The agreements, terms, covenants and conditions herein shall bind and inure to the benefit of Landlord and Tenant and their respective heirs, legal representatives, successors and, except as otherwise provided herein, their assigns.
(g) Submission by Landlord of the within Lease for execution by Tenant, shall confer no rights nor impose any obligations on either party unless and until both Landlord and Tenant shall have executed this Lease and duplicate originals thereof shall have been delivered to the respective parties.
(h) This Lease may be executed simultaneously in two or more counterparts, each of which shall be deemed to be an original, but all of which, together, shall constitute one and the same instrument.
(i) This Lease constitutes the entire agreement and understanding of the parties, and no prior, contemporaneous or subsequent oral agreement or statement shall alter or modify the terms and provisions hereof unless agreed to by the parties in writing.
(j) Neither this Lease nor any memorandum or short form thereof may be recorded without the prior written consent of Landlord.
(k) If any one or more of the provisions contained in this Lease shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Lease and this Lease shall be construed as if such provision had never been contained in this Lease. This Lease has been negotiated by the parties and no party shall be deemed to have drafted this Lease for purposes of construing any ambiguity.
(l) Any dispute between Landlord and Tenant relating to the factual question of whether Landlord has unreasonably withheld or delayed its consent or approval where Landlord has agreed herein not to unreasonably withhold or delay its consent or approval, shall be determined by arbitration in accordance with the provisions of Article 32 hereof. Wherever in this Lease Landlord's consent or approval is required, if Landlord shall delay or refuse such consent or approval, Tenant in no event shall be entitled to make, nor shall Tenant make, any claim, and Tenant hereby waives any claim, for money damages (nor shall Tenant claim any money damages by way of set-off, counterclaim or defense) based upon any claim or assertion by Tenant that Landlord unreasonably withheld or unreasonably delayed its consent or approval. Tenant's sole remedy shall be an action or proceeding to enforce any such provision, for specific performance, injunction or declaratory judgment and such remedy shall be available only in those instances where Landlord has expressly agreed in writing not unreasonably to withhold its consent or where as a matter of law Landlord may not unreasonably withhold its consent.
(m) Tenant represents and warrants to Landlord that Tenant has not dealt with any broker, finder or other party entitled to a broker's or finder's fee, or other commissions or compensation, arising out of or in connection with the execution of this Lease other than Pyramid Brokerage Company, Inc. (the "Broker"). Tenant agrees to indemnify Landlord from (i) the claims of any and all brokers, finders or other parties (other than Broker) for broker's or finder's fees, or other commissions or compensation, arising out of or in connection with the execution of this Lease, or any transactions relating to this Lease; and (ii) any and all costs and expenses, including reasonable attorney's fees incurred by Landlord in connection with the defense of any such claims and the enforcement of the foregoing indemnities. This paragraph shall survive the expiration or earlier termination of this Lease.
(n) From time to time during the term of this Lease, within fifteen (15) days after Landlord's request, Tenant shall deliver to Landlord financial statements consisting of Tenant's balance sheet, profit and loss statement and such other financial statements as Landlord may reasonably request, which statements shall be audited statements, if then available or if audited statements are not then available, shall be certified in writing by a responsible officer of Tenant in a manner reasonably satisfactory to Landlord. In any event, within fifteen (15) days after Landlord's demand, but not earlier than sixty (60) days after the expiration of each calendar year occurring within the term of this Lease, Tenant shall deliver to Landlord all of the customary financial statements of Tenant for the then ended calendar year, audited by a firm of independent certified public accountants.
(o) Landlord shall nor have and hereby waives any and all liens or rights it may have in Tenant's personal property including, without limitation, in Tenant's inventory, merchandise, removable trade fixtures, and equipment. Provided that no Event of Default is continuing, Landlord agrees to execute, upon request and from time to time (but not more than two (2) times in any twelve (12) month period), a confirmation of such waiver and Landlord further agrees to execute, simultaneously with this Lease, the form of Landlord's Waiver and License Agreement attached hereto as Schedule C.
(p) Tenant covenants and agrees that Tenant shall continuously operate the demised premises for storage, warehouse and ancillary office uses until the second (2nd) anniversary of the date hereof on all Business Days (hereinafter defined), during all Business Hours (hereinafter defined), except in the event that Tenant shall be prevented from operating Tenant's business in the demised premises during such period by conditions beyond Tenant's reasonable control, such as by acts of God or the elements, strikes and labor disputes, casualty and condemnation. Tenant represents to Landlord that it is Tenant's current intention to operate from the demised premises from the second (2nd) anniversary of the date hereof until the tenth (10th) anniversary of the date hereof and Tenant further covenants and agrees that if Tenant shall not be operating from the demised premises at any time during the period from the second (2nd) anniversary of the date hereof until the tenth (10th) anniversary of the date hereof then Tenant shall make its best efforts to see that the demised premises be operated by a subtenant or assignee permitted under the terms of the Lease, unless such subtenant or assignee be prevented during such period from conducting business in the demised premises by conditions beyond such subtenant's or assignee's reasonable control, such as by acts of God or the elements, strikes and labor disputes, casualty and condemnation. As used herein, the term "Business Days" shall be deemed to mean all days other than Saturdays, Sundays and Holidays. The term "Holidays" shall be deemed to mean all federal, state, municipal and bank holidays now or hereafter in effect. The term "Business Hours" shall be deemed to mean 9 A.M. to 4 P.M. on Business Days.
32. ARBITRATION. Either party may request arbitration of any matter in dispute wherein arbitration is expressly provided in this Lease as the procedure to resolve such dispute. The party requesting arbitration shall do so by giving notice to that effect to the other party, and both parties shall promptly thereafter jointly apply to the American Arbitration Association (or any organization successor thereto) in the County in which the demised premises are located for the appointment of a single arbitrator. The arbitration shall be conducted in accordance with the then prevailing rules of the American Arbitration Association (or any organization successor thereto) in the County in which the demised premises are located. In rendering such decision and award, the arbitrator shall not add to, subtract from or otherwise modify the provisions of this Lease. All the expenses of the arbitration shall be borne by the losing party, but each party shall bear the expenses of its own counsel and witnesses.
