<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Quarterly Period Ended: July 28, 1996
Commission File Number: 0-20672
SPORTMART, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2702213
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 South Wolf Road, Wheeling, Illinois 60090
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (847) 520-0100
Indicate by check mark whether the registrant 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).
Yes X No
----- -----
Indicate by check mark whether the registrant has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
As of September 4, 1996, there were 5,148,833.5 shares of Voting Common
Stock, par value $.01, and 7,686,304.5 shares of Class A Common Stock, par
value $.01, of the registrant outstanding.
<PAGE> 2
SPORTMART, INC.
QUARTERLY PERIOD ENDED JULY 28, 1996
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE(S)
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of July 28, 1996 and January 28, 1996 .. 1
Consolidated Statements of Operations for the thirteen weeks
ended July 28, 1996 and July 30, 1995 and the twenty-six weeks
ended July 28, 1996 and July 30, 1995 ................................. 2
Consolidated Statements of Stockholders' Equity
for the twenty-six weeks ended July 28, 1996 and
the fifty-two weeks ended January 28, 1996 ............................ 3
Consolidated Statements of Cash Flows for the twenty-six weeks
ended July 28, 1996 and July 30, 1995 ................................. 4
Notes to Consolidated Financial Statements ............................ 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................... 8-13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders .................... 14
Item 6. Exhibits and Reports on Form 8-K ...................................... 14
SIGNATURES ....................................................................... 15
</TABLE>
-i-
<PAGE> 3
I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JULY 28, 1996 AND JANUARY 28, 1996
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS JULY 28, JANUARY 28,
1996 1996
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ - $ 4,017
Due from related parties 1,449 1,348
Merchandise inventories 179,715 174,952
Prepaid expenses and other assets 8,259 16,442
Advertising co-op receivable 7,229 5,547
Assets held pending sale and leaseback 4,200 2,883
Deferred income taxes 4,347 4,347
-------- --------
Total current assets 205,199 209,536
Property and equipment, net 73,627 72,040
Other assets 3,800 3,745
Deferred income taxes 2,183 2,178
-------- --------
$284,809 $287,499
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ 2,655 $ -
Notes payable 27,890 18,213
Current portion of long-term debt and capitalized lease obligations 5,691 7,221
Accounts payable 65,251 67,297
Accrued expenses:
Salaries and wages 3,703 3,297
Taxes other than income 6,937 6,912
Advertising 3,662 7,959
Other 10,763 18,314
-------- --------
Total current liabilities 126,552 129,213
Long-term bank notes payable 30,058 30,000
Long-term debt, net of current portion 14,800 18,800
Capitalized lease obligations, net of current portion 3,566 4,008
Other long-term liabilities 5,351 4,682
-------- --------
180,327 186,703
-------- --------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock; $.01 par value;
5,000,000 shares authorized; none issued - -
Voting common stock; $.01 par value; 50,000,000 shares authorized;
5,148,833 shares issued and outstanding on July 28, 1996
and January 28, 1996 52 52
Class A common stock, non-voting; $.01 par value, 50,000,000
shares authorized; 7,686,304 and 7,625,538 shares issued and
outstanding on July 28, 1996 and January 28, 1996, respectively 76 76
Additional paid-in capital 79,810 79,637
Cumulative translation adjustment (57) (12)
Retained earnings 24,601 21,043
-------- --------
Total stockholders' equity 104,482 100,796
-------- --------
$284,809 $287,499
======== ========
</TABLE>
1
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 4
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------- ------------------------
JULY 28, JULY 30, JULY 28, JULY 30,
1996 1995 1996 1995
---------- ---------- ----------- -----------
(restated) (restated)
<S> <C> <C> <C> <C>
Net sales $146,079 $133,945 $262,289 $237,087
Cost of sales, including buying, distribution
and occupancy 108,986 99,294 199,576 180,422
---------- ---------- ----------- -----------
Gross profit 37,093 34,651 62,713 56,665
Operating expenses:
Mart 22,100 20,027 42,368 38,965
General and administrative 4,855 4,044 9,491 7,801
Mart pre-opening 384 379 501 461
---------- ---------- ---------- ----------
Operating income 9,754 10,201 10,353 9,438
---------- ---------- ---------- ----------
Other income (expense):
Interest expense, net (1,947) (1,046) (3,913) (2,195)
Other (expense) income (161) 96 (314) 257
---------- ---------- ---------- ----------
(2,108) (950) (4,227) (1,938)
---------- ---------- ---------- ----------
Income from continuing operations before income taxes 7,646 9,251 6,126 7,500
Income tax provision 3,211 3,908 2,568 3,142
---------- ---------- ---------- ----------
Income from continuing operations 4,435 5,343 3,558 4,358
Loss from discontinued operations, (net of income tax benefit of
$102 and $208 for the 13 and 26 weeks ended July 30, 1995,
respectively) - (153) - (311)
---------- ---------- ---------- ----------
Net income $ 4,435 $ 5,190 3,558 4,047
========== ========== ========== ==========
Net income per share from continuing operations $ .35 $ .42 $ .28 $ .34
Net loss per share from discontinued operations - (.01) - (.02)
---------- ---------- ---------- ----------
Net income per share $.35 $ .41 $ .28 .32
========== ========== ========== ==========
Weighted average number of
common shares outstanding 12,835,137 12,774,370 12,817,582 12,769,452
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 5
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
VOTING CLASS A ADDITIONAL CUMULATIVE TOTAL
COMMON STOCK COMMON STOCK PAID-IN TRANSLATION RETAINED STOCKHOLDERS'
----------------------- ------------------
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT EARNINGS EQUITY
----------- --------- --------- ------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 29, 1995 5,125,537 $ 52 7,625,538 $ 76 $ 79,431 - $ 27,488 $ 107,047
Issuance of 23,296 common
shares under stock
purchase plan 23,296 - - - 206 - - 206
Cumulative translation adjustment - - - - - $ (12) - (12)
Net loss - - - - - - (6,445) (6,445)
---------- --------- --------- -------- ---------- ---------- -------- -------------
Balances, January 28, 1996 5,148,833 52 7,625,538 76 79,637 (12) 21,043 100,796
Issuance of 60,766 of Class A
common shares under
stock purchase plan - - 60,766 - 173 - - 173
Cumulative translation adjustment - - - - - (45) - (45)
Net income - - - - - - 3,558 3,558
---------- --------- --------- -------- ---------- ---------- -------- -------------
Balances, July 28,
1996 (unaudited) 5,148,833 $ 52 7,686,304 $ 76 $ 79,810 $ (57) $ 24,601 $ 104,482
========== ========= ========= ======== ========== ========== ======== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 6
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------
JULY 28, JULY 30,
1996 1995
----------- -----------
(restated)
<S> <C> <C>
Cash flows from operating activities:
Net income from continuing operations $3,558 $4,358
Loss from discontinued operations - (311)
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 5,514 4,070
Gain on disposition of capital lease - (322)
Other adjustment (44) 76
Deferred income tax provision (5) -
Net (increase) decrease in assets:
Merchandise inventories (4,763) (25,775)
Prepaid expenses and other assets 8,183 1,088
Advertising co-op receivable (1,682) (283)
Other assets-noncurrent (54) (417)
Net increase (decrease) in liabilities:
Accounts payable (2,046) 30,847
Accrued expenses (10,058) (3,498)
Other long-term liabilities 668 810
----------- -----------
Net cash (used in) provided by operating activities (729) 10,643
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (8,899) (11,022)
Purchase of assets held pending sale and leaseback (1,317) (2,582)
Advances to related parties (454) (74)
Repayment of advances to related parties 353 -
----------- -----------
Net cash used in investing activities (10,317) (13,678)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 173 206
Principal payments under capital lease obligations and long-term debt (5,535) (1,611)
Bank overdraft 2,655 -
Advances on lines of credit 106,972 65,650
Repayment on lines of credit (97,236) (60,550)
----------- -----------
Net cash provided by financing activities 7,029 3,695
----------- -----------
Net (decrease) increase in cash and cash equivalents (4,017) 660
Cash and cash equivalents at beginning of period 4,017 3,165
----------- -----------
Cash and cash equivalents at end of period $ - $ 3,825
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 7
SPORTMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Sportmart, Inc. (the "Company") operates in one business segment which is
the retail sporting goods business. As of September 4, 1996, the
Company had 70 superstores ("marts") located in the United States and
Canada.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of Sportmart,
Inc. and Sportdepot Stores Inc., its wholly-owned subsidiary. Sportmart
Canada, Inc. was incorporated in April 1994 and the first mart in Canada
opened in March 1995. In addition Sportdepot Stores Inc. was incorporated
in January 1995 as a wholly-owned subsidiary of Sportmart Canada, Inc. In
October 1995, Sportmart Canada, Inc. was amalgamated into Sportdepot Stores
Inc. All significant intercompany transactions and balances have been
eliminated.
Principles of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. 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, the accompanying unaudited consolidated financial statements
contain all adjustments (consisting solely of normal recurring accruals)
necessary to present fairly the consolidated financial position of
Sportmart, Inc. as of July 28, 1996 and the consolidated results of its
operations and its cash flows for the thirteen and twenty-six week periods
ended July 28, 1996 and July 30, 1995. Because of the seasonal nature of
the business, results for interim periods are not indicative of a full
year's operations.
These consolidated financial statements should be read in conjunction with
the Company's audited financial statements for the fiscal year ended
January 28, 1996 included in the Company's Form 10-K as filed on April 29,
1996 with the Securities and Exchange Commission.
Net Income Per Share
Net income per share from continuing operations, net loss per share from
discontinued operations and net income per share are based on 12,835,137
and 12,774,370 weighted average common shares outstanding for the thirteen
weeks ended July 28, 1996 and July 30, 1995, respectively. Net income
per share from continuing operations, net loss per share from discontinued
operations and net income per share are based on 12,817,582 and 12,769,452
5
<PAGE> 8
weighted average common shares outstanding for the twenty-six weeks
ended July 28, 1996 and July 30, 1995, respectively.
3. FOREIGN CURRENCY TRANSLATION
The consolidated financial statements and transactions of the Company's
Canadian subsidiary are maintained in their functional currency (Canadian
dollars) and translated into U.S. dollars in accordance with Statement of
Financial Accounting Standards No. 52. Foreign currency balance sheet
accounts are translated into United States dollars at the rate of exchange
in effect at the end of the period. Income and expenses are translated at
the average rates of exchange in effect during the year. Translation
adjustments have been accumulated in a separate component of stockholders'
equity. Such adjustments do not affect cash flow and are unrealized.
