SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: Commission File No.:
May 31, 1999 0-16442
FIRST TEAM SPORTS, INC.
(Exact name of Registrant as specified in its charter)
Minnesota 41-1545748
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1201 Lund Boulevard
Anoka, Minnesota 55303
(Address of principal executive offices)
Registrant's telephone number, including area code:
(612) 576-3500
--------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes__x__ No_____
---------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,803,861 shares of Common
Stock, $.01 par value per share, outstanding as of July 8, 1999.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
FIRST TEAM SPORTS, INC.
CONSOLIDATED BALANCE SHEETS
May 31, 1999 and February 28, 1999
<TABLE>
<CAPTION>
May 31, February 28,
ASSETS 1999 1999
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,271,674 $ 723,574
Receivables:
Trade, less allowance for
doubtful accounts of $748,000 at
May 31, 1999 and $642,000 at
February 28, 1999 17,545,382 12,284,005
Refundable income taxes 762,517 1,136,858
Inventories 10,110,812 10,047,020
Prepaid expenses 630,157 839,777
Deferred income taxes 1,267,000 1,175,000
----------- -----------
Total current assets 31,587,542 26,206,234
PROPERTY AND EQUIPMENT,
Land 600,000 600,000
Building 4,988,680 4,988,680
Production equipment 2,294,158 2,278,231
Office furniture and equipment 1,855,544 1,825,257
Warehouse equipment 939,306 937,677
Vehicles 101,043 104,380
----------- -----------
10,778,731 10,734,225
Less accumulated depreciation 3,623,806 3,316,390
----------- -----------
7,154,925 7,417,835
Deferred income taxes 1,896,000 1,988,000
OTHER ASSETS
License agreements, less accumulated
amortization of $3,774,000 at May 31,
1999 and $3,687,000 at February 28, 1999 1,592,695 1,680,024
Goodwill, less accumulated amortization
of $362,000 at May 31, 1999 and $329,000
at February 28, 1999 1,115,888 1,119,197
Other 702,277 723,104
----------- -----------
3,410,860 3,522,325
----------- -----------
$44,049,327 $39,134,394
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
FIRST TEAM SPORTS, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
May 31, 1999 and February 28, 1999
<TABLE>
<CAPTION>
May 31, February 28,
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes payable to bank $ 7,765,000 $ 2,525,000
Current maturities of
long-term debt 1,295,583 1,305,763
Accounts payable, trade 3,456,513 3,692,759
Accrued expenses 930,701 1,311,043
------------ ------------
Total current liabilities 13,447,797 8,834,565
LONG-TERM DEBT,
less current maturities 5,181,105 5,576,967
DEFERRED INCOME TAXES 195,000 195,000
DEFERRED REVENUE 600,000 600,000
SHAREHOLDERS' EQUITY
Common Stock, par value $.01 per
share; authorized 10,000,000
shares; issued and outstanding
5,803,848 shares at May 31, 1999
and February 28, 1999 58,039 58,039
Additional paid-in capital 9,825,240 9,825,240
Retained earnings 15,344,485 14,647,756
Accumulated other comprehensive income (loss) (602,339) (603,173)
------------ ------------
24,625,425 23,927,862
------------ ------------
$ 44,049,327 $ 39,134,394
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
FIRST TEAM SPORTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
May 31,
1999 1998
------------ ------------
<S> <C> <C>
Net sales $ 14,176,606 $ 15,138,589
Cost of goods sold 9,599,922 10,782,924
------------ ------------
Gross profit 4,576,684 4,355,665
------------ ------------
Operating expenses:
Selling 1,325,459 1,400,361
General and
administrative 1,993,517 1,749,570
------------ ------------
3,318,976 3,149,931
------------ ------------
Operating income 1,257,708 1,205,734
Interest expense (178,769) (359,181)
------------ ------------
Income before income
tax expense 1,078,939 846,553
Income tax expense (382,211) (282,553)
------------ ------------
Net income for the
period $ 696,728 $ 564,000
============ ============
Net income per share:
Basic $ 0.12 $ 0.10
Diluted $ 0.12 $ 0.10
Shares used in computation of
net income per share:
Basic 5,803,861 5,792,253
Diluted 5,904,487 5,885,956
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
FIRST TEAM SPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Three Months Ended May 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