33. SECURITY DEPOSIT. Upon the execution of this Lease, Tenant shall deposit with Landlord the sum of Sixty Thousand ($60,000.00) Dollars as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this Lease which sum shall be held by Landlord in a separate interest bearing account; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this Lease, including, but not limited to, the payment of Rent, Landlord may upon notice to Tenant
use, apply or retain the whole or any part of the security so deposited and all interest earned thereon to the extent required for the payment of any rent and additional rent or any other sum as to which Tenant is in default or for any sum which Landlord may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this Lease, including but not limited to, any damages or deficiency accrued before or after summary proceedings or other re-entry by Landlord. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this Lease, said security plus all of the interest earned thereon shall be returned to Tenant within thirty (30) days after the date fixed as the end of this Lease and after delivery of entire possession of the demised premises to Landlord. In the event of a sale or transfer or leasing by Landlord of the demised premises, Landlord shall have the right to transfer said security to the vendee or lessee and, upon such transfer, Landlord shall thereupon be deemed to be released by Tenant from all liability for the return of such security; and Tenant agrees to look to the new Landlord solely for the return of such security; and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Landlord. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Landlord nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. In the event Landlord, in accordance with its rights under this Lease, applies or retains any portion or all of the security deposited, Tenant shall forthwith restore the amount so applied or retained so that at all times the amount deposited shall be $60,000.00.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this instrument the day and year first above written.
LANDLORD:
COOLIDGE BINGHAMTON, LLC
By: Coolidge Binghamton Realty Corp.
its managing member
By: /s/ Sheldon Stahl
--------------------------
Name: Sheldon Stahl
Title: Vice President
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TENANT:
DICK'S SPORTING GOODS, INC.
By: /s/ Joseph Queri
-----------------------------
Name: Joseph Queri
Title: Sr. Vice President
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All that tract or parcel of land, situate in the Town of Conklin, County of Broome and State of New York, more particularly described as follows:
BEGINNING at an iron pin set in the westerly boundary of County Road 322, said point being 830.5 feet southerly, as measured along the westerly boundary of County Road 322, from the intersection of the westerly boundary of County Road 322 with the southerly boundary of Carlin Road;
THENCE southerly along the westerly boundary of County Road 322 along a curve to the right, with a radius of 833.00 feet, a distance of 110.00 feet to a point;
THENCE, continuing along the westerly boundary of County Road 322, South 13 degrees 34 minutes 56 seconds West, a distance of 287.99 feet to a point;
THENCE, continuing in a southerly direction along the westerly boundary of County Road 322, along a curve to the left, with a radius of 4242.00 feet, a distance of 266.55 feet to an iron pin set in the centerline of an existing creek;
THENCE in a general westerly direction along the centerline of said creek, as it winds and turns, a distance of 849 feet, more or less, to an iron pin set in the east line of lands now or formerly of William R. Masler, said iron pin being North 3 degrees 28 minutes 38 seconds West a distance of 105.89 feet from 1 1/2" iron pipe;
THENCE North 3 degrees 28 minutes 38 seconds West along the east line of said lands now or formerly of Masler a distance of 596.71 feet to an iron pipe set;
THENCE South 76 degrees 40 minutes 20 seconds East a distance of 1004.62 feet to the point or place of beginning.
1. Any state of facts an accurate survey and inspection of the demised premises would show;
2. [Here set forth all exceptions in Purchaser's title report or title commitment for the demised premises, updated through the date of the closing] [to be added at the closing];
3. Any matter created or caused by Tenant or any party claiming under or through Tenant; and
4. Any matter existing as of the date of this Lease, of which Tenant has knowledge.
SCHEDULE C
__________ ___, 1999
LANDLORD'S WAIVER AND LICENSE AGREEMENT
General Electric Capital
Corporation, as Agent
201 High Ridge Road
Stamford, Connecticut 06927
Ladies and Gentlemen:
Reference is made to a lease dated ________ ___, 1999 (the "Lease") entered into between __________________ ("Landlord") and Tenant pursuant to which Landlord, as the owner of the real property commonly known as "Lot L-2, Broome Corporate Park" located in the Town of Conklin, County of Broome, State of New York, leased to Tenant such real property together with the building and other improvements located thereon as more particularly set forth in the Lease (the "Premises").
Reference is also made to the financing arrangements between Tenant, certain lenders ("LENDERS") and you, as agent for the Lenders (in such capacity, together with your officers, directors, employees, agents and invitees, "AGENT") including, but not limited to, the Credit Agreement between Tenant, Lenders and Agent (the foregoing, together with all related documents, agreements, instruments and notes, as the same may now exist or may hereafter be amended, supplemented or otherwise modified, being collectively referred to herein as the "AGREEMENTS").
Pursuant to the terms of the Agreements, Tenant has granted to Agent for the benefit of Lenders a security interest in all of the existing and hereafter acquired tangible and intangible personal property of Tenant, including, but not limited to, cash, cash equivalents, bank accounts, accounts and other receivables, inventories, (wherever located), securities (whether or not marketable), contract rights, instruments, documents, franchise rights, patents, trade names, trademarks, trade styles, copyrights and all other intellectual property rights, notes receivable and general intangibles and all fixtures and equipment other than those fixtures and equipment which are a part of the real property delivered to Tenant under the Lease, or which are so permanently attached to the real property delivered to Tenant under the Lease that they have become a part of that real property or which otherwise constitute part of the Excluded Fixtures (as hereinafter defined), and all substitutions, accessions and proceeds of the foregoing (collectively, the "COLLATERAL") as security for any now existing or hereafter arising obligations of Tenant to Agent and Lenders pursuant to the Agreements or otherwise.