During the course of operating in Canada, the Company enters into
transactions in currencies other than its Canadian subsidiary's functional
currency. Realized and unrealized gains and losses relating to these
transactions which arise as a result of changes in currency exchange rates
are recognized in income as incurred. The gains and losses on these
transactions for the twenty-six weeks of fiscal 1996 were not material. As
of July 28, 1996, the Company had outstanding approximately $7.8 million in
forward exchange contracts with various settlement dates prior to November
1, 1996.
4. NON-RECURRING CHARGE
During the fourth quarter of fiscal 1995, the Company recorded a pre-tax
charge of $5.7 million associated with non-recurring charges.
Approximately 79% of the charge was related to costs associated with
the closing of a mart in Chicago, Illinois (River North) and a clearance
mart in Wheeling, Illinois. The River North location was closed as of the
end of fiscal 1995 and the Wheeling mart was closed in May of fiscal 1996.
Included in the original charge of store closings was severance, lease
buy-out costs, inventory write-down costs, unamortized portions of
nonrecoverable capital improvements, as well as other miscellaneous exit
costs. The remainder of the non-recurring charge at the end of fiscal 1995
was primarily due to severance for one individual at the corporate location
and mart reorganization severance. As of July 28, 1996, the reserve is
approximately $2.9 million due to the payout of the lease costs, severance
payments and write-off of inventory costs. The Company believes the
original estimates for these non-recurring costs continue to appear
reasonable.
5. DISCONTINUED OPERATIONS
During the fourth quarter of fiscal 1995, the Company announced its
strategic decision to discontinue the operations of its No Contest
Division. The No Contest division is accounted for as discontinued
operations, and accordingly, their operations are segregated in the
accompanying income statements. Net sales, operation costs and
expenses, other income and expense, and income taxes for fiscal year 1995
have been reclassified for amounts associated with the discontinued units.
A reserve was established for the estimated costs of disposal of the
business segment of $2.9 million ($1.7 million after tax). The reserve
included estimated lease buy-out costs for approximately one year of
occupancy costs per location, severance payments, inventory write-down
costs, unamortized portions of nonrecoverable capital improvements as well
as other miscellaneous exit costs. As of July 28, 1996, the reserve is
6
<PAGE> 9
approximately $400,000 due to the payout of the lease costs, severance
payments and write-off of inventory costs. The Company believes the
original estimates for total costs to dispose of the business segment
continue to appear reasonable.
6. SUBSEQUENT EVENTS
On September 6, 1996, the Company entered into a $135.0 million revolving
credit agreement with Bankers Trust. The new credit facility has a five
year term and is secured by the inventory and personal property of the
Company. Interest is due monthly on outstanding borrowings based on LIBOR
(London Interbank Offered Rate) plus a fee ranging up to 2.50% depending on
the maintenance of certain financial ratios. The Company also has the
option to borrow at the prime rate plus 1.00%. This new revolving line of
credit requires the maintenance of minimum net worth and maximum debt to
inventory ratios. The proceeds from this new credit facility were used to
repay all borrowings outstanding under the previous revolving credit
facility and the loans from Allstate. As a result of the termination of
the previous debt facilities, the Company will incur an extraordinary
charge of approximately $450,000, net of tax, in the third quarter.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain income
statement data of the Company expressed as a percentage of net sales and the
number of marts open at the end of each period:
<TABLE>
<CAPTION>
THIRTEEN WEEKS TWENTY-SIX WEEKS
ENDED ENDED
July 28, July 30, July 28, July 30,
Income statement data: 1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including buying,
distribution and occupancy 74.6 74.1 76.1 76.1
------- ------ ------ ------
Gross profit 25.4 25.9 23.9 23.9
Operating expenses:
Mart expenses 15.1 15.0 16.2 16.5
General and administrative
expenses 3.4 3.0 3.6 3.3
Mart pre-opening expenses .3 .3 .2 .2
------- ------ ------ ------
Operating income 6.6 7.6 3.9 3.9
Interest expense, net (1.3) (.8) (1.5) (.9)
Other (expense) income, net (.1) .1 (.1) .1
------- ------ ------ ------
Income from continuing operations
before income taxes 5.2 6.9 2.3 3.1
Income tax provision 2.2 2.9 1.0 1.3
------- ------ ------ ------
Income from continuing operations 3.0% 4.0% 1.3% 1.8%
======= ====== ====== ======
Number of marts at end of period 70 59
</TABLE>
THIRTEEN WEEKS ENDED JULY 28, 1996 COMPARED TO THIRTEEN WEEKS ENDED JULY 30,
1995
Net sales from continuing operations increased from $133.9 million in the
thirteen weeks ended July 30, 1995 to $146.1 million in the thirteen weeks
ended July 28, 1996, a 9.1% increase. The net sales increase in the thirteen
weeks ended July 28, 1996 was primarily attributable to the inclusion of
operating results for the net of eleven new marts opened (fourteen new marts
less three closed marts) since July 30, 1995. However, the sales volumes in
the nine Canadian locations opened during fiscal 1995 were less than those
typically realized for new marts opened in the United States and less than the
Company's expectations. The Company has created a new merchandising position
to better address the differences between the U.S. and Canadian consumer
preferences.
Net sales in comparable marts decreased 4.9% during the quarter ended July 28,
1996. Management believes that comparable mart sales were modestly impacted by
cannibalization from new marts which overlapped the customer base of existing
8
<PAGE> 11
marts as a result of the Company's strategy to dominate certain
markets. Additionally, the Company's apparel and footwear businesses showed
strong results, however, these results were not enough to offset declines in
hardlines merchandise, some of which were planned, as well as decreases in
in-line skates and bicycles. Several personnel and organizational changes have
been made to address the Company's comparable mart sales performance. These
include new senior executives in merchandising, marketing, and store
operations and a new organizational structure of the buying staff.
Gross profit after buying, distribution and occupancy costs increased $2.4
million during the quarter ended July 28, 1996 to $37.1 million, a 6.9%
increase, due primarily to a higher level of sales. Gross profit as a
percentage of net sales decreased .5% primarily due to an increase in occupancy
costs related to new marts which more than offset the percentage to sales
improvement in the merchandise cost of sales in this thirteen week period.
Mart expenses increased from $20.0 million in the period ended July 30, 1995 to
$22.1 million in the period ended July 28, 1996, a 10.5% increase. This
increase was primarily due to the inclusion of operating expenses in the
thirteen weeks ended July 28, 1996 for the new marts opened since July 30,
1995. As a percentage of net sales, mart expenses were comparable with the
prior year.
General and administrative expenses increased from $4.0 million in the thirteen
weeks ended July 30, 1995 to $4.9 million in the thirteen weeks ended July 28,
1996, a 22.5% increase. This increase was due primarily to additional computer
equipment depreciation and lease costs and additional personnel related costs
for employees added during fiscal 1995. As a percentage of net sales, general
and administrative expenses increased from 3.0% in the period ended July 30,
1995 to 3.4% in the period ended July 28, 1996 due to the additional
expenditures discussed above and the comparable mart sales declines.
Operating income decreased slightly from $10.2 million for the thirteen weeks
ended July 30, 1995 to $9.8 million for the thirteen weeks ended July 28, 1996.
Operating income also decreased as a percentage of sales from 7.6% for the
thirteen weeks ended July 30, 1995 to 6.6% in the thirteen weeks ended July 28,
1996 primarily due to the increased cost of sales and general and
administrative expenses noted above coupled with the comparable mart sales
declines.
Net interest expense as a percentage of net sales increased from .8% to 1.3%
due to higher average borrowings and increased interest rates over the prior
year. Total borrowings were higher than the previous year primarily due to the
capital expenditures related to the opening of new marts since August, 1995.
Other expense increased as a percentage of net sales from (.1)% to .1% for the
thirteen weeks ended July 28, 1996 due to decreased commission income, bank
commitment fees and the recognition of the Company's portion of the loss in its
joint venture in Israel for the second quarter.
For the periods ended July 28, 1996 and July 30, 1995, the statements of income
reflect a provision for federal, state and provincial income taxes based on
the Company's expected annual tax rates.
TWENTY-SIX WEEKS ENDED JULY 28, 1996 COMPARED TO TWENTY-SIX WEEKS ENDED JULY
30, 1995
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<PAGE> 12
Net sales from continuing operations increased from $237.1 million in the
twenty-six weeks ended July 30, 1995 to $262.3 million in the twenty-six weeks
ended July 28, 1996, a 10.6% increase. The net sales increase in the
twenty-six weeks ended July 28, 1996 was primarily attributable to the
inclusion of operating results for the net of eleven new marts opened (fourteen
new marts less three closed marts) since July 30, 1995. However, the sales
volumes in the nine Canadian locations opened during fiscal 1995 were less than
those typically realized for new marts opened in the United States and less
than the Company's expectations. The Company has created a new merchandising
position to better address the differences between the U.S. and Canadian
consumer preferences.
Net sales in comparable marts decreased 3.6% during the twenty-six week period
ended July 28, 1996. Management believes that comparable mart sales were
modestly impacted by cannibalization from new marts which overlapped the
customer base of existing marts as a result of the Company's strategy to
dominate certain markets. Additionally, comparable mart sales were adversely
affected by increased competition and cooler weather in the Midwest during the
first quarter than experienced in the prior year coupled with weak sales in
in-line skates and bicycles. Several personnel and organizational changes have
been made to address the Company's comparable mart sales performance. These
include new senior executives in merchandising, marketing, and store operations
and a new organizational structure of the buying staff.
Gross profit after buying, distribution and occupancy costs increased $6.0
million during the twenty-six week period ended July 28, 1996 to $62.7 million,
a 10.6% increase, due primarily to a higher level of sales. Gross profit as a
percentage of net sales was unchanged at 23.9%. Even though the merchandise
cost of sales, as a percentage of sales, decreased during the twenty-six week
period, this favorable variance was offset by increased occupancy costs as a
percentage of sales due to the inclusion of the new marts.