May 31, May 31,
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income 696,728 564,000
Adjustments required to reconcile net
income to net cash used in
operating activities:
Depreciation 307,416 311,205
Amortization 143,402 164,727
Change in operating assets and liabilities:
Receivables (5,333,047) (5,389,085)
Inventories (36,560) 2,983,737
Prepaid expenses 210,118 134,798
Accounts payable (236,604) (899,783)
Accrued expenses (376,487) (168,259)
Income taxes 410,470 312,597
---------- ----------
Net cash used in operating activities (4,214,564) (1,986,063)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (49,344) --
Other -- (261,774)
---------- ----------
Net cash used in investing activities (49,344) (261,774)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds on short-term borrowings 5,240,000 3,375,000
Proceeds from long-term borrowings -- 262,760
Principal payments on long-term
borrowings (405,433) (356,158)
Net proceeds from exercise of stock options -- --
---------- ----------
Net cash provided by financing activities 4,834,567 3,281,602
---------- ----------
Increase in cash and
cash equvalents 570,659 1,033,765
Effect of foreign currency translation (22,559) 31,161
Cash and cash equivalents:
Beginning 723,574 1,869,545
---------- ----------
Ending 1,271,674 2,934,471
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
FIRST TEAM SPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principals for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation have been
included. The operating results for the period ended May 31, 1999 are not
necessarily indicative of the operating results to be expected for the full
fiscal year.
For further information, refer to the financial statements and footnotes thereto
included in the Company's annual report or Form 10-K for the year ended February
28, 1999.
NOTE 2.
As of March 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130 Report Comprehensive Income ("Statement 130"). Statement
130 establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of this statement had no impact on the
Company's net income or shareholders' equity. Statement 130 requires the
Company's foreign currency translation, which prior to adoption was reported
separately in shareholders' equity, to be included in other comprehensive
income.
During the quarters ended May 31, 1999 and 1998, total comprehensive
income amounted to $697,560 and $357,659 respectively.
<PAGE>
NOTE 3.
Basic EPS Diluted EPS
1999 1998 1999 1998
---- ---- ---- ----
(in thousands, except per share data)
Three Months Ended May 31
Net Income $ 697 $ 564 $ 697 $ 564
===================== ====================
Weighted average common
shares outstanding 5,804 5,792 5,804 5,792
Stock options -- -- 100 94
--------------------- --------------------
Total common equivalent
shares outstanding 5,804 5,792 5,904 5,886
===================== ===================
Net Income per share $.12 $.10 $.12 $.10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Net Sales. Net sales were $14.2 million in the first quarter of fiscal
2000, a decrease of 6% compared to the first quarter of fiscal 1999 when sales
were $15.1 million. In-line skate sales volume decreases, combined with a
decrease in the average selling price of the Company's Skate Attack brand, were
the principal factors in the Company's net sales decline in the first quarter of
fiscal 2000.
The Company's product groups consist of in-line skates, in-line
accessories and parts (primarily protective wear and replacement wheels and
bearings), roller hockey products, ice hockey sticks and ice hockey protective
wear and accessories. Within the product groups, the Company maintains
UltraWheels(TM), Skate Attack(TM), Heavy(TM) and Third World(TM) in-line product
lines and a Hespeler ice hockey line. The UltraWheels, Heavy and Third World
lines consist of higher quality and higher priced products that are targeted for
the specialty and sporting goods chain store customers. The Skate Attack line
consists of lower priced products for the mass merchant customers. The Hespeler
ice hockey line consists of high quality products that are targeted primarily at
the specialty and sporting goods chain stores.