In order to induce Agent and Lenders to enter into the Agreements and in consideration of the loans and other financial accommodations to Tenant contemplated thereunder which will accrue to the benefit of Landlord by enabling Tenant to meet its various obligations to Landlord, including those arising under or in connection with the Lease, and for ten dollars ($10) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. Landlord hereby agrees with Agent for the benefit of Lenders as follows:
1. LEASE
(a) Landlord acknowledges that as of the date hereof, (i) the Lease is in full force and effect and each of the Lease and this Agreement constitutes the legal, valid and binding obligation of Landlord enforceable against Landlord in accordance with its terms; and, (ii) Landlord (without having made an investigation) is not aware of any existing default of Tenant under the Lease or any such default which would result from the execution, delivery and performance of the Agreements.
(b) Agent shall have the right, without the obligation, to cure any default of Tenant under the Lease, which default, pursuant to the express terms of the Lease, Tenant has been given the right to cure, but such right to cure of Agent shall be exercisable only during the same period, if any, as is provided to Tenant in the Lease in which to cure such default. Any of the foregoing done by Agent shall be effective to cure such default as if the same had been done by Tenant and shall not be deemed an assumption of the Lease or any of Tenant's obligations thereunder by Agent and any Lender. Landlord agrees that neither Agent nor Lender shall have any obligations to Landlord under the Lease or otherwise or any obligation to assume the Lease or any obligations thereunder.
2. WAIVER OF LIEN RIGHTS
Landlord hereby waives any and all title, landlord's lien, right of distraint or levy, security interest or other interest which Landlord may not or hereafter have in any of the Collateral not or hereafter located at the Premises, whether for unpaid rent or otherwise and whether by virtue of the Lease, the landlord-tenant relationship, any possession thereof, any local, state or federal law or statute, including, without limitation, Title 11 of the United States Code, as amended, common law doctrine, or otherwise. Landlord agrees that all Collateral (it being understood and agreed that the Collateral shall not include the Tenant's interest in the Lease) is and shall remain personal property and shall not constitute fixtures, notwithstanding any attachment to real property except for those fixtures (herein called the "Excluded Fixtures") which are a part of the real property or which are so permanently attached to the real property that they have become a part of that real property pursuant to applicable law including, but not limited to, all parts of the plumbing, electrical, heating, ventilating and air conditioning system serving the Premises and any mechanical equipment or other leasehold improvements, wherever located, and any installations made by or on behalf of Tenant on any roof or otherwise located outside the Premises.
3. LICENSE
(a) Each of Tenant and Landlord hereby agree that, pursuant to the terms of the Agreements, without any accountability or liability to Landlord or Tenant except as provided in paragraph 3(b) below, Agent may enter on, use and occupy the Premises, at any time prior to thirty (30) days after receipt of written notice from Landlord that Landlord has repossessed the Premises or that the term of the Lease has expired or been terminated (such date shall be herein referred to as the "Outside Removal Date"), for the purposes of repossessing and/or removing the Collateral in accordance with the provisions of the Agreements (including, without limitation, for inspections and collateral audit and management purposes), the Uniform Commercial Code and any other applicable law (and whether or not a default exists under the Lease or the Agreements). Agent agrees that no sale (public or otherwise) will be conducted in, at or upon the Premises, and no signage concerning any such sale will be permitted in, at or upon the Premises. Landlord agrees not to unreasonably restrict or otherwise unreasonably interfere with access to, or use of, the
Premises by Agent for the foregoing purposes prior to the Outside Removal Date. Agent agrees (i) to fully cooperate with Landlord's agents in connection with such removal of the Collateral and (ii) to conduct such removal in a manner reasonably designed to minimize interruption or interference with the normal business operations of Landlord and the Premises. Said license shall be irrevocable and shall continue at Agent's option until the Outside Removal Date. Use or occupancy of the Premises by Agent as set forth herein shall not constitute an assumption by Agent or any Lender of the Lease or any obligations thereunder.
(b) In consideration of the foregoing, Agent agrees (to the extent not paid by Tenant) to pay to Landlord for the use and occupancy of the Premises by Agent as provided above: (i) per diem rent (based upon the base rent, operating costs, utilities, taxes and other governmental impositions payable by Tenant under the Lease had the term thereof continued during Agent's use or occupancy of the Premises), but excluding any supplemental rent or other costs, expenses or amounts or any indemnities payable thereunder, upon default or otherwise) for each day Agent uses or occupies the Premises as provided above and (ii) actual out of pocket costs and expenses of repairing any damage (ordinary wear and tear excepted) to the Premises attributable to Agent's use and occupation of the Premises as provided above. Agent's agreements under this Agreement including, without limitation, the agreements of Agent in this subparagraph 3 (b), shall not diminish or otherwise affect any of the obligations of Tenant under the Lease, including, without limitation, the obligation of Tenant to pay holdover rentals to Landlord pursuant to Article 30 of the Lease, if Tenant, Agent or anyone claiming under or through Tenant or Agent, uses or occupies the Premises after the expiration or sooner termination of the Lease.
4. MISCELLANEOUS
Notices hereunder shall be in writing and shall be sent by certified mail, return receipt requested, to the respective parties at the following addresses:
To Tenant: DICK'S SPORTING GOODS, INC.
200 Industry Drive
Pittsburgh, Pennsylvania 15275
To Lender: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent
201 High Ridge Road
Stamford, Connecticut 06927
Attn: Dick's Sporting Loan Officer
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This Agreement shall be governed by the internal laws of the State of
New York and shall remain in full force and effect until the earlier to occur of
(i) the Outside Removal Date or (ii) the satisfaction of or earlier termination
of the Agreements between Lender and Tenant (the earlier to occur of (i) or (ii)
is hereinafter referred to as the "Termination Date"). This agreement may not be
changed or terminated without the prior written consent of all parties hereto.