Mart expenses increased from $39.0 million in the period ended July 30, 1995 to
$42.4 million in the period ended July 28, 1996, an 8.7% increase. This
increase was primarily due to the inclusion of operating expenses in the
twenty-six weeks ended July 28, 1996 for the new marts opened since July 30,
1995. As a percentage of net sales, mart expenses decreased from 16.5% in the
period ended July 30, 1995 to 16.2% in the period ended July 28, 1996 due
primarily to decreases in net advertising expenses as well as improved
efficiencies in overall regional expense categories.
General and administrative expenses increased from $7.8 million in the
twenty-six weeks ended July 30, 1995 to $9.5 million in the twenty-six weeks
ended July 28, 1996, a 21.8% increase. This increase was due primarily to
additional computer equipment depreciation and lease costs and additional
personnel related costs for employees added during fiscal 1995. As a
percentage of net sales, general and administrative expenses increased from
3.3% in the period ended July 30, 1995 to 3.6% in the period ended July 28,
1996 due to the additional expenditures discussed above and the comparable mart
sales declines.
Operating income increased from $9.4 million for the twenty-six weeks ended
July 30, 1995 to $10.4 million for the twenty-six weeks ended July 28, 1996.
Operating income remained unchanged as a percentage of sales at 3.9%.
Net interest expense as a percentage of net sales increased from .9% to 1.5%
due to higher average borrowings and increased interest rates over the prior
year. Total borrowings were higher than the previous year primarily
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<PAGE> 13
due to the capital expenditures related to the opening of new marts since
August, 1995. Other expense increased as a percentage of net sales from (.1)%
to .1% for the twenty-six weeks ended July 28, 1996 due to decreased commission
income, bank commitment fees and the recognition of the Company's portion of
the loss in its joint venture in Israel.
For the periods ended July 28, 1996 and July 30, 1995, the statements of income
reflect a provision for federal, state and provincial income taxes based on
the Company's expected annual tax rates.
LIQUIDITY AND CAPITAL RESOURCES
As of July 28, 1996, the Company had working capital of $78.6 million as
compared to $80.3 million as of January 28, 1996. Net cash used in operating
activities was $729,000 for the twenty-six weeks ended July 28, 1996, versus
$10.6 million provided by operations for the twenty-six weeks ended July 30,
1995. The primary difference between the $729,000 net cash used in operations
during the twenty-six weeks ended July 28, 1996 and the $10.6 million provided
by operations in the prior year is related to changes in merchandise
inventories, prepaid expenses and other assets and accrued expenses. The $4.8
million increase in merchandise inventories from January 28, 1996 to July 28,
1996 is less than the $25.6 million increase during the same period in the
prior year due to the Company's efforts in reducing average per mart
inventories by 9.3% from July 30, 1995 inventories on a per mart basis. The
$8.2 million decrease in prepaid expenses and other assets from January 28,
1996 to July 28, 1996 is more than the $1.1 million decrease during the same
period in the prior year due to a $2.3 million payment from the liquidator for
the closing of the No Contest division, a $2.6 million decrease in the prepaid
income taxes due to estimated quarterly tax payments coupled with a $2.0 million
decrease in deferred capitalizable preopening for the four new stores opened
since January 28, 1996. Net cash used during the twenty-six weeks ended July
28, 1996 also reflects a $10.1 million decrease in accrued expenses from
January 28, 1996 primarily related to reductions in amounts accrued for
advertising, fixed assets and the reserve for store closings.
Net cash used in investing activities decreased from $13.7 million in fiscal
1995 to $10.3 million in fiscal 1996. The net cash used in investing
activities in both fiscal years was primarily the result of $8.9 million in
capital expenditures made in fiscal 1996 and $11.0 million in capital
expenditures during fiscal 1995.
Net cash provided by financing activities for the first twenty-six weeks of
fiscal 1996 of $7.0 million was primarily due to $9.7 million net advances on
the lines of credit partially offset by $5.4 million principal payments on the
Allstate loans. The net cash provided by financing activities in fiscal 1995
was primarily due to $5.1 million net advances on the lines of credit.
Prior to September 6, 1996, the Company had revolving lines of credit of $125.0
million with a syndicate of banks in the United States and Canada which the
Company used to fund both seasonal and general capital requirements. As of
September 4, 1996, approximately $64.0 million was outstanding under these
revolving lines of credit. In addition, prior to September 6, 1996, the
Company had $20.2 million in loans outstanding from Allstate.
On September 6, 1996, the Company entered into a $135.0 million revolving
credit agreement with Bankers Trust. The proceeds from this new credit
facility were used to repay all borrowings outstanding under the previous
revolving credit facility and the loans from Allstate. The new credit facility
has a five year term and is secured by the inventory and personal property
11
<PAGE> 14
of the Company. Interest is due monthly on outstanding borrowings
based on LIBOR plus a fee ranging up to 2.50% depending on the maintenance of
certain financial ratios. The Company also has the option to borrow at the
prime rate plus 1.00%. This new revolving line of credit requires the
maintenance of minimum net worth and maximum debt to inventory ratios. The new
facility provides the Company with less restrictive convenants and greater
borrowing availability than the previous revolving credit facility.
The Company's primary on-going cash requirements for fiscal 1996 relate to
capital expenditures relating to improvement of existing operations. As of
July 28, 1996, the Company has invested approximately $4.2 million in capital
expenditures related to the opening of the four marts which opened in Wisconsin
and Vancouver. In addition, the Company plans to invest, during fiscal 1996,
approximately $4.9 million in the renovation of existing marts and distribution
centers and approximately $2.8 million to upgrade its management information
systems of which $2.0 million and $1.5 million, respectively, has already been
expended as of July 28, 1996. The Company expects to be able to fund its
working capital requirements and expansion plans with a combination of
anticipated cash flow from operations, bank borrowings, normal trade credit
agreements and the continued use of lease financing.
FOREIGN CURRENCY AND INTEREST RATE RISK MANAGEMENT
Derivative financial instruments are utilized by the Company to reduce interest
rate and foreign currency exchange risks. The Company does not use derivatives
for speculative trading purposes.
In March 1995, the Company entered into an interest rate swap agreement, a form
of derivative, with a major financial institution. This agreement became
effective in August 1995 and expires in August 1998. This agreement
effectively converts $10.0 million of its floating rate bank debt (based on
LIBOR plus a fee determined by financial performance) to a fixed rate of 7.54%
(plus the same fee) and requires settlement on a quarterly basis. The
difference in interest between the fixed rate and effective LIBOR interest rate
is recognized as an adjustment to interest expense in the period incurred.
During the course of operating in Canada, the Company enters into forward
exchange contracts to hedge intercompany loans and other commitments in
currencies other than its Canadian subsidiary's functional currency. Realized
and unrealized gains and losses arising from these forward exchange contracts
are recognized in income as offsets to gains and losses resulting from the
underlying hedged transaction. As of July 28, 1996, the Company had
approximately $7.8 million of open forward exchange contracts with various
settlement dates prior to November 1, 1996.
SEASONALITY AND INFLATION
The second and fourth fiscal quarters, which respectively include Father's Day
and Christmas, have historically contributed the greatest volume of net sales
and income before taxes. For fiscal years 1995 and 1994, the second and fourth
fiscal quarters combined accounted for approximately 58% and 57%, respectively,
of the Company's fiscal year net sales. The loss before taxes was
significantly impacted in the fourth quarter of fiscal 1995 by the charges
which resulted primarily from closing the No Contest operations and two
Sportmart locations, however, typically, the second and fourth quarters account
for substantially all of the Company's income before taxes. In contrast,
12
<PAGE> 15
the Company has consistently experienced net losses in the third
quarter and it anticipates that such trend may continue through fiscal 1996.
Inventory levels, which gradually increase beginning in February, generally
reach their peak in November and then fall to their lowest level following the
December holiday season. Although the operations of the Company are influenced
by general economic conditions, the Company does not believe that inflation has
had a material effect on the results of operations during the twenty-six weeks
ended July 28, 1996.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements which are not historical facts contained in this release are
forward looking statements that involve risks and uncertainties, including, but
not limited to, product demand and market acceptance risks, the effect of
economic conditions, the impact of competitive products and pricing, product
development, commercialization and technological difficulties, capacity and
supply constraints or difficulties, the results of financing efforts, actual
purchases under agreements, the effect of the Company's accounting policies,
and other risks detailed in the Company's Securities and Exchange Commission
filings.
13
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY - HOLDERS.
(a) The Annual Meeting of Stockholders of the Company
was held on June 28, 1996.
(b) 1. The Stockholders voted to elect two directors to the
Company's Board of Directors, with the following votes:
<TABLE>
<CAPTION>
Authority Broker
Directors For Against Withheld Abstentions Non-Votes
<S> <C> <C> <C> <C> <C>
John A. Lowenstein 4,797,553 ___ 153,517 ____ ____
Charles G. Cooper 4,797,917 ___ 153,153 ____ ____
</TABLE>
(c) 2. The Stockholders also voted to approve certain amendments
to the Sportmart, Inc. Stock Option Plan, which amendments provided for an
increases in the number of shares of Class A Common Stock potentially
subject to grants under the Stock Option Plan, with the following vote:
<TABLE>
<CAPTION>
Authority Broker
For Against Withheld Abstentions Non-Votes
<S> <C> <C> <C> <C>
3,798,871 102,505 ____ 12,790 1,036,904
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS.
Exhibit 10.39 - Credit Agreement between the Registrant and BT
Commerical Corporation
Exhibit 10.40 - Sportmart, Inc. 1996 Restricted Stock Plan
Exhibit 11 - Statement regarding computation of income per share.
Exhibit 27 - Financial Data Schedule
B. REPORTS ON FORM 8-K.
None.
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements 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.
SPORTMART, INC.
Date: 9/11/96 By: /S/ ANDREW H. HOCHBERG
------------------- --------------------------------------------
Andrew H. Hochberg, Chief
Executive Officer
Date: 9/11/96 By: /S/ THOMAS T. HENDRICKSON
------------------- --------------------------------------------
Thomas T. Hendrickson,
Executive Vice President and
Chief Financial Officer
15
<PAGE> 1
EXHIBIT 10.39
CONFIDENTIAL TREATMENT
Confidential portions of this agreement which have been redacted are marked
with brackets
("[ ]"). The omitted material has been filed separately with the Securities
and Exchange Commission.