A breakdown and analysis of the Company's main product lines is as follows:
First Quarter
---------------------------------
(amounts in millions) Fiscal 2000 Fiscal 1999
---------------------------------
Amount % Amount % Change
----- ----- ----- ----- -----
In-line Skates $11.3 79.6% $12.3 81.5% (8.1%)
In-line Accessories and Parts 1.5 10.6% 1.8 11.9% (16.7%)
Ice Hockey Sticks 0.5 3.5% 0.6 4.0% (16.7%)
Ice Hockey Protective and Access. 0.9 6.3% 0.4 2.6% 125.0%
----- ----- ----- -----
$14.2 100.0% $15.1 100.0% (6.0%)
----- ----- ----- -----
The Company distributes products to numerous countries worldwide. A
geographic breakdown for the first quarter is as follows:
First Quarter
---------------------------------
(amounts in millions) Fiscal 2000 Fiscal 1999
---------------------------------
Amount % Amount % Change
----- ----- ----- ----- -----
Domestic $ 7.7 54.2% $ 8.8 58.3% (12.5%)
Canada 4.8 33.8% 4.2 27.8% 14.3
Europe 1.5 10.6% 2.1 13.9% (28.6%)
Other International 0.2 1.4% 0.0 0.0% 100.0%
----- ----- ----- -----
Total Net Sales $14.2 100.0% $15.1 100.0% (6.0%)
===== ===== ===== =====
<PAGE>
Several factors contributed to the Company's sales performance in the
first quarter of fiscal 2000. The decrease in domestic sales is the result of a
loss in product placements with the mass merchant distribution channels. This
was a continued result of the mass merchants reduction in branded selections as
well as a continued decline in the average price of in-line skates at the mass
merchant level. Sales of the Company's Skate Attack brand (sold primarily to the
mass merchants) decreased approximately 70% while sales of the Ultra Wheels
brand increased 24%. During the first quarter of fiscal 1999, approximately 43%
of the Company's in-line skate sales came from the sporting good chain stores
compared to 78% during the first quarter of fiscal 2000. The increased sales in
Canada were primarily the result of Hespeler ice hockey product sales and the
continued strong acceptance of the Company's in-line products in Canada. The
decrease in European sales is primarily the result of continued competitive
pressures in the European in-line skate market and the continued number of
in-line skate customers buying direct from Pacific Rim manufacturers. The
increase in other international sales is primarily the result of the Company's
continued efforts to open up new accounts in the international arena.
While the Company believes there are some positive signs that the
market conditions in the in-line industry may be improving, the national and
international markets continue to be very competitive and under extreme price
competition.
Gross Margin As a percentage of net sales, the gross margin was 32% in
the first quarter of fiscal 2000 compared to 29% in the first quarter of fiscal
1999. The increase in the gross margin as a percentage of net sales in the first
quarter of fiscal 2000 was primarily due to an increase in the percentage of
Ultra Wheels skates versus the Skate Attack skates and an increase in the
percentage of total sales related to Hespeler products. As stated above the
Company's strategy has been to focus on the sporting goods chain stores and its
Ultra Wheels brand of in-line skates, which carry better margins.
The Company's Ultra Wheels brand accounted for 79% of total net sales
in the first quarter of fiscal 2000 compared to 61% in the first quarter of
fiscal 1999, while the Company's Skate Attack brand accounted for 11% of total
sales in the first quarter of fiscal 2000 compared to 32% in the first quarter
of fiscal 1999. The Hespeler brand accounted for 10% of total net sales in the
first quarter of fiscal 2000 compared to 7% in the first quarter of fiscal 1999.
Operating Expenses. Selling expenses were $1.3 million, or 9% of total
net sales, in the first quarter of fiscal 2000 compared to $1.4 million or 9% in
the first quarter of fiscal 1999. The decrease in selling expenses in fiscal
2000 is primarily the result of a reduction in royalties and co-op advertising
costs associated with the decreased sales volume and management's efforts to
closely monitor and control its expenditures.
General and administrative expenses were $2.0 million, or 14% of total
net sales, in the first quarter of fiscal 2000 compared to $1.7 million or 12%
in the first quarter of fiscal 1999. The increase in general and administrative
expenses in fiscal 2000 was primarily related to personnel costs and insurance
costs.