This Agreement shall be binding upon the heirs, personal representatives,
successors, and assigns of the parties hereto and shall also be binding upon and
inure to the benefit of any successor, owner, or transferee of said Premises,
and shall inure to benefit of Agent and Lenders and their respective successors
and assigns and other transferees, as express third party beneficiaries hereof.
Agent may, without affecting the validity of this Agreement, extend the time of payment of any obligations of Tenant to Agent and/or Lenders or alter the performance of any of the
terms and conditions of any of the Agreements, without the consent of, or notice to, the undersigned and without in any manner whatsoever impairing or affecting the effectiveness of this Agreement. Without affecting any of the rights or obligations of any of Agent, Landlord or Tenant under this Agreement and without the consent of, or notice to, Agent (i) Landlord and Tenant may modify, amend, extend, terminate, cancel or surrender the Lease at any time and from time to time, and (ii) Landlord may enforce any of the rights and remedies of Landlord under the Lease or pursuant to law, including, without limitation, the right to terminate the Lease and dispossess Tenant by reason of any default by Tenant under the Lease.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above-written.
By:__________________________ Name:________________________ Its:_________________________
DICK'S SPORTING GOODS, INC.
By:________________________________
Joseph Queri, Senior Vice President
Accepted and Agreed to:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
By:___________________________
Name:_________________________
Title:________________________
Exhibit 10.10
AGREEMENT
THIS AGREEMENT entered into this 11 day of January, 2002 (the "Effective Date"), between DICK'S SPORTING GOODS, INC., a Delaware corporation (the "Company"), and ________________, ("the Employee") a resident of the state of __________.
RECITALS:
A. The Employee is a key employee of the Company and, as such, has received substantial training and acquired new skills as a result of his employment.
B. The Employee also has had access to confidential documents and other information deemed by the Company to be proprietary and confidential and essential to the Company's business.
C. The Company has offered the Employee the right to participate in a new multi-year bonus program and certain new severance benefits, in exchange for certain agreements from the Employee.
D. In order to participate in this program, the Employee has agreed to maintain the confidentiality of the information deemed by the Company to be proprietary and confidential, and to refrain from competing with the Company and soliciting the Company's employees upon the termination of the Employee's employment, on the terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth herein, receipt and sufficiency of which are hereby acknowledged by both parties, it is agreed as follows:
1. MULTI-YEAR BONUS PROGRAM. As of the Effective Date, the Employee shall be included as a participant in a new enhanced bonus program known as the Dick's Sporting Goods, Inc. Long-Term Incentive Plan (the "Program"), a copy of which has been provided to the Employee along with this Agreement. The Employee's participation in the Program shall be subject to all the terms and conditions of such Program, as they may be amended from time to time by the Company's Board of Directors or management. The Employee shall continue to be included as a participant in the Program until the earlier of (a) the date on which the Employee ceases to be an Employee of the Company for any reason (the "Termination Date"), (b) the date on which the Employee ceases to work in a Program-eligible position, or (c) the completion or cessation of the Program in accordance with its terms. The cessation of the Employee's participation in the Program shall not affect the other provisions of this Agreement, which shall remain in full force and effect with respect to the Company and the Employee, without modification, in the event the Employee ceases to participate in the Program.
(a) Beginning on the date hereof and continuing for the Restricted Period (as defined in Section 2(c)), the Employee shall not:
(i) Own, manage, control, be employed by, be a consultant to, participate in, or be connected in any manner with the ownership, management, operation, or control of any entity that owns and/or operates Big Box (as defined in Section 2(c)) sporting goods retail stores in a metropolitan area where the Company operates such a store or stores, or has specific plans to open such a store within one year after the Termination Date, if the Employee had been informed of such store opening plans prior to the Termination Date, specifically including but not limited to The Sports Authority, Inc., Gart Sports Company, Galyan's Trading Company, Gander Mountain/Holiday Companies, Bass Pro Shops and Cabela's, Inc. and their respective successors and affiliates; or
(ii) Induce or solicit, directly or indirectly, any person who is an employee, officer or agent of the Company to terminate said relationship, or otherwise assist in the recruitment of any Company employee to accept employment with another employer.
(b) For purposes of this Section 2 and Section 3 below, the term "Company" shall mean and include, in addition to the Company itself, DSG Holdings LLC, and dsports.com LLC, together with their respective subsidiaries successors and assigns.
(c) For purposes of this Section 2, (i) the "Restrictive Period" means a period of twelve (12) consecutive months from the Termination Date, or, if the Employee has not been employed by the Company for twelve (12) months prior to the Termination Date, for a time period after the Termination Date that is equal to the period of the Employee's employment; and (ii) "Big Box" means a store specializing in the sale of goods having at least twenty-five thousand (25,000) square feet of selling space dedicated substantially to the retail sale of hard and soft line sporting goods and apparel, including single stores, stores that are part of regional or nationwide chains, specialty stores, and any other sales establishments otherwise meeting the foregoing definition.
(a) Except as expressly permitted by the Company in writing, the Employee shall not at any time, either before or after the Termination Date, knowingly disclose to any person not connected with the Company or use for his own benefit or for the benefit of any person other than the Company, any proprietary or confidential information either disclosed to or developed by the Employee during his employment by the Company. For purposes of this Agreement, the term "proprietary or confidential information" shall include, but not be limited to, any trade secret or confidential information, knowledge or data, whether of a technical or commercial nature, sales or production records or data, product pricing, formulas, Inventions (as defined in Section 3(b)), financial statements or other financial information, engineering and
tooling records and data, managerial and operational policies, ideas, plans, methods, practices and procedures, vendor arrangements and vendor lists, marketing strategies, and other confidential business information related to the conduct of the business of the Company.