================================================================================
CREDIT AGREEMENT
$135,000,000
AMONG
SPORTMART, INC.,
AS BORROWER,
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO,
TOGETHER WITH THOSE ASSIGNEES
PURSUANT TO SECTION 11.8 HEREOF,
AS LENDERS,
AND
BT COMMERCIAL CORPORATION,
AS AGENT
DATED AS OF SEPTEMBER 6, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
1 DEFINITIONS ......................................................... 1
1.1 General Definitions ........................................... 1
1.2 Accounting Terms and Determinations ........................... 17
1.3 Other Terms; Headings ......................................... 17
2 REVOLVING LOANS ..................................................... 18
2.1 Revolving Credit Commitments .................................. 18
2.2 Borrowing of Revolving Loans .................................. 18
2.3 Notice of Request for Lender Advances ......................... 19
2.4 Periodic Settlement of Agent Advances; Interest and Fees;
Statements .................................................... 19
2.5 Sharing of Payments ........................................... 20
2.6 Defaulting Lenders ........................................... 21
3 LETTERS OF CREDIT ................................................... 22
3.1 Issuance of Letters of Credit ................................. 22
3.2 Terms of Letters of Credit .................................... 23
3.3 Notice of Issuance ............................................ 23
3.4 Lenders' Participation ........................................ 23
3.5 Payments of Amounts Drawn Under Letters of Credit ............. 23
3.6 Payment by Lenders ............................................ 23
3.7 Obligations Absolute .......................................... 24
3.8 Agent's Execution of Applications and Other Issuing
Bank Documentation: Reliance on Credit Agreement by Issuing
Bank .......................................................... 24
4 COMPENSATION, REPAYMENT AND REDUCTION OF COMMITMENTS ................ 24
4.1 Interest on Revolving Loans ................................... 24
4.2 Unused Line Fee ............................................... 25
4.3 Letter of Credit Fees ......................................... 25
4.4 Interest and Letter of Credit Fees After Event of Default ..... 26
4.5 Collateral Monitoring Fee ..................................... 26
4.6 Expenses ...................................................... 26
4.7 Mandatory Payment; Reductions of Commitments .................. 26
4.8 INTENTIONALLY DELETED ......................................... 27
4.9 Maintenance of Loan Account; Statements of Account ............ 27
4.10 Payment Procedures ............................................ 27
4.11 Collection of Accounts ........................................ 27
4.12 Distribution and Application of Collections and Other Amounts . 28
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
4.13 Calculations .................................................. 28
4.14 Special Provisions Relating to LIBOR Rate Loans ............... 28
4.15 Indemnification in Certain Events ............................. 31
5 CONDITIONS PRECEDENT ................................................ 33
5.1 Conditions Precedent to Initial Revolving Loan and
Letter of Credit .............................................. 33
5.2 Conditions Precedent to All Revolving Loans and
Letters of Credit ............................................. 34
6 REPRESENTATIONS AND WARRANTIES ...................................... 34
6.1 Organization and Qualification ................................ 35
6.2 Authority ..................................................... 35
6.3 Enforceability ................................................ 35
6.4 No Conflict ................................................... 35
6.5 Consents and Filings .......................................... 35
6.6 Government Regulation ......................................... 35
6.7 Solvency ...................................................... 36
6.8 Rights in Collateral; Priority of Liens ....................... 36
6.9 Financial Data ................................................ 36
6.10 Locations of Offices, Records and Inventory ................... 36
6.11 Subsidiaries; Ownership of Stock .............................. 37
6.12 No Judgments or Litigation .................................... 37
6.13 No Defaults ................................................... 37
6.14 Labor Matters ................................................. 37
6.15 Compliance with Law ........................................... 37
6.16 ERISA ......................................................... 38
6.17 Compliance with Environmental Laws ............................ 38
6.18 Intellectual Property ......................................... 38
6.19 Licenses and Permits .......................................... 39
6.20 Taxes and Tax Returns ......................................... 39
6.21 Material Contracts ............................................ 40
6.22 Accuracy and Completeness of Information ..................... 40
6.23 No Change ..................................................... 40
7 AFFIRMATIVE COVENANTS ............................................... 40
7.1 Financial Reporting ........................................... 40
7.2 Collateral Reporting .......................................... 42
7.3 Notification Requirements ..................................... 43
7.4 Corporate Existence ........................................... 44
7.5 Books and Records; Inspections ................................ 44
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
7.6 Insurance ..................................................... 45
7.7 Taxes ......................................................... 45
7.8 Compliance with Laws .......................................... 45
7.9 Use of Proceeds ............................................... 45
7.10 Fiscal Year ................................................... 46
7.11 Maintenance of Property ....................................... 46
7.12 ERISA Documents ............................................... 46
7.13 Environmental and Other Matters ............................... 46
7.14 Further Assurances ............................................ 47
8 NEGATIVE COVENANTS .................................................. 47
8.1 Consolidated Book Net Worth ................................... 47
8.2 INTENTIONALLY DELETED ......................................... 48
8.3 INTENTIONALLY DELETED ......................................... 48
8.4 Capital Expenditures ......................................... 48
8.5 Additional Indebtedness ....................................... 48
8.6 Liens ......................................................... 49
8.7 Contingent Obligations ........................................ 50
8.8 Sale of Assets ................................................ 50
8.9 Restricted Payments ........................................... 50
8.10 Investments ................................................... 51
8.11 Affiliate Transactions ........................................ 51
8.12 Additional Bank Accounts ...................................... 51
8.13 Excess Cash ................................................... 52
8.14 Additional Negative Pledges ................................... 52
8.15 Additional Subsidiaries........................................ 52
9 EVENTS OF DEFAULT AND REMEDIES ...................................... 52
9.1 Events of Default ............................................. 52
9.2 Acceleration, Termination of Commitments and Cash
Collateralization ............................................. 54
9.3 Rescission of Acceleration..................................... 54
9.4 Remedies....................................................... 55
9.5 Right of Setoff ............................................... 55
9.6 License of Use of Software and Other Intellectual Property .... 55
9.7 Application of Proceeds; Surplus; Deficiencies ................ 55
10 THE AGENT ........................................................... 55
10.1 Appointment of Agent .......................................... 55
10.2 Nature of Duties of Agent ..................................... 56
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
10.3 Lack of Reliance on Agent .................................... 56
10.4 Certain Rights of the Agent .................................. 57
10.5 Reliance by Agent ............................................ 57
10.6 Indemnification of Agent ..................................... 57
10.7 The Agent in its Individual Capacity ......................... 58
10.8 Holders of Revolving Notes ................................... 58
10.9 Successor Agent .............................................. 58
10.10 Collateral Matters ........................................... 59
10.11 Actions with Respect to Defaults ............................. 60
10.12 Delivery of Information ...................................... 60
11 MISCELLANEOUS ....................................................... 60
11.1 GOVERNING LAW ................................................ 60
11.2 SUBMISSION TO JURISDICTION ................................... 61
11.3 SERVICE OF PROCESS ........................................... 61
11.4 JURY TRIAL ................................................... 61
11.5 LIMITATION OF LIABILITY ...................................... 61
11.6 Delays ....................................................... 61
11.7 Notices ...................................................... 62
11.8 Assignments and Participations ............................... 62
11.9 Confidentiality .............................................. 63
11.10 Indemnification .............................................. 64
11.11 Amendments and Waivers ....................................... 64
11.12 Counterparts and Effectiveness ............................... 65
11.13 Severability ................................................. 65
11.14 Maximum Rate ................................................. 65
11.15 Entire Agreement; Successors and Assigns ..................... 66
</TABLE>
ANNEXES
- ---------
Annex I List of Lenders; Commitment Amounts; and
Applicable Lending Offices
SCHEDULES
- ---------
Schedule A Closing Document List
Schedule B Disclosure Schedules
Schedule B, Part 6.1 States in which Qualified
Schedule B, Part 6.9 Contingent Obligations and Other Liabilities
iv
<PAGE> 6
Schedule B, Part 6.10 Principal Places of Business; Locations of
Collateral
Schedule B, Part 6.11 Subsidiaries
Schedule B, Part 6.12 Pending Judgments, Litigation and other Claims
Schedule B, Part 6.14 Labor Contracts
Schedule B, Part 6.16 Plans
Schedule B, Part 6.17 Environmental Matters
Schedule B, Part 6.20 Tax Matters; Tax Sharing Agreements
Schedule B, Part 6.21 Material Contracts
Schedule B, Part 7.6 Insurance
Schedule B, Part 8.5 Existing Indebtedness
Schedule B, Part 8.6 Existing Liens
Schedule B, Part 8.9 Employee Stock Plans and Agreements
Schedule B, Part 8.10 Existing Investments
Schedule B, Part 8.12 Disbursement Accounts
EXHIBITS *
- --------------------------
Exhibit A Form of Borrowing Base Certificate
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Revolving Note
Exhibit D LIBOR Margin Schedule
Exhibit E Form of Notice of Continuation
Exhibit F Form of Notice of Conversion
Exhibit G Form of Compliance Certificate
Exhibit H Form of Assignment and Assumption Agreement
* [Copies of omitted exhibits will be furnished supplementally to the
Commission upon request.]
v
<PAGE> 7
THIS CREDIT AGREEMENT ("Credit Agreement") is entered into as of
September 6, 1996, among SPORTMART, INC., a Delaware corporation ("Borrower");
each financial institution identified on Annex I (together with its successors
and assigns, hereinafter referred to individually as a "Lender" and collectively
as the "Lenders"); and BT COMMERCIAL CORPORATION, a Delaware corporation (in its
individual capacity, "BTCC"), acting in its capacity as agent for the Lenders
(in such capacity, together with its successors in such capacity, the "Agent").
ARTICLE 1
DEFINITIONS
1.1 GENERAL DEFINITIONS.
ACCOUNT has the meaning set forth in the Security Agreement.
AFFILIATE of a Person means another Person who directly or indirectly
controls, is controlled by, is under common control with or is a director or
officer of, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to vote ten percent (10%) or
more of the securities having ordinary voting power for the election of
directors and the direct or indirect power to direct the management and policies
of a business.
AGENT ADVANCES has the meaning set forth in Section 2.2.
APPLICABLE LENDING OFFICE means, with respect to each Lender, such
Lender's LIBOR Lending Office in the case of a LIBOR Rate Loan, and such
Lender's Domestic Lending Office in the case of a Prime Rate Loan.
ASSIGNMENT AND ASSUMPTION AGREEMENT has the meaning set forth in Section
11.8.
AUDITORS means either (i) one of the so-called "Big Six" accounting
firms, or (ii) a nationally recognized firm of independent public accountants
selected by the Borrower and satisfactory to the Agent in its reasonable
discretion.