<PAGE>
In fiscal 1997 the Company purchased a new software system and
appropriate computer hardware. As part of the Company's selection process, the
ability to recognize the year 2000 was a major requirement and thus the Company
is prepared for the change. The Company is currently working to quantify and
minimize the potential impact of the year 2000 on the processing of date
sensitive information by the Company's vendors and/or customers. Based on
preliminary information, costs of addressing potential problems are currently
not expected to have a material adverse impact on the Company's financial
position, results of operations or cash flows in future periods.
Other Income and Expense. Interest expense was $179,000 in the first
quarter of fiscal 2000, compared to $359,000 in the first quarter of fiscal
1999. The decrease in interest expense for fiscal 2000 was primarily due to
decreased usage of the Company's line of credit facility. The Company has
continued to manage its cash flows, which during the first quarter resulted in a
decrease in the outstanding balance of its line of credit facility as compared
to the prior year's first quarter.
Provision for Income Taxes. The Company's effective tax rate was 35% in
the first quarter of fiscal 2000 compared to 33% in the first quarter of fiscal
1999. The slight increase in fiscal 2000 is primarily due to the effect of state
and foreign tax rates, the percentage of state and foreign revenues, deferred
tax items and the level of pre-tax income.
Net Income. The Company had net income of $697,000, or $.12 per share,
in the first quarter of fiscal 2000 compared to $564,000 or $.10 per share, in
fiscal 1999. The improvement for the first quarter can be primarily attributed
to the increase in the gross margins as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of fiscal 2000, the Company's operations used $4.2
million of cash compared to $2.0 million in the first quarter of fiscal 1999.
The increase in the net cash use by operations was primarily the result of the
change in the Company's inventory and accounts payable balances.
Net cash used in investing activities was $49,000 in the first quarter
of fiscal 2000 compared to $262,000 in the first quarter of fiscal 1999. The use
of cash for investing activities in fiscal 2000 was attributable to equipment
purchases.
Net cash provided by financing activities was $4.8 million in the first
quarter of fiscal 2000 compared to $3.3 million in the first quarter of fiscal
1999. The increase in the net cash provided by financing activities was
primarily due to the change in the Company's credit facility.
<PAGE>
The Company's debt to worth ratio was .8 to 1 as of May 31, 1999
compared to .6 to 1 as of February 28, 1999 and .7 to 1 as of May 31, 1998. The
Company's long-term debt, which consists primarily of a mortgage note on the
Company's facility and obligations under endorsement license agreements, less
current maturities, was $5.2 million as of May 31, 1999.
The Company's primary financing facility is a $10 million revolving
credit line, which is subject to a borrowing base which is calculated twice a
month, and is based on a percentage of eligible receivables and inventories. As
of May 31, 1999, the borrowing base limitation was $10 million, of which $7.8
million was outstanding. In connection with this credit facility, the Company
agreed, among other things, to maintain certain minimum financial ratio and
income levels.
The Company's revolving credit line expired June 30, 1999 and has been
extended through September 1, 1999. The Company is reviewing financing proposals
from various lenders and expects to enter into a new comparable financing
facility.
The Company believes its current cash position, funds available under
existing bank arrangements, the ability to obtain additional financing, and cash
generated from operations will be sufficient to finance the Company's operating
requirements through fiscal 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market Risk. The Company's sales and results of operations are subject
to foreign currency fluctuations. The Company's foreign operations are in
countries with fairly stable currencies; therefore, the effect of foreign
currencies has not been significant. The Company hedges its exposure to
translation gains and losses by maintaining and controlling its foreign cash
flows when possible, thus reducing such exposure.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. See Exhibit Index immediately following the
signature page of this Form 10-Q.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Registrant during the quarter to which this Form 10-Q relates.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FIRST TEAM SPORTS, INC.
By: /s/ John J. Egart
John J. Egart
President and CEO
and By: /s/ Kent A. Brunner
Kent A. Brunner
Vice President and CFO
Dated: July 14, 1999
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT INDEX TO FORM 10-Q
For Quarter Ended: Commission File No.: 0-16422
May 31, 1999
- --------------------------------------------------------------------------------
FIRST TEAM SPORTS, INC.