(b) Any and all inventions, products, improvements, processes, formulae, manufacturing methods or techniques, designs, or styles (collectively referred to as "Inventions") made, developed, or created by the Employee, alone or in conjunction with others, during regular hours of work or otherwise, during his term of employment by the Company, that may be directly or indirectly useful in or related to the business of, or tests being carried out by, the Company, shall be the Company's exclusive property. The Employee will, upon the Company's request, execute all documents necessary or advisable in the opinion of the Company's counsel to direct issuance of any type of intellectual property right to the Company with respect to Inventions that are to be the Company's exclusive property under this Section 3(b) or to vest in the Company title to such Inventions. The expense of securing any such intellectual property right shall be borne by the Company. The Employee will keep confidential and will hold for the Company's sole benefit any Invention that is to be the Company's exclusive property under this Section 3(b) for which no intellectual property right is issued.
(c) The Employee shall not, either before or after the Termination Date, make any disparaging or negative comments about the Company or any of its officers, directors or employees, whether oral or written, and shall take reasonable steps necessary or appropriate to cause the members of his family and advisors to abide by such disclosure restriction.
(a) The Employee acknowledges that his employment by the Company is employment-at-will, and that this Agreement does not create any obligation on his part to work for the Company or for the Company to employ him for any fixed period of time, and that his employment may be terminated by the Company at any time with or without cause.
(b) Subject to the other terms and conditions of this Agreement,
including but not limited to Section 4(d), in the event the Employee's
employment is terminated by the Company for any reason other than those set
forth in Section 4(c) of this Agreement, the Employee shall be entitled to
receive as a severance payment (the "Severance Payment") an amount equal to the
greater of (i) four (4) weeks of pay at the Employee's regular salary rate, or
(ii) one (1) week of pay at the Employee's regular salary rate for each year of
employment by the Company or one of its subsidiaries, prorated for partial
years. So long as the Employee is in compliance with all applicable provisions
of this Agreement, including but not limited to Section 2, the Severance Amount
shall be payable biweekly over the Restrictive Period.
(c) The Employee shall not be entitled to receive the Severance Payment
if the Company, in its reasonable business judgment, terminates the Employee for
any of the following reasons: (i) fraud or felonious conduct by the Employee;
(ii) embezzlement or misappropriation of funds or property of the Company by the
Employee; (iii) material breach of this Agreement by the Employee or any
material violation of the Company's rules, policies or
procedures set forth in the Company Employee Handbook; (iv) gross negligence by the Employee; or (v) the Employee's consistent inability or refusal to perform, or willful misconduct in or disregard of the performance of his duties and obligations property assigned to him.
(d) Notwithstanding any other provision of this Agreement, the
Employee shall not be entitled to receive the Severance Payment if an Employee's
employment is terminated (i) voluntarily by the Employee, (ii) as a result of
the death of the Employee, (iii) as the result of the Employee's retirement, or
(iv) as a result of the permanent disability of the Employee, which shall be
deemed to have occurred if the Employee is deemed to be "totally disabled" under
the Company's long-term disability policy then in effect.
5. BREACH BY THE EMPLOYEE.
(a) Both parties hereto recognize that the obligations of the Employee hereunder are special, unique and of extraordinary character and if the Employee hereafter fails to comply with the restrictions imposed upon him under this Agreement, the Company will not have an adequate remedy at law. It is agreed that under such circumstances, the Company, in addition to the right to terminate the payment of any amounts due to the Employee hereunder and any other rights which it may have, shall be entitled to injunctive relief to enforce any such restrictions and obligations, and that in the event any actual proceedings are brought in equity to enforce any such provision, the Employee shall not raise as a defense that there is an adequate remedy at law. Nothing in this Agreement shall be construed to prohibit the Company from pursuing any other available remedies for such breach or threatened breach, including termination of payments and recovery of damages from the Employee.
(b) In the event the Company has reason to believe that the Employee has violated or may be violating any provision of this Agreement during or after the Employee's employment, the Company will give the Employee notice of such belief and the reasons therefor. Unless the Employee promptly satisfies the Company that such belief was mistaken, the Employee hereby authorizes the Company to notify any third party of such belief and to furnish a copy of relevant provisions of this Agreement to said party. The foregoing is in addition to, but not in lieu of, any and all rights the Company may have in law or in equity in the event of a breach by the Employee.
6. GOVERNING LAW. This Agreement shall be governed, construed and interpreted under, and in accordance with, the laws of the State of Pennsylvania.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement (and supersedes and replaces in their entirety any prior agreements, arrangements and understandings) between the parties with respect to the subject matter hereof, and no amendment hereof shall be deemed valid unless in writing and signed by parties hereto.
8. INTERPRETATION AND CONSTRUCTION. The headings and sections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this Agreement.
9. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without affecting, impairing or invalidating the remaining provisions hereof or the enforceability thereof in such jurisdiction or the validity or enforceability of any provision hereof in any other jurisdiction, unless to enforce the remaining provisions would materially alter the parties' respective benefits and burdens hereunder.
10. BINDING EFFECT; NON-ASSIGNABILITY; WAIVER. The rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding upon, the Company and its successors and assigns. The rights and obligations of the Employee under this Agreement are personal to the Employee and may not be assigned, transferred or delegated by The Employee to any other person or entity; PROVIDED, that the provisions of Section 3 hereof shall be binding upon the heirs, successors and legal representatives of the Employee. The waiver of either of the parties of any breach of any provision hereof shall not be effective unless in writing and shall not constitute a waiver by such party if any other succeeding breach of any provision hereof.
11. NOTICES. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed by registered or certified mail, or overnight delivery service, to the addresses hereinafter described or at such other addresses as may be designated in writing by notice duly given to the other party. The date of the giving of such notices, requests, demands, and other communications shall be deemed to be the date of delivery.
If to the Employee to:
If to the Company to:
Dick's Sporting Goods, Inc.
200 Industry Drive
RIDC Park West
Pittsburgh, PA 15275
Attention: Edward W. Stack
12. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
13. VARIATIONS IN PRONOUNS. All pronouns and any variations thereof refer to masculine, feminine or neuter, singular or plural, as the context may require.