BANKRUPTCY CODE means Title 11 of the U.S. Code (11 U.S.C. Section
Section 101 et seq.), as amended from time to time, and any successor statute.
BENEFIT PLAN means a "defined benefit plan" (as defined in Section 3(35)
of ERISA) for which the Borrower, any of its Subsidiaries or any ERISA Affiliate
has been an "employer" (as defined in Section 3(5) of ERISA) within the past six
years.
<PAGE> 8
BORROWING means a borrowing of Revolving Loans of the same Type by the
Borrower on a pro rata basis from each of the Lenders on a given date (whether
pursuant to Section 2.2 or resulting from continuations or conversions of
Revolving Loans on a given date pursuant to Sections 4.14(a) and (b),
respectively) having, in the case of LIBOR Loans, the same Interest Period.
BORROWING BASE means, at any time, the sum at such time of:
(a) eighty-five percent (85%) of Eligible Accounts Receivable, plus
(b) sixty-five percent (65%) of Eligible Inventory; provided,
however, that so long as no Default or Event of Default has occurred and
is continuing, during the period from September 15 through and including
December 15 of each year during the term hereof, the amount available
for advance against Eligible Inventory shall be increased by the lesser
of (i) an additional five percent (5%) of Eligible Inventory or (ii)
$10,000,000.
In addition, the Agent, in the exercise of its Permitted Discretion, may
(i) establish and increase or decrease reserves against Eligible Accounts
Receivable and Eligible Inventory, (ii) reduce the advance rates provided for in
this definition, or restore such advance rates to any level equal to or below
the advance rates in effect as of the date of this Credit Agreement, and (iii)
impose additional restrictions (or eliminate the same) to the standards of
eligibility set forth in the definitions of "Eligible Accounts Receivable" and
"Eligible Inventory." Agent shall give Borrower written notice of any such
exercise not later than two (2) Business Days after the date thereof, but the
failure to give any such notice shall not effect such exercise.
BORROWING BASE CERTIFICATE means the certificate of the Borrower
concerning the Borrowing Base to be provided under Section 7.2, substantially in
the form of Exhibit A.
BT ACCOUNT has the meaning set forth in Section 4.11.
BUSINESS DAY means any day that is not a Saturday, a Sunday or a day on
which commercial banks in Chicago, Illinois are required or permitted by law to
be closed and, when used in connection with LIBOR Rate Loans, this definition
will also exclude any day on which commercial banks are not open for dealing in
United States dollar deposits in the London (U.K.) interbank market.
CAPITAL EXPENDITURES means, for any Person for any period, the sum of
(i) all expenditures for property, plant or equipment, and (ii) the portion of
Capital Leases and that portion of Investments made by such Person allocable to
property, plant or equipment, all as capitalized by such Person for financial
statement purposes in accordance with GAAP during
2
<PAGE> 9
such period (whether payable in cash or other property or accrued as a
liability). Capital Expenditures shall exclude proceeds of a casualty loss
applied to the repair or replacement of the property affected by the casualty
loss. "Casualty loss", as used herein, means, for any Person, (i) the loss,
damage, or destruction of any asset or property owned or used by such Person,
(ii) the condemnation, confiscation, or other taking, in whole or in part, of
any such asset or property, or (iii) the diminishment of the use of any such
asset or property so as to render impracticable or unreasonable the use thereof
for its intended purpose.
CASH EQUIVALENTS means either of the following, so long as the same are
maintained in accounts in which the Agent has a perfected security interest: (i)
securities issued, guarantied or insured by the United States, or any of its
agencies and having maturities of not more than one year; and (ii) certificates
of deposit having maturities of not more than one year issued by a United States
national or state chartered commercial bank of recognized standing whose
combined capital and unimpaired surplus is in excess of $200,000,000 and whose
short-term commercial paper rating, or that of its parent holding company, is at
least "A-1" or the equivalent by S&P and at least "Prime-1" or the equivalent by
Moody's.
CHANGE OF CONTROL means the occurrence of any of the following:
(a) the acquisition by a person, entity or affiliated group of
beneficial ownership of forty percent (40%) or more of the
combined voting power of the then outstanding voting
securities of Borrower;
(b) (1) individuals who constitute the Board of Directors of Borrower
on the date hereof (any such Board, an "Incumbent Board") cease
for any reason to constitute at least a majority of such Board,
provided, that any new director who is approved by a vote of at
least two-thirds of the applicable Incumbent Board shall be
considered a member of such Incumbent Board (other than an
individual initially assuming office as a result of either an
actual or threatened election contest or other actual or
threatened solicitation of proxies or consents by or on behalf of
a person, entity or affiliated group other than such Incumbent
Board), and (2) a member of the Hochberg Family ceases to be the
chief executive officer of Borrower;
(c) the approval by the stockholders of Borrower of a merger,
consolidation or reorganization involving Borrower, unless (i)
the stockholders of Borrower immediately before such merger,
consolidation or reorganization own immediately thereafter at
least fifty-one percent (51%) of the combined voting power of the
outstanding voting securities of the surviving corporation in
substantially the same proportion as their ownership of
securities immediately before any such transaction; (ii) (1) the
individuals constituting an Incumbent
3
<PAGE> 10
Board immediately prior to such merger, consolidation or
reorganization constitute at least a majority of the Board of
the applicable surviving corporation and (2) a member of the
Hochberg Family ceases to be the chief executive officer of
Borrower; and (iii) no person, entity or affiliated group which
does not currently have beneficial ownership of forty percent
(40%) or more of the combined voting power of the surviving
corporation's then outstanding voting securities acquires
such a level of ownership;
(d) the sale or other transfer of all or substantially all of the
assets of Borrower to any Person; and
(e) the adoption of a plan relating to the liquidation or
dissolution of the Borrower.
CLOSING DATE means the date of execution and delivery of this Credit
Agreement by all of the parties hereto, or if later, the date on which the
initial Borrowing is advanced or the initial Letter of Credit is issued,
whichever occurs earlier.
CLOSING DOCUMENT LIST has the meaning set forth in Section 5.1.
CODE has the meaning set forth in Section 1.3.
COLLATERAL means the Accounts, Inventory, all of Borrower's interest in
the Inter-Company Loan, and all other real and personal property identified in
the Collateral Documents as security for the Obligations.
COLLATERAL ACCESS AGREEMENT means an agreement in form and substance
reasonably satisfactory to the Agent pursuant to which a mortgagee or lessor of
real property on which Collateral is stored or otherwise located, or a
warehouseman, processor or other bailee of Inventory, acknowledges the Liens of
the Agent and, in the case of any such agreement with a mortgagee or lessor,
permits the Agent access to and use of such real property for a reasonable
amount of time following the occurrence and during the continuance of an Event
of Default to assemble, complete and sell any Collateral stored or otherwise
located thereon.
COLLATERAL DOCUMENTS means, collectively, the Security Agreement and all
other contracts, instruments and other documents pursuant to which Liens are now
or hereafter granted to the Agent to secure any or all of the Obligations.
COLLATERAL MONITORING FEE has the meaning set forth in Section 4.5.
COLLECTIONS means all cash, funds, checks, notes, instruments and any
other form of remittance tendered by account debtors in payment of Accounts.
4
<PAGE> 11
COMMITMENT of a Lender means its commitment to make Revolving Loans and
to participate in Letters of Credit, up to the amount set forth below its name
on Annex I, as such amount may be reduced from time to time in accordance with
the terms of this Credit Agreement.
CONSOLIDATED BOOK NET WORTH means at any time for the determination
thereof, the sum of the Consolidated Entity's capital stock, capital in excess
of par or stated value of shares of its capital stock, retained earnings, and
any other account which, in accordance with GAAP, constitutes stockholder's
equity, less treasury stock.
CONSOLIDATED ENTITY means the Borrower and those of its Subsidiaries
consolidated with it for purposes of financial reporting.
CONSOLIDATED NET INCOME means, for any period, the consolidated net
income of the Consolidated Entity for such period, excluding (i) gains or losses
from asset dispositions, (ii) any extraordinary items, and (iii) other
non-recurring items not related to operations, but including, in all cases, all
costs, charges, fees and expenses incurred in connection with any retail store
closings.
CONTINGENT OBLIGATION means, with respect to any Person, any direct,
indirect, contingent or non-contingent guaranty or obligation of such Person for
the Indebtedness of another Person, except for endorsements in the ordinary
course of business.
CREDIT DOCUMENTS means, collectively, this Credit Agreement, the
Revolving Notes, the Letters of Credit, each of the Collateral Documents and all
other documents, agreements and instruments now or hereafter executed in
connection herewith or therewith, in each case as modified, amended, extended,
restated or supplemented from time to time.
CREDIT PARTIES means, collectively, the Borrower and each other party to
any of the Credit Documents (other than the Lenders, the Agent or the Issuing
Bank).
DEFAULT means an event, condition or default which with the giving of
notice, the passage of time or both would be an Event of Default.
DEFAULTING LENDER has the meaning set forth in Section 2.6.
DISBURSEMENT ACCOUNT means the operating account of the Borrower
maintained with the Disbursement Account Bank.
5
<PAGE> 12
DISBURSEMENT ACCOUNT BANK means Bankers Trust Company or any other
financial institution selected from time to time by the Agent and reasonably
acceptable to the Borrower.
DOMESTIC LENDING OFFICE means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" on Annex I, as such
annex may be amended from time to time, which office shall in any event be
located in the United States.
EBITDA means, with respect to any period, the Consolidated Net Income for
such period before payment or provision of taxes measured by income plus,
without duplication, all interest charges, all Fees payable in connection with
this Credit Agreement, amortization and depreciation expense, in each case
determined on a consolidated basis for the Consolidated Entity.