- --------------------------------------------------------------------------------
Exhibit
Number Description
3.1 Restated Articles of Incorporation -- incorporated by reference to
Exhibit 3.1 to the Company's Form 10-K for the year ended February 28,
1997
3.2 Bylaws -- incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-18 Reg. No. 33-16345C
4.1 Specimen of Common Stock Certificate--incorporated by reference to 4.1
to the Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1991
4.2 Certificate of Designations of Series A Preferred Stock (included in
Restated Articles of Incorporation -- see Exhibit 3.1)
4.3 Rights Agreement dated as of March 15, 1996 between the Company and
Norwest Bank Minnesota, N.A. as Rights Agent -- incorporated by
reference to Exhibit 2.1 to the Company's Registration Statement on
Form 8-A, Reg. No. 0-16422
4.4 Form of Right Certificate -- incorporated by reference to Exhibit 2.2
to the Company's Registration Statement on Form 8-A, Reg. No. 0-16422
4.5 Summary of Rights to Purchase Share of Series A Preferred Stock-
incorporated by reference to Exhibit 2.3 to the Company's Registration
Statement of Form 8-A, Reg. No. 0-16422
10.1* Amendment dated as of December 1, 1998 to Employment Agreement, Dated
August 18, 1997, between the Company and Kent Brunner**
<PAGE>
Exhibit
Number Description
10.2* Amendment dated as of January 1, 1998 to Employment Agreement dated
January 23, 1996 between the Company and John J. Egart**
10.3* Amendment dated as of January 1, 1998 to Employment Agreement dated
January 23, 1996 between the Company and David G. Soderquist**
27* Financial Data Schedule (included in electronic version only)
**Management contract or compensatory plan or arrangement.
- -------------
*Filed herewith
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of December 1,
1998, between FIRST TEAM SPORTS, INC., a Minnesota corporation (the "Company"),
and KENT A. BRUNNER, a resident of Minnesota ("Executive").
WITHNESSETH
WHEREAS, the Company and Executive have entered into an Employment
Agreement dated as of August 18, 1997 (the "Employment Agreement"); and
WHEREAS, Sections 3, 6, 7 and 9 of the Employment Agreement provide
that Executive shall receive certain cash payments calculated on the basis of
Executive's "Base Salary" in the event Executive's employment is terminated by
the Company under various circumstances or in the event the term of the
Employment Agreement is now renewed; and
WHEREAS, the Company and Executive have agreed to amend Sections 3, 6,
7 and 9 of the Employment Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained the parties hereto agree as follows:
1. Amendment of Section 3 of Employment Agreement. Section 3 of
the Employment Agreement is hereby amended to read in its
entirety as follows:
The Company shall retain Executive and Executive shall serve
in the employ of the Company for a minimum period of two (2)
years commencing as of the date of this Agreement; provided,
however, that either Executive or the Company may terminate
the employment of Executive during the term in accordance
with, and subject to the right of Executive to receive
payments and other benefits that may be due pursuant to this
Agreement. The Agreement will be subject to automatic renewals
for successive additional two (2) year periods, unless
terminated earlier as provided in Section 9 of this Agreement.
2. Amendment of Section 6 of Employment Agreement. Section
6(a)(i) of the Employment Agreement is hereby amended to read
in its entirety as follows:
"(i) The Company shall make a cash payment to Executive equal
to the greater of (A) the sum of the highest monthly Base
Salary in effect any time during the three-year period
immediately preceding such termination times the number of
months remaining in the Term (without regard to renewals)
under this Agreement, plus an amount equal to the incentive
bonus earned by Executive in the prior fiscal year multiplied
by the number of months remaining in the Term (without regard
to renewals) divided by twelve (12), or (B) the sum of the
highest annual Base Salary in effect any time during the
three-year period immediately preceding such termination, plus
the amount of incentive bonus earned by Executive during the
prior fiscal year. Such payment shall be made in cash within
fifteen (15) days from and after termination of Executive's
employment."