14. NO THIRD PARTY BENEFICIARY RIGHTS. This Agreement is not intended to and shall not be construed to give any person other than the parties signatory hereto any interest or rights (including, without limitation, any third party beneficiary rights) with respect to or in connection with any agreement or provision contained herein or contemplated hereby.
15. ACKNOWLEDGMENT. The Employee acknowledges the following:
(a) He has carefully read all of the provisions of this Agreement, and has given careful consideration to the restrictions imposed upon him hereby, and he agrees that the same are necessary for the proper protection of the Company's business.
(b) He has had and expects to continue to have access to confidential and proprietary information of the Company, has received valuable training at the expense of the Company, and has developed important knowledge and skills as a result of his employment by the Company, and the Company's business will be materially and adversely affected if he violates this Agreement, including in particular the provisions of Section 2 or 3.
(c) He considers the Agreement and each of the restrictive provisions contained herein to be reasonable with respect to the subject matter thereof, and represents that his experience and capabilities are such that the provisions of this Agreement, including but not limited to Sections 2 and 3 hereof, will not prevent him from earning a livelihood.
(d) The Company has agreed to enter into this Agreement in consideration of the representation by the Employee that he will abide by and be bound by all of the restrictions set forth herein.
(e) His participation in the Program and receipt of the severance benefits described in Section 4(b) are contingent upon his agreement to and compliance with the other provisions of this Agreement, including but not limited to Sections 2 and 3 hereof.
(f) He has had an opportunity to consider and review this Agreement for a sufficient period of time.
(g) He has been advised to consult with an attorney prior to executing this Agreement, and has done so if he, in his sole discretion, believed it necessary or appropriate, and had a sufficient opportunity to discuss it with his attorney, and understands its terms and effects.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have executed this Agreement as of the day and year first above written.
DICK'S SPORTING GOODS, INC.
By: /s/ Edward W. Stack ----------------------------------- Edward W. Stack Chairman and Chief Executive Officer |
Exhibit 10.13
AGREEMENT OF SHAREHOLDERS
THIS AGREEMENT OF SHAREHOLDERS is made this 12th day of November, 1992, by and among Edward W. Stack, a resident of the State of New York ("E. Stack"), Richard T. Stack, a resident of the state of Florida ("R. Stack") and Dick's Clothing & Sporting Goods, Inc., a New York corporation (the "Company").
W I T N E S S E T H:
WHEREAS, E. Stack and R. Stack currently are holders of Common Stock of the Company; and
WHEREAS, R. Stack is acquiring from E. Stack simultaneously herewith two hundred ninety thousand shares of Series B Convertible Preferred Stock (the "Series B Preferred Stock") of the Company pursuant to a Stock Purchase Agreement (the "Purchase Agreement") of even date herewith; and
WHEREAS, E. Stack is an officer, employee and member of the Board of Directors of the Company and fully knowledgeable about the Company and its business and affairs; and
WHEREAS, E. Stack and R. Stack have also executed and delivered a Stockholders' Agreement (the "Stockholders Agreement") of even date herewith among E. Stack, R. Stack, the Company and the other holders of capital stock of the Company; and
NOW, THEREFORE, in consideration of the sale by E. Stack to R. Stack of the Series B Preferred Stock, and in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, E. Stack and R. Stack agree as follows:
1. IRREVOCABLE PROXY. R. Stack hereby grants to E. Stack an irrevocable proxy in the form attached hereto as Exhibit 1 in respect of all shares of capital stock of the Company owned by R. Stack, whether now owned or hereafter acquired by R. Stack. R. Stack hereby agrees that he will, as and when necessary or advisable, execute and deliver such additional irrevocable proxies or other documents as requested by E. Stack from time to time during the term of this Agreement to ensure that E. Stack is fully and completely authorized to act as proxy for R. Stack for all matters in respect of all shares of capital stock of the Company held by R. Stack. R. Stack hereby represents and warrants that as of the date of this Agreement he is the owner of two hundred fifty thousand (250,000) shares of Common Stock of the Company and two hundred ninety thousand (290,000) shares of Series B Preferred Stock, inclusive of the shares being acquired pursuant to the Purchase Agreement.
The irrevocable proxy granted to E. Stack hereunder shall be effective until terminated in writing by E. Stack, PROVIDED, that in the event R. Stack desires to sell common stock of the Company (subject to the limitation on sale set forth in Section 2.1 of this Agreement) to a bonafide unaffiliated purchaser after there has been a public offering of the Company's common stock, E. Stack will agree to terminate the irrevocable proxy only as to the shares of common stock that are sold to such bonafide unaffiliated purchaser.
[The rest of this page 1A has been left intentionally blank.]
-1A-
2. OPTION.
2.1 GRANT. R. Stack hereby grants to E. Stack an option (the "Option") to purchase one hundred forty five thousand (145,00) shares of Common Stock of the Company owned by R. Stack, for the exercise price and on the other terms set forth in this Section 2. R. Stack covenants and agrees that he shall at all times maintain ownership of sufficient shares of Common Stock of the Company in order to satisfy any exercise of the Option, such shares to be free and clear of all liens, claims and encumbrances except those hereunder and under the Stockholders' Agreement.
2.2 TIME OF EXERCISE; TERM. The Option shall be exercisable by E. Stack in whole or in part at any time after the completion of a public offering of shares of Common Stock of the Company. The Option shall be irrevocable and shall not terminate unless and until the earlier of (a) the tenth anniversary of the date of this Agreement or (b) E. Stack agrees in writing to a termination of the Option. Upon any partial exercise of the Option, the Option shall remain outstanding for all remaining shares as to which it has not been exercised.