ELIGIBLE ACCOUNTS RECEIVABLE means Accounts of the Borrower, and, so long
as the Inter-Company Loan remains in effect and is part of the Collateral,
Accounts of SportDepot, deemed by the Agent in the exercise of its Permitted
Discretion to be eligible for inclusion in the calculation of the Borrowing
Base. In determining the amount to be so included, the face amount of such
Accounts shall be reduced by the amount of all returns, discounts, deductions,
claims, credits, charges, or other allowances. Unless otherwise approved in
writing by the Agent, no Account shall be deemed to be an Eligible Account
Receivable if:
(a) it arises out of a sale made by the Borrower or SportDepot to an
Affiliate; or
(b) it is unpaid more than ten (10) days after the date of invoice
or charge slip; or
(c) the account debtor is (or the assets of the account debtor are)
the subject of an Insolvency Event; or
(d) the Account is not payable in United States or Canadian dollars
or the account debtor for the Account is located outside the United States
or Canada, unless the Account is supported by an irrevocable letter of
credit satisfactory to the Agent (as to form, substance and issuer) and
assigned to and directly drawable by the Agent; or
(e) excluding credit card sales, the sale to the account debtor is
on a bill-and-hold, guarantied sale, sale-and-return, sale on approval or
consignment basis or made pursuant to any other written agreement
providing for repurchase or return; or
(f) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower duly
assigns its rights to
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payment of such Account to the Agent pursuant to the Assignment of
Claims Act of 1940, as amended (31 U.S.C. Section Section 3727 et
seq.); or
(g) the Account does not comply with all Requirements of Law,
including, without limitation, the Federal Consumer Protection Act,
the Federal Truth-in-Lending Act and Regulation Z; or
(h) the Account is not subject to a valid and perfected first
priority Lien in favor of the Agent or, with respect to any Account of
SportDepot, is not subject to a valid and perfected first priority Lien
in favor of Borrower, which has been duly assigned to Agent, or does
not otherwise conform to the representations and warranties
contained in the Credit Documents.
ELIGIBLE INVENTORY means the aggregate amount of Inventory of Borrower,
and, so long as the Inter-Company Loan remains in effect and is part of the
Collateral, Inventory of SportDepot, deemed by the Agent in the exercise of its
Permitted Discretion to be eligible for inclusion in the calculation of the
Borrowing Base. In determining the amount to be so included, Inventory shall
be valued at the lower of cost or market on a basis consistent with the
Borrower's current and historical accounting practice. Unless otherwise
approved in writing by the Agent, no Inventory shall be deemed Eligible
Inventory if:
(a) it is not owned solely by the Borrower or SportDepot or the
Borrower or SportDepot does not have good, valid and marketable title
thereto; or
(b) exclusive of Inventory-in-Transit, it is not located in the
United States or Canada (other than the Province of Quebec); or
(c) exclusive of Inventory-in-Transit and Inventory located at a
retail store location of Borrower, it is not located on property owned
by the Borrower or by a third party that has executed and delivered a
Collateral Access Agreement and, in the case of Inventory located on
property owned by such a third party, it is segregated or otherwise
separately identifiable from goods of others, if any, stored on such
property; or
(d) exclusive of Inventory-in-Transit, it is not subject to a valid
and perfected first priority Lien in favor of the Agent, except with
respect to Inventory stored at sites described in clause (c) above, for
Liens for unpaid rent or normal and customary warehousing charges; or
(e) it consists of goods returned or rejected by the Borrower's or
SportDepot customers (except for first-quality goods returned to stock
to be sold in the
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ordinary course of business) or goods in transit to third parties
(other than to warehouse sites covered by a Collateral Access
Agreement); or
(f) it is not first-quality finished goods, is obsolete, or
does not otherwise conform to the representations and warranties
contained in the Credit Documents.
ERISA means the Employee Retirement Income Security Act of 1974, 29
U.S.C. Section Section 1000 et seq., amendments thereto, successor statutes,
and regulations or guidance promulgated thereunder.
ERISA AFFILIATE means any entity required to be aggregated with the
Borrower or any of its Subsidiaries under Sections 414 (b), (c), (m) or (o) of
the Internal Revenue Code.
EVENT OF DEFAULT has the meaning set forth in Article 9.
EXPENSES means all reasonable costs and expenses of the Agent incurred
in connection with the Credit Documents and the transactions contemplated
therein, including, without limitation, (i) the costs of conducting record
searches, examining collateral, opening bank accounts and lockboxes, depositing
checks, and receiving and transferring funds (including charges for checks for
which there are insufficient funds), (ii) the reasonable fees and expenses of
legal counsel and paralegals (including the allocated cost of internal counsel
and paralegals), accountants, appraisers and other consultants, experts or
advisors retained by the Agent, (iii) expenses incurred in connection with the
assignments of or sales of participations in the Revolving Loans, (iv) the cost
of title insurance premiums, real estate survey costs, and fees and taxes in
connection with the filing of financing statements, (v) the costs of preparing
and recording Collateral Documents, releases of Collateral, and waivers,
amendments, and terminations of any of the Credit Documents, and (vi) all costs
and expenses required to be paid by the Borrower pursuant to the letter dated
August 22, 1996 between Borrower and Agent (the "Fee Letter"). Expenses also
means all reasonable costs and expenses (including the reasonable fees and
expenses of legal counsel and other professionals) paid or incurred by the
Agent and any Lender (i) during the continuance of an Event of Default, (ii) in
enforcing or defending its rights under or in respect of this Credit Agreement,
the other Credit Documents or any other document or instrument now or hereafter
executed and delivered in connection herewith, (iii) collecting the Revolving
Loans, (iv) foreclosing or otherwise collecting upon the Collateral or any part
thereof and (v) in obtaining any legal, accounting or other advice in
connection with any of the foregoing.
EXPIRATION DATE means September 5, 2001.
FEDERAL FUNDS RATE means, for any period, a fluctuating interest rate
per annum for each day during such period equal to the weighted average of the
rates on overnight federal
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funds transactions with members of the Federal Reserve System arranged by
Federal Funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three Federal Funds brokers of recognized standing
selected by the Agent.
FEDERAL RESERVE BOARD means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeeding to its functions.
FEES means, collectively, the Unused Line Fee, the Letter of Credit
Fees, the L/C Facing Fee, the Issuing Bank Fees, the Collateral Monitoring Fee,
and the other fees provided for in the Fee Letter.
FINANCIAL STATEMENTS means the consolidated and consolidating balance
sheets, statements of operations, statements of cash flows and statements of
changes in shareholder's equity of the Consolidated Entity for the period
specified, prepared in accordance with GAAP and consistently with prior
practices.
GAAP means generally accepted accounting principles in the United
States as in effect from time to time.
GOVERNING DOCUMENTS means certificates or articles of incorporation,
by-laws and other similar organizational or governing documents.
GOVERNMENTAL AUTHORITY means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
HIGHEST LAWFUL RATE means, at any given time during which any
Obligations shall be outstanding hereunder, the maximum nonusurious interest
rate that at any time or from time to time may be contracted for, taken,
reserved, charged or received on such Obligations, under the laws of the State
of Illinois (or the law of any other jurisdiction whose laws may be mandatorily
applicable notwithstanding other provisions of this Credit Agreement and the
other Credit Documents), or under applicable federal laws which may presently
or hereafter be in effect and which allow a higher maximum nonusurious interest
rate than under Illinois (or such other jurisdiction's) law, in any case after
taking into account, to the extent permitted by applicable law, any and all
relevant payments or charges under this Credit Agreement and any other Credit
Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions.
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HOCHBERG FAMILY means any of Andrew Hochberg, Larry Hochberg or John
Lowenstein.
INDEBTEDNESS of a Person means, without duplication, (a) indebtedness
for borrowed money or for the deferred purchase price of property or services
(other than trade liabilities and accrued expenses incurred in the ordinary
course of business and payable in accordance with customary practices), whether
on open account or evidenced by a note, bond, debenture or similar instrument,
(b) obligations under capital leases, (c) reimbursement obligations for letters
of credit, banker's acceptances or other credit accommodations, (d) liabilities
under any Interest Rate Agreement, (e) Contingent Obligations and (f)
Indebtedness secured by any Lien on any property of that Person, even if that
Person has not assumed such Indebtedness.
INSOLVENCY EVENT means, with respect to any Person, the occurrence of
any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or generally fail to pay, or admit in writing its inability to pay,
its debts as they become due, (b) the voluntary commencement of any proceeding
or the filing of any petition under any bankruptcy, insolvency or similar law,
(c) the seeking of dissolution or reorganization or the appointment of a
receiver, trustee, custodian or liquidator for it or a substantial portion of
its property, assets or business or to effect a plan or other arrangement with
its creditors, (d) the filing of any answer admitting the jurisdiction of the
court and the material allegations of an involuntary petition filed against it
in any bankruptcy, insolvency or similar proceeding, (e) such Person shall make
a general assignment for the benefit of its creditors, or shall consent to, or
acquiesce in the appointment of, a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business. Insolvency
Event shall also mean, with respect to any Person, the occurrence of any of the
following: an involuntary proceeding or involuntary petition shall be
commenced or filed against such Person under any bankruptcy, insolvency or
similar law seeking the dissolution or reorganization of it or the appointment
of a receiver, trustee, custodian or liquidator for it or of a substantial part
of its property, assets or business, or any writ, judgment, warrant of
attachment, execution or similar process shall be issued or levied against a
substantial part of its property, assets or business, and such proceedings or
petitions shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released, vacated or
fully bonded, within sixty (60) days after commencement, filing, or levy, as
the case may be, or any order for relief shall be entered in any such
proceeding.
INTER-COMPANY LOAN means the revolving credit facility in the amount of
$50,000,000 made by Borrower to SportDepot, which shall be (i) evidenced by
loan documents acceptable to Agent in the exercise of its Permitted Discretion,
(ii) secured by a first priority, perfected security interest (other than
Permitted Liens) in all personal property of SportDepot whether now owned or
hereafter created or acquired, and (iii) assigned to Agent as Collateral for
the Obligations.
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INTEREST PERIOD means, for any LIBOR Rate Loan, the period commencing
on the date of such Borrowing and ending on the last day of the period selected
by the Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months, in each case as the
Borrower may, in an appropriate Notice of Borrowing, Notice of Continuation or
Notice of Conversion, select; provided, that the Borrower may not select any
Interest Period that ends after the Expiration Date. Whenever the last day of
any Interest Period would otherwise occur on a day other than a Business Day,
the last day of such Interest Period shall be extended to occur on the next
succeeding Business Day; provided, that if such extension would cause the last
day of such Interest Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next preceding Business
Day.
INTEREST RATE AGREEMENT means any interest rate or currency protection
or hedge agreement, including, without limitation, interest rate future,
option, swap, and cap agreements.
INTERNAL REVENUE CODE means the Internal Revenue Code of 1986,
amendments thereto, successor statutes, and regulations or guidance promulgated
thereunder.
INVENTORY has the meaning set forth in the Security Agreement.