<PAGE>
3. Amendment of Section 7 of Employment Agreement. Section
7(a)(i) of the Employment Agreement is hereby amended to read
in its entirety as follows:
"(i) Subject to paragraph (c) hereof, the Company shall make a
cash payment to Executive equal to the greater of (A) the sum
of the highest monthly Base Salary in effect any time during
the three-year period immediately preceding such termination
times the number of months remaining in the Term (without
regard to renewals) under this Agreement, plus an amount equal
to the incentive bonus earned by Executive in the prior fiscal
year multiplied by the number of months remaining in the Term
(without regard to renewals) divided by twelve (12), or (B) 2
times the sum of the highest annual Base Salary in effect any
time during the three-year period immediately preceding such
termination, and the amount of incentive bonuses which, absent
termination of Executive's employment, could have been earned
by Executive during the fiscal year of the Company in which
Executive's employment under this Agreement ceases. For
purposes of Clause (B), the computation of the amount of
incentive bonuses shall be based upon the bonus programs in
effect at the time of termination of Executive's employment
and such computation shall assume that target performance
levels are satisfied for all purposes during such fiscal year.
Such payment shall be made in cash within fifteen (15) days
from and after termination of Executive's employment."
4. Amendment of Section 9(b) of Employment Agreement. Section
9(b)(i) of the Employment Agreement is hereby amended to read
in its entirety as follows:
"(i) Unless the notice of nonrenewal is given during a
Transition Period, the Company shall make a cash payment equal
to the amount of the highest annual Base Salary in effect any
time during the three-year period immediately preceding
termination of employment. Such payment shall be made in cash
within fifteen (15) days from and after the end of Executive's
employment term. If the notice of renewal is given during a
Transition Period, then, subject to Section 7(c), the Company
shall make a cash payment to Executive equal to two (2) times
the sum of (A) the amount of the highest annual Base Salary in
effect any time during the three-year period immediately
preceding termination of Executive's employment and (B) the
amount of incentive bonuses which, absent termination of
Executive's employment, could have been earned by Executive
during the fiscal year of the Company in which Executive's
employment under this Agreement ceases. For purposes of Clause
(B), the computation of the amount of incentive bonuses shall
be based upon the bonus programs in effect at the time of
termination of Executive's employment and such computation
shall assume that target performance levels are satisfied for
all purposes during such fiscal year. Such payment shall be
made in cash within fifteen (15) days from and after
termination of Executive's employment."
5. Other Provisions Unaffected. Except as provided herein, all
other provisions to the Employee Agreement shall remain in
force and unaffected by this Amendment.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its officer, and Executive has executed this Agreement, as of the
day and year first written above.
FIRST TEAM SPORTS, INC.
By /s/ John J. Egart
John J. Egart,
President and Chief Executive Officer
/s/ Kent A. Brunner
Kent A. Brunner
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 1,
1998, between FIRST TEAM SPORTS, INC., a Minnesota corporation (the "Company"),
and JOHN J. EGART, a resident of Minnesota ("Executive").
WITHNESSETH
WHEREAS, the Company and Executive have entered into an Employment
Agreement dated as of January 23, 19996 (the "Employment Agreement"); and
WHEREAS, Sections 6, 7 and 9 of the Employment Agreement provide that
Executive shall receive certain cash payments calculated on the basis of
Executive's "Base Salary" in the event Executive's employment is terminated by
the Company under various circumstances or in the event the term of the
Employment Agreement is now renewed; and
WHEREAS, in light of the disappointing recent financial performance of
the Company and the in-line skate industry generally, Executive has voluntarily
agreed to accept a reduction in the amount of Base Salary payable to Executive
under the Employment Agreement; provided that such reduction does not reduce the
amounts to which Executive would otherwise be entitled pursuant to Sections 6, 7
or 9 of the Employment Agreement in the event of a termination or nonrenewal of
employment;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained the parties hereto agree as follows:
1. Amendment of Section 6 of Employment Agreement. Section
6(a)(i) of the Employment Agreement is hereby amended to read
in its entirety as follows:
"(i) The Company shall make a cash payment to Executive equal
to the greater of (A) the sum of the highest monthly Base
Salary in effect any time during the three-year period
immediately preceding such termination times the number of
months remaining in the Term (without regard to renewals)
under this Agreement, plus an amount equal to the incentive
bonus earned by Executive in the prior fiscal year multiplied
by the number of months remaining in the Term (without regard
to renewals) divided by twelve (12), or (B) the sum of the
highest annual Base Salary in effect any time during the
three-year period immediately preceding such termination, plus
the amount of incentive bonus earned by Executive during the
prior fiscal year. Such payment shall be made in cash within
fifteen (15) days from and after termination of Executive's
employment."