2.3 EXERCISE PRICE. Subject to any adjustment required by Section 2.6 of this Agreement, the exercise price of the Option for each share of Common Stock covered thereby shall be equal to seventy five percent (75%) of the per share Market Price (as hereinafter defined) of the Common Stock of the Company on the date the Option is exercised. For purposes of this Agreement, the Market Price of the Common Stock of the Company shall be deemed to be the mean between the high and low prices of the Common Stock on the national securities exchange on the day on which the Option is exercised, if the Common Stock is then being traded on a national securities exchange, and if the Common Stock is then being traded on such an exchange but there are no sales on such day, the Market Price shall be deemed to be the mean between the high and low prices of the Common Stock on the national securities exchange on the day on which the most recent sales occurred prior to the date of exercise; and if the Common Stock is not then traded on such an exchange, then the Market Price shall be deemed to be the mean between the high and low bid and asked prices for the Common Stock on the over-the-counter market on the day on which the Option is exercised.
2.4 MANNER OF EXERCISE. E. Stack shall exercise the Option, as to all or a portion of the shares covered thereby, by providing written notice of exercise to R. Stack. The notice of exercise shall be signed by E. Stack and shall specify the number of shares to be purchased and the exercise price to be paid therefor, and shall be accompanied by the payment of the exercise price for the shares as to which the Option is then being exercised. The exercise price must be payable in United States dollars and may be paid by check or wire transfer payable to R. Stack. Upon notice of exercise and payment of the exercise
price, R. Stack shall deliver to E. Stack a stock certificate or certificates representing the number of shares of Common Stock as to which the Option has been exercised, duly endorsed for transfer to E. Stack or accompanied by executed stock powers reflecting transfer to E. Stack, in each case with his signature(s) guaranteed. All such shares shall be free and clear of all liens, claims and encumbrances except those imposed by this Agreement.
2.5 TRANSFERABILITY. The Option granted hereby shall not be assignable or transferable by E. Stack except that upon his death the Option shall be transferable to the executors or administrators of his estate or any person or persons who shall have acquired the right to exercise the Option by bequest or inheritance. Transferability of shares of Common Stock issued upon the exercise of the Option shall not be restricted by this Agreement.
2.6 ADJUSTMENTS FOR CERTAIN TRANSACTIONS.
(a) In case the Company shall (i) declare a dividend on outstanding shares of its Common Stock in shares of its Common Stock, (ii) subdivide outstanding shares of Common Stock, (iii) combine outstanding shares of Common Stock into a smaller number of such shares, (iv) issue by reclassification of shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation) any shares of any class of stock, or (v) distribute any other property (other than cash) as a distribution or dividend on or in exchange for shares of Common Stock (including any such distribution in connection with a consolidation, merger, sale of assets or liquidation), the number of shares of Common Stock or other consideration for which the Option may be exercised at the time of the record date for such dividend or the effective date of such subdivision, combination or reclassification (the "Determination Date") shall be proportionately adjusted in such manner that the number of shares of Common Stock for which E. Stack has an Option shall be equal to the number of shares or other consideration that he would be entitled to receive if the Option (or any unexercised portion thereof) had been exercised immediately prior to the Determination Date.
(b) In the event the Company takes any action described in subsections
(a)(i), (ii), (iii), (iv) or (v), above, the Company shall give written notice
of such action to E. Stack at least thirty (30) days prior to the action. Upon
any such action, the exercise price shall be increased or decreased, as the case
may be, such that the exercise price is equal to (i) the aggregate exercise
price less any amounts paid to R. Stack upon the partial exercise of the Option
prior to the Determination Date, (ii) divided by the number of shares of Common
Stock for which the Option may be exercised after the adjustment described in
subsection (a) above is made.
3. TERMINATION. This Agreement, and the respective rights and obligations of the parties hereto, shall terminate only upon a written agreement of termination executed by all parties hereto.
4. NOTICES. All notices and other communications hereunder shall be in writing and shall be delivered to each party as follows:
if to E. Stack to:
804 Overbrook Drive
Vestal, New York 13850
if to R. Stack to:
15218 86th Way N.
Palm Beach Gardens, Florida 33418
if to the Company to:
Dick's Clothing & Sporting Goods, Inc.
Corporate Park Drive
RD2, Box 34-B
Conklin, New York 13748
or to such other address as any party may specify in writing to other parties. All such notices and other communications shall be effective after delivery to the address specified.
5. SPECIFIC PERFORMANCE. The rights of the parties under this Agreement are unique and, accordingly, the parties shall, in addition to such other remedies as may be available to any of them at law or in equity, have the right to enforce their rights hereunder by actions for specific performance to the extent permitted by law.
6. LEGEND. The certificates representing all shares of capital stock of the Company owned by R. Stack shall bear on their face a legend indicating the existence of the restrictions imposed hereby.
7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between them or any of them as to such subject matter.
8. WAIVERS AND FURTHER AGREEMENTS. Any waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of that provision or of any other provision hereof. Each of the parties hereto agrees to execute all such further instruments and documents and to take all such further action as any other party
may reasonably require in order to effectuate the terms and purposes of this Agreement.
9. ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, legal representatives, successors and permitted transferees, PROVIDED, HOWEVER, that except as specifically provided herein, this Agreement shall not be assignable by any party without the written consent of the other parties hereto.
10. SEVERABILITY. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement and such invalid, illegal and unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.
11. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
12. SECTION HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a sealed instrument as of the day and year first above written.
DICK'S CLOTHING AND SPORTING GOODS, INC.
By:/s/ ------------------------------- President /s/ Edward W. Stack ------------------------------- EDWARD W. STACK /s/ Richard T. Stack ------------------------------- RICHARD T. STACK |
EXHIBIT 1
KNOW ALL MEN BY THESE PRESENTS that the undersigned does hereby make, constitute and appoint EDWARD W. STACK his true and lawful attorney, for him and in his name, place and stead, to act as his proxy in respect of all of the shares of capital stock of Dick's Clothing & Sporting Goods, Inc., a New York corporation (hereinafter referred to as the "Corporation"), which he now or hereafter may own or hold, including, without limitation, the right, on his behalf, to demand the call by any proper officer of the Corporation pursuant to the provisions of its Certificate of Incorporation or By-Laws and as permitted by law of a meeting of its shareholders and at any such meeting of shareholders, annual, general or special, to vote for the transaction of any and all business that may come before such meeting, or any adjournment thereof, including, without limitation, the right to vote for the sale of all or any part of the assets of the Corporation and/or the liquidation and dissolution of the Corporation; giving and granting to his said attorney full power and authority to do and perform each and every act and thing whether necessary or desirable to be done in and about the premises, as fully as he might or could do if personally present with full power of substitution, appointment and revocation, hereby ratifying and confirming all that his said attorney shall do or cause to be done by virtue hereof.