INVENTORY-IN-TRANSIT means Inventory owned by Borrower and purchased
against Letters of Credit issued in favor of the seller thereof, and in transit
to Borrower by common carrier or by ocean freight.
INVESTMENT means all expenditures made and all liabilities incurred
(contingently or otherwise) for or in connection with the acquisition of stock
or Indebtedness of, or for loans, advances, capital contributions or transfers
of property to, or acquisition of substantially all the assets of, a Person. In
determining the aggregate amount of Investments outstanding at any particular
time, (i) the amount of any Investment represented by a guaranty shall be taken
at not less than the principal amount of the obligations guaranteed and
outstanding; (ii) there shall be deducted in respect of each such Investment
any amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (iii)
there shall not be deducted in respect of any Investment any amounts received
as earnings on such Investment, whether as dividends, interest or otherwise;
and (iv) there shall not be deducted from the aggregate amount of Investments
any decrease in the market value thereof.
ISSUING BANK means Bankers Trust Company or any Lender or other
financial institution that is acceptable to the Agent and the Borrower which
may at any time issue or be
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requested to issue a Letter of Credit (including the guaranty of a foreign
exchange contract) for the account of the Borrower.
ISSUING BANK FEES has the meaning set forth in Section 4.3(b).
L/C FACING FEE has the meaning set forth in Section 4.3(a).
LENDER ADVANCES has the meaning set forth in Section 2.2.
LETTER OF CREDIT FEE has the meaning set forth in Section 4.3(a).
LETTER OF CREDIT OBLIGATIONS means, without duplication, the sum of the
aggregate undrawn face amount of all Letters of Credit (including guarantees
with respect to foreign exchange contracts) outstanding, plus the aggregate
amount of all drawings under Letters of Credit (or payments under guarantees
with respect to foreign exchange contracts) for which the Borrower has not
reimbursed the Issuing Bank, plus the aggregate amount of all payments made by
Lenders to the Issuing Bank for their participations in Letters of Credit
(including guarantees with respect to foreign exchange contracts), for which
the Borrower has not reimbursed the Lenders.
LETTER OF CREDIT REQUEST has the meaning set forth in Section 3.3.
LETTERS OF CREDIT means all letters of credit or guarantees with
respect to foreign exchange contracts issued for the account of the Borrower
under Article 3 and all amendments, renewals, extensions or replacements
thereof.
LIBOR LENDING OFFICE means, with respect to any Lender, the office of
such Lender specified as its "LIBOR Lending Office" opposite its name on Annex
I, as such annex may be amended from time to time (or, if no such office is
specified, its Domestic Lending Office).
LIBOR MARGIN means two and one-half percent (2.5%); provided, however,
that if the Consolidated Entity's EBITDA for any fiscal year shall fall within
the ranges set forth below with respect to the applicable Determination Date
(as herein defined), based on the annual audited financial statement of the
Consolidated Entity for the applicable fiscal year, and so long as no Default
or Event of Default then exists, the LIBOR Margin shall be the rate set forth
opposite such range in Exhibit D for the period commencing on the first day of
the month immediately following the Determination Date and continuing until the
first day of the month immediately following the next Determination Date. As
used herein, "Determination Date" shall mean ten (10) Business Days following
the day on which Agent receives the annual audited financial statements of the
Consolidated Entity required to be delivered during the term hereof pursuant to
Subsection 7.1(b).
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LIBOR RATE means, with respect to any Interest Period for each LIBOR
Rate Loan comprising part of the same Borrowing, an interest rate per annum
equal to the rate (rounded upward to the nearest whole multiple of
one-sixteenth (1/16) of one percent (1.00%) per annum, if such rate is not such
a whole multiple of one-sixteenth (1/16) of one percent (1.00%)) of the offered
quotation, if any, to first class banks in the London (U.K.) interbank market
by Bankers Trust Company (or such other money center bank reasonably acceptable
to the Agent) for United States dollar deposits of amounts in immediately
available funds comparable to the principal amount of the LIBOR Rate Loan of
BTCC for which the LIBOR Rate is being determined with maturities comparable to
the Interest Period for which such LIBOR Rate will apply as of approximately
10:00 a.m. Chicago time two (2) Business Days prior to the commencement of such
Interest Period.
LIBOR RATE LOAN means a Revolving Loan that bears interest as provided
in Section 4.l(b) hereof.
LIEN means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title, or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
LINE OF CREDIT means the aggregate revolving line of credit extended
pursuant to this Credit Agreement by the Lenders to the Borrower for Revolving
Loans and Letters of Credit, in an amount up to $135,000,000, as such amount
may be reduced from time to time pursuant to the respective terms and
provisions hereof.
LOAN ACCOUNT has the meaning set forth in Section 4.9.
MAJORITY LENDERS means those Lenders holding in the aggregate more than
fifty percent (50%) of the total Commitments, or if the Commitments are
terminated, those Lenders owed more than fifty percent (50%) of the Revolving
Loans and Letter of Credit Obligations then outstanding.
MATERIAL ADVERSE EFFECT means a material adverse effect on (i) the
business, operations, results of operations, assets, liabilities or financial
condition of the Consolidated Entity, (ii) the ability of the Borrower to
perform its obligations under any of the Credit Documents, or on the ability of
the Agent or the Lenders to enforce the Obligations or realize upon the
Collateral, or (iii) the value of the Collateral, or the amount which the Agent
or the Lenders would be likely to receive (after giving consideration to delays
in payment and costs of enforcement) in the liquidation of such Collateral.
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MATERIAL CONTRACT means any contract or other arrangement other than a
Plan to which the Borrower or any of its Subsidiaries is a party (other than
the Credit Documents) for which breach, nonperformance, cancellation or failure
to renew could reasonably be expected to have a Material Adverse Effect.
MOODY'S means Moody's Investors Services, Inc., or any successor
thereto.
MULTIEMPLOYER PLAN means a "multiemployer plan" (as defined in Section
4001(a) (3) of ERISA) to which the Borrower, any of its Subsidiaries or any
ERISA Affiliate has contributed within the past six years or with respect to
which the Borrower or any of its Subsidiaries could reasonably be expected to
incur any liability.
NOTICE OF BORROWING means an irrevocable and binding notice delivered
by the Borrower to the Agent either by telephone or by facsimile transmission
(and if by telephone, confirmed in writing), of the Borrower's request for a
Borrowing, which notice shall be substantially in the form of Exhibit B.
NOTICE OF CONTINUATION has the meaning set forth in Section 4.14(a).
NOTICE OF CONVERSION has the meaning set forth in Section 4.14(b).
OBLIGATIONS means the unpaid principal and interest hereunder
(including interest accruing on or after the occurrence of an Insolvency
Event), reimbursement obligations under Letters of Credit, Fees, Expenses and
all other obligations and liabilities of the Borrower to the Agent, the Issuing
Bank or to the Lenders under this Credit Agreement, the Revolving Notes, or any
other Credit Document.
PERMITTED DISCRETION means the Agent's judgment exercised in good faith
and not in an irrational manner based upon its consideration of any factor
which the Agent believes in good faith could affect the value of any
Collateral, including any Inventory or Accounts or the amount which the Agent
and the Lenders would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of such
Collateral. In exercising such judgment, the Agent may consider such factors
which are already included in or tested by the definition of Eligible Accounts
Receivable or Eligible Inventory, as well as any of the following: (i) the
financial and business climate of the Borrower's industry, (ii) changes in
collection history and dilution with respect to the Accounts, (iii) changes in
levels of backlog of firm purchase orders and demand for, and pricing of,
Inventory, (iv) changes in any concentration of risk with respect to Accounts
and Inventory, and (v) any other objective factors that change the credit risk
of lending to the Borrower on the security of the Accounts and Inventory,
consistent with Agent's customary business practices as applied to similarly
situated borrowers.
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PERMITTED LIENS means the Liens referred to in clauses (a) through (j)
of Section 8.6.
PERSON means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and its successors, heirs and assigns.
PLAN means any Benefit Plan, Multiemployer Plan, or Retiree Health
Plan, or any employee benefit plan, within the meaning of Section 3(3) of Title
I of ERISA, whether oral or written, maintained or contributed to by the
Borrower or any of its Subsidiaries, or with respect to which any of them could
reasonably be expected to incur liability.
PRIME LENDING RATE means the rate which Bankers Trust Company announces
as its prime lending rate, from time to time. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers Trust Company and each of the
Lenders may make commercial loans or other loans at rates of interest at, above
or below the Prime Lending Rate.
PRIME RATE LOAN means a Revolving Loan that bears interest as provided
in Section 4.1(a) hereof.
PROPORTIONATE SHARE of a Lender means a fraction, expressed as a
percentage, obtained by dividing its Commitment by the Line of Credit or, if
the Commitments are terminated, by dividing its then outstanding Revolving
Loans and Letter of Credit participations by the then outstanding aggregate
Revolving Loans and Letter of Credit Obligations.
PURCHASE MONEY LIENS has the meaning set forth in Section 8.5.
REGISTER has the meaning set forth in Section 11.8.
REGULATION D means Regulation D of the Federal Reserve Board, as in
effect from time to time.
REGULATION G means Regulation G of the Federal Reserve Board, as in
effect from time to time.
REGULATION U means Regulation U of the Federal Reserve Board, as in
effect from time to time.
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REGULATION X means Regulation X of the Federal Reserve Board, as in
effect from time to time.
REGULATION Z means Regulation Z of the Federal Reserve Board, as in
effect from time to time.
REPORTABLE EVENT means any of the events described in Section 4043 of
ERISA and the regulations thereunder.
REQUIREMENT OF LAW means, with respect to any Person, (a) the Governing
Documents of such Person, (b) any law, treaty, rule or regulation or
determination of an arbitrator, court or other Governmental Authority binding
on such Person, or (c) any franchise, license, lease, permit, certificate,
authorization, qualification, easement, right of way, right or approval binding
on a Person or any of its property.
RETIREE HEALTH PLAN means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA that provides benefits to persons after
termination of employment, other than as required by Section 601 of ERISA, Part
6 of Subtitle B of Title I of ERISA or applicable state continuation coverage
laws.
REVOLVING LOANS has the meaning set forth in Section 2.1.
REVOLVING NOTE means a promissory note of the Borrower payable to the
order of any Lender, substantially in the form of Exhibit C.
S&P means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
SECURITY AGREEMENT means the Security Agreement of even date herewith
executed in favor of the Agent by the Borrower.