2. Amendment of Section 7 of Employment Agreement. Section
7(a)(i) of the Employment Agreement is hereby amended to read
in its entirety as follows:
<PAGE>
"(i) Subject to paragraph (c) hereof, the Company shall make a
cash payment to Executive equal to the greater of (A) the sum
of the highest monthly Base Salary in effect any time during
the three-year period immediately preceding such termination
times the number of months remaining in the Term (without
regard to renewals) under this Agreement, plus an amount equal
to the incentive bonus earned by Executive in the prior fiscal
year multiplied by the number of months remaining in the Term
(without regard to renewals) divided by twelve (12), or (B) 2
times the sum of the highest annual Base Salary in effect any
time during the three-year period immediately preceding such
termination, and the amount of incentive bonuses which, absent
termination of Executive's employment, could have been earned
by Executive during the fiscal year of the Company in which
Executive's employment under this Agreement ceases. For
purposes of Clause (B), the computation of the amount of
incentive bonuses shall be based upon the bonus programs in
effect at the time of termination of Executive's employment
and such computation shall assume that target performance
levels are satisfied for all purposes during such fiscal year.
Such payment shall be made in cash within fifteen (15) days
from and after termination of Executive's employment."
3. Amendment of Section 9(b) of Employment Agreement. Section
9(b)(i) of the Employment Agreement is hereby amended to read
in its entirety as follows:
"(i) Unless the notice of nonrenewal is given during a
Transition Period, the Company shall make a cash payment equal
to the amount of the highest annual Base Salary in effect any
time during the three-year period immediately preceding
termination of employment. Such payment shall be made in cash
within fifteen (15) days from and after the end of Executive's
employment term. If the notice of renewal is given during a
Transition Period, then, subject to Section 7(c), the Company
shall make a cash payment to Executive equal to two (2) times
the sum of (A) the amount of the highest annual Base Salary in
effect any time during the three-year period immediately
preceding termination of Executive's employment and (B) the
amount of incentive bonuses which, absent termination of
Executive's employment, could have been earned by Executive
during the fiscal year of the Company in which Executive's
employment under this Agreement ceases. For purposes of Clause
(B), the computation of the amount of incentive bonuses shall
be based upon the bonus programs in effect at the time of
termination of Executive's employment and such computation
shall assume that target performance levels are satisfied for
all purposes during such fiscal year. Such payment shall be
made in cash within fifteen (15) days from and after
termination of Executive's employment."
4. Other Provisions Unaffected. Except as provided herein, all
other provisions to the Employee Agreement shall remain in
force and unaffected by this Amendment.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its officer, and Executive has executed this Agreement, as of the
day and year first written above.
FIRST TEAM SPORTS, INC.
By /s/ Kent A. Brunner
Kent A. Brunner , Vice President of Finance
/s/ John J. Egart
John J. Egart
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 1,
1998, between FIRST TEAM SPORTS, INC., a Minnesota corporation (the "Company"),
and DAVID G. SODERQUIST, a resident of Minnesota ("Executive").