This Proxy is given to EDWARD W. STACK pursuant to the Agreement of Shareholders of even date herewith by and among Edward W. Stack, Richard T. Stack and the Corporation, and this Proxy shall not be revocable or revoked by the undersigned, shall be binding upon his heirs, administrators, successors and assigns until such Agreement of Shareholders is terminated as provided therein. This Proxy shall survive so long as such Agreement of Shareholders is in effect.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy this ___ day of November, 1992.
RICHARD T. STACK
STATE OF )
) ss:
COUNTY OF )
|
On November ___, 1992 before me personally came Richard T. Stack to me known, and known to me to be the individual described in, and who executed the foregoing IRREVOCABLE PROXY, and duly acknowledged to me that he executed the same.
EXHIBIT 2
RELEASE
To all whom these presents shall come or may concern, know that Richard T. Stack, residing at 15218 86th Way N., Palm Beach Gardens, Florida, as RELEASOR, in consideration of the sum of one ($1) dollar and all other good and valuable consideration received from Dick's Clothing & Sporting Goods, Inc. (the "Company"), and Edward W. Stack, individually and as an officer, director and shareholder of the Company, as RELEASEES, receipt and sufficiency of which are hereby acknowledged, releases and discharges each RELEASEE, jointly and severally, and each RELEASEE's officers, directors, shareholders, employees, investors, agents, affiliates, administrators, heirs, successors and assigns, individually and as representatives of RELEASEES, from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, claims, and demands whatsoever, in law, admiralty or equity (hereinafter "ACTIONS"), which against each RELEASEE, jointly or severally, the RELEASOR, RELEASOR'S, agents, affiliates, administrators, successors or assigns ever had, now have or hereafter can, shall or may, have, individually or as representatives of RELEASOR, for, upon, or by reason of any matter, cause or thing, including without limitation all ACTIONS arising out of the operation, management, restructuring, recapitalization or issuance of capital stock of the Company,
from the beginning of the world to the day of the date of this RELEASE; except for (a) ACTIONS under the Agreement of Shareholders dated as of November 11, 1992 among RELEASOR and RELEASEES, and (b) ACTIONS under the Stockholder's Agreement dated as of November 11, 1992 among RELEASOR, RELEASEES, and the other shareholders of the Company.
This RELEASE may not be changed orally.
IN WITNESS WHEREOF, the RELEASOR has hereunto set RELEASOR'S hand and seal on November __, 1992.
In Presence of
-------------------------- ----------------------------------------
RICHARD STACK
STATE OF )
) SS.
COUNTY OF )
|
On November __, 1992, before me personally came Richard T. Stack to me known to be the individual described in, and who executed the foregoing RELEASE, and duly acknowledged to me that he executed the same.
EXHIBIT 3
SHAREHOLDER CERTIFICATE
The undersigned, Richard T. Stack, a shareholder of Dick's Clothing & Sporting Goods, Inc., a New York corporation (the "Company"), does hereby certify as follows:
1. I have reviewed and understand the proposed transaction involving the Company pursuant to which the capital structure of the Company will be changed, the rights and preferences of outstanding stock will be changed, additional preferred stock that is convertible to common stock will be issued to certain new investors, and a stockholders' agreement restricting my ability to transfer my stock will be signed. I understand that this transaction will dilute my interest in the Company and that certain rights that I may presently have, including pre-emptive rights under New York law, will be eliminated.
2. I have been represented by counsel that I believe to be competent in connection with the proposed transaction.
3. I have read the following documents relating to this transaction:
(a) Series A Preferred Stock Purchase Agreement and the Schedules to the Purchase Agreement;
(b) Stockholders Agreement;
(c) Registration Rights Agreement;
(d) Restatement of Certification of Incorporation;
(e) Stock Purchase Agreement;
(f) Unanimous Consent of Shareholders and related Resolutions;
(g) Termination of Stock Purchase Agreement;
(h) Agreement of Shareholders;
(i) Release; and
(j) Irrevocable Proxy.
All of the foregoing documents have been explained to me by my counsel and I understand their effect on me and my ownership in the Company. My attorney and I have been provided with the opportunity to speak with and ask questions of the officers, directors and other shareholders of the Company, and the Company's counsel, and to review documents and information regarding the Company and the proposed transaction. To the extent questions have been asked or documents or information requested they have been answered or provided to my satisfaction and to the satisfaction of my attorney.
4. I have given careful consideration of the proposed transaction and have decided to vote in favor of and to consummate the proposed transaction based upon my personal review and investigation of the Company and the transaction and upon the advice of my counsel. I am not relying on any representations, promises or agreements of any other person except to the extent any representations, promises or agreements are specifically set forth in one of the documents described above.
5. I believe the proposed transaction is in my best interest as a shareholder of the Company.
Executed this ________ of November, 1992.
RICHARD T. STACK
STATE OF )
) ss:
COUNTY OF )
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On November ___, 1992 before me personally came Richard T. Stack to me known, and known to me to be the individual described in, and who executed the foregoing SHAREHOLDER CERTIFICATE, and duly acknowledged to me that he executed the same.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No. 333-96587 of Dick's Sporting Goods, Inc. on Form S-1 of our report dated July 1, 2002 (July 15, 2002 as to Note 15) appearing in the Prospectus, which is part of this Registration Statement, and of our report dated July 1, 2002 relating to the financial statement schedule appearing elsewhere in this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP Pittsburgh, Pennsylvania August 26, 2002 |