SETTLEMENT DATE has the meaning set forth in Section 2.4(a).
SUBORDINATED INDEBTEDNESS means unsecured Indebtedness of a Person
subordinated to the full repayment of the Obligations on terms and conditions,
and pursuant to a written subordination agreement, acceptable to Agent in its
sole discretion.
SUBSIDIARY of a Person means a corporation or other entity in which
that Person directly or indirectly owns or controls the shares of stock or
other ownership interests having
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ordinary voting power to elect a majority of the board of directors or a
majority of the board of managers (or in lieu thereof the sole manager) of such
corporation or other entity.
SPORTDEPOT means SportDepot Stores Inc. an Ontario corporation, a
wholly owned Subsidiary of Borrower.
TERMINATION EVENT means (i) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan that could reasonably be expected to give
rise to a Material Adverse Effect; (ii) the withdrawal of the Borrower, any of
its Subsidiaries or any ERISA Affiliate from a Benefit Plan during a plan year
in which it was a "substantial employer" (as defined in Section 4001(a) (2) of
ERISA) if such withdrawal could reasonably be expected to give rise to a
Material Adverse Effect; (iii) the providing of notice of intent to terminate a
Benefit Plan in a distress termination (as described in Section 4041 (c) of
ERISA); (iv) the institution by the Pension Benefit Guaranty Corporation of
proceedings to terminate a Benefit Plan or Multiemployer Plan; (v) any event or
condition (a) which could reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Benefit Plan or Multiemployer Plan, or (b) that would result
in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA if
such termination could reasonably be expected to give rise to a Material
Adverse Effect; or (vi) the partial or complete withdrawal, within the meaning
of Sections 4203 and 4205 of ERISA, of the Borrower, any of its Subsidiaries or
any ERISA Affiliate from a Multiemployer Plan if such withdrawal could
reasonably be expected to give rise to a Material Adverse Effect.
TYPE means a LIBOR Rate Loan or a Prime Rate Loan.
UNUSED LINE FEE has the meaning set forth in Section 4.2.
1.2 Unless otherwise defined or specified herein, all accounting terms
used in this Credit Agreement shall be construed in accordance with GAAP,
applied on a basis consistent in all material respects with the Financial
Statements referred to in Section 6.9. All accounting determinations for
purposes of determining compliance with the financial covenants contained in
Article 8 shall be made in accordance with GAAP as in effect on the Closing
Date and applied on a basis consistent in all material respects with the
audited Financial Statements delivered to the Agent on or before the Closing
Date. The Financial Statements required to be delivered hereunder from and
after the Closing Date, and all financial records, shall be maintained in
accordance with GAAP. If GAAP shall change from the basis used in preparing
the audited Financial Statements delivered to the Agent on or before the
Closing Date, the certificates required to be delivered pursuant to Section 7.1
demonstrating compliance with the covenants contained herein shall include, at
the election of the Borrower or upon the request of the Majority Lenders,
calculations setting forth
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the adjustments necessary to demonstrate how the Borrower is in compliance with
the financial covenants based upon GAAP as in effect on the Closing Date.
1.3 Terms used herein and not otherwise defined in Article 1 that are
defined in the Uniform Commercial Code in effect in the State of Illinois (the
"Code") shall have the meanings given in the Code. Each of the words "hereof,"
"herein," and "hereunder" refer to this Credit Agreement as a whole. An Event
of Default shall "continue" or be "continuing" until such Event of Default has
been waived in accordance with Section 11.11 hereof. References to Articles,
Sections, Annexes, Schedules, and Exhibits are internal references to this
Credit Agreement, and to its attachments, unless otherwise specified. The
headings and the Table of Contents are for convenience only and shall not
affect the meaning or construction of any provision of this Credit Agreement.
ARTICLE 2
REVOLVING LOANS
2.1 REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions
set forth in this Credit Agreement, and in reliance on the representations and
warranties of the Borrower set forth herein, on and after the Closing Date and
to and excluding the Expiration Date, each Lender severally agrees to make
loans and advances to the Borrower (each a "Revolving Loan") in an amount not
to exceed at any time its Proportionate Share of the lesser at such time of the
Line of Credit or the Borrowing Base MINUS, in each case, the then outstanding
Letter of Credit Obligations.
2.2 BORROWING OF REVOLVING LOANS. Revolving Loans may be made
available to the Borrower directly by the Lenders ("Lender Advances") or, in
the circumstances described in Section 2.2(b), from the Agent acting on behalf
of the Lenders ("Agent Advances").
(a) LENDER ADVANCES. Subject to the determination by the Agent
and the Lenders that the conditions for borrowing contained in Section
5.2 are satisfied, upon receipt of a Notice of Borrowing from the
Borrower received by the Agent before noon Chicago time on a Business
Day, Lender Advances of Revolving Loans shall be made to the extent of
each Lender's Proportionate Share of the requested Borrowing (unless
advanced pursuant to subsection (b) hereof). Each Notice of Borrowing
shall specify whether the requested Borrowing is of Prime
Rate Loans or LIBOR Rate Loans.
(b) AGENT ADVANCES. The Agent is authorized by the Lenders, but
is not obligated, to make Agent Advances upon a receipt of any Notice of
Borrowing received by the Agent before 2:00 P.M. Chicago time on a
Business Day. Agent Advances
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shall be subject to periodic settlement with the Lenders under Section
2.4. Agent Advances may be made only in the following circumstances:
(i) NORMAL COURSE AGENT ADVANCES. For administrative
convenience, the Agent may, but is not obligated, to make Agent
Advances up to the amount available for borrowing under Section
2.1 in reliance upon the actual or deemed representations of the
Borrower under Section 5.2 that the conditions for borrowing are
satisfied.
(ii) OTHER AGENT ADVANCES. When the conditions for borrowing
under Section 5.2 cannot be fulfilled, and notwithstanding the
Borrowing Base limitation of Section 2.1, the Agent may, but is
not obligated, to continue to make Agent Advances for seven (7)
Business Days or until sooner instructed by the Majority Lenders
to cease, in an aggregate amount at any time not to exceed
$3,000,000.
(c) DISBURSEMENT OF REVOLVING LOANS. The proceeds of Revolving
Loans shall be transmitted: (x) in the circumstances described
in Section 3.5, by the Agent directly to the Issuing Bank, and (y) in
all other circumstances, by the Agent or Lenders, as the case may be.
(d) NOTICES OF BORROWING. Notices of Borrowing may be given under
this Section by telephone or facsimile transmission, and, if by
telephone, promptly confirmed in writing. The Borrower shall specify
in each Notice of Borrowing whether the conditions for the requested
Borrowing are satisfied. The Borrower may request one or more
Borrowings of Revolving Loans constituting Prime Rate Loans on the same
Business Day. Each Notice of Borrowing for LIBOR Rate Loans shall be
given not later than noon Chicago time on the third Business Day prior
to the proposed Borrowing. Each Notice of Borrowing shall, unless
otherwise specifically provided herein, consist entirely of Revolving
Loans of the same Type and, if such Borrowing is to consist of LIBOR
Rate Loans, shall be in an aggregate amount of not less than
$3,000,000.00 or an integral multiple of $1,000,000.00 in excess
thereof. The right of the Borrower to choose LIBOR Rate Loans is
subject to the provisions of Section 4.14. Once given, a Notice of
Borrowing is irrevocable by and binding on the Borrower. The Borrower
shall provide to the Agent a list, with specimen signatures, of
officers or other employees authorized to request Revolving Loans. The
Agent is entitled to rely upon such list until it is replaced by the
Borrower.
2.3 NOTICE OF REQUEST FOR LENDER ADVANCES. Subject to the last
sentence of this Section, the Agent shall give each Lender prompt notice by
telephone or facsimile transmission of a Notice of Borrowing that is received
pursuant to Section 2.2(a) and is to be
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satisfied by Lender Advances. No later than 3:00 P.M. Chicago time on the date
of receipt of such notice, each Lender shall make available for the account of
its Applicable Lending Office to the Agent at the Agent's address for deposit
into the Loan Disbursement Account, its Proportionate Share of such Borrowing
in immediately available funds. Unless the Agent receives contrary written
notice prior to any such Borrowing, it is entitled to assume that each Lender
will make available its Proportionate Share of the Borrowing and in reliance
upon that assumption, but without any obligation to do so, may advance such
Proportionate Share on behalf of the Lender, without the necessity of giving
daily notice to each Lender of the receipt of a Notice of Borrowing.
2.4 PERIODIC SETTLEMENT OF AGENT ADVANCES: INTEREST AND FEES:
STATEMENTS.
(a) THE SETTLEMENT DATE; ALLOCATION OF INTEREST AND FEES. The
amount of each Lender's Proportionate Share of Revolving Loans
shall be computed weekly (or more frequently in the Agent's discretion)
and shall be adjusted upward or downward based on all Loans
(including Agent Advances) and repayments received by the Agent as of
5:00 P.M. Chicago time on the last Business Day of the period specified
by the Agent (such date, the "Settlement Date").
(b) SUMMARY STATEMENTS; SETTLEMENTS. The Agent shall deliver to
the Borrower and each of the Lenders promptly after the Settlement Date
a summary statement of the account of outstanding Loans (including
Agent Advances) for the period, the amount of repayments received for
the period, and the amount allocated to each Lender of the interest and
Unused Line Fee for the period. After application of payments under
Section 4.12, as reflected on the summary statement: (i) the Agent
shall transfer to each Lender its allocated share of interest and
Unused Line Fee, and its Proportionate Share of repayments; and (ii)
each Lender shall transfer to the Agent, or the Agent shall transfer to
each Lender, such amounts as are necessary to insure that, after giving
effect to all such transfers, the amount of Loans made by each Lender
shall be equal to such Lender's Proportionate Share of the aggregate
amount of Loans outstanding as of such Settlement Date. If the summary
statement requires transfers to be made to the Agent by the Lenders and
is received by the Lenders prior to 12:00 noon Chicago time on a
Business Day, such transfers shall be made in immediately available
funds no later than 3:00 P.M. Chicago time that day; and, if received
after 12:00 noon Chicago time, then no later than 3:00 P.M. Chicago
time on the next Business Day. The obligation of each Lender to
transfer such funds is irrevocable, unconditional and without recourse
to or warranty by the Agent.
(c) DISTRIBUTION OF INTEREST