WITHNESSETH
WHEREAS, the Company and Executive have entered into an Employment
Agreement dated as of January 23, 19996 (the "Employment Agreement"); and
WHEREAS, Sections 6, 7 and 9 of the Employment Agreement provide that
Executive shall receive certain cash payments calculated on the basis of
Executive's "Base Salary" in the event Executive's employment is terminated by
the Company under various circumstances or in the event the term of the
Employment Agreement is now renewed; and
WHEREAS, in light of the disappointing recent financial performance of
the Company and the in-line skate industry generally, Executive has voluntarily
agreed to accept a reduction in the amount of Base Salary payable to Executive
under the Employment Agreement; provided that such reduction does not reduce the
amounts to which Executive would otherwise be entitled pursuant to Sections 6, 7
or 9 of the Employment Agreement in the event of a termination or nonrenewal of
employment;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained the parties hereto agree as follows:
1. Amendment of Section 6 of Employment Agreement. Section
6(a)(i) of the Employment Agreement is hereby amended to read
in its entirety as follows:
"(i) The Company shall make a cash payment to Executive equal
to the greater of (A) the sum of the highest monthly Base
Salary in effect any time during the three-year period
immediately preceding such termination times the number of
months remaining in the Term (without regard to renewals)
under this Agreement, plus an amount equal to the incentive
bonus earned by Executive in the prior fiscal year multiplied
by the number of months remaining in the Term (without regard
to renewals) divided by twelve (12), or (B) the sum of the
highest annual Base Salary in effect any time during the
three-year period immediately preceding such termination, plus
the amount of incentive bonus earned by Executive during the
prior fiscal year. Such payment shall be made in cash within
fifteen (15) days from and after termination of Executive's
employment."
2. Amendment of Section 7 of Employment Agreement. Section
7(a)(i) of the Employment Agreement is hereby amended to read
in its entirety as follows:
<PAGE>
"(i) Subject to paragraph (c) hereof, the Company shall make a
cash payment to Executive equal to the greater of (A) the sum
of the highest monthly Base Salary in effect any time during
the three-year period immediately preceding such termination
times the number of months remaining in the Term (without
regard to renewals) under this Agreement, plus an amount equal
to the incentive bonus earned by Executive in the prior fiscal
year multiplied by the number of months remaining in the Term
(without regard to renewals) divided by twelve (12), or (B) 2
times the sum of the highest annual Base Salary in effect any
time during the three-year period immediately preceding such
termination, and the amount of incentive bonuses which, absent
termination of Executive's employment, could have been earned
by Executive during the fiscal year of the Company in which
Executive's employment under this Agreement ceases. For
purposes of Clause (B), the computation of the amount of
incentive bonuses shall be based upon the bonus programs in
effect at the time of termination of Executive's employment
and such computation shall assume that target performance
levels are satisfied for all purposes during such fiscal year.
Such payment shall be made in cash within fifteen (15) days
from and after termination of Executive's employment."
3. Amendment of Section 9(b) of Employment Agreement. Section
9(b)(i) of the Employment Agreement is hereby amended to read
in its entirety as follows:
"(i) Unless the notice of nonrenewal is given during a
Transition Period, the Company shall make a cash payment equal
to the amount of the highest annual Base Salary in effect any
time during the three-year period immediately preceding
termination of employment. Such payment shall be made in cash
within fifteen (15) days from and after the end of Executive's
employment term. If the notice of renewal is given during a
Transition Period, then, subject to Section 7(c), the Company
shall make a cash payment to Executive equal to two (2) times
the sum of (A) the amount of the highest annual Base Salary in
effect any time during the three-year period immediately
preceding termination of Executive's employment and (B) the
amount of incentive bonuses which, absent termination of
Executive's employment, could have been earned by Executive
during the fiscal year of the Company in which Executive's
employment under this Agreement ceases. For purposes of Clause
(B), the computation of the amount of incentive bonuses shall
be based upon the bonus programs in effect at the time of
termination of Executive's employment and such computation
shall assume that target performance levels are satisfied for
all purposes during such fiscal year. Such payment shall be
made in cash within fifteen (15) days from and after
termination of Executive's employment."
4. Other Provisions Unaffected. Except as provided herein, all
other provisions to the Employee Agreement shall remain in
force and unaffected by this Amendment.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its officer, and Executive has executed this Agreement, as of the
day and year first written above.
FIRST TEAM SPORTS, INC.
By /s/ John J. Egart
John J. Egart,
President and Chief Executive Officer
/s/ David G. Soderquist
David G. Soderquist
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> MAY-31-1999
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0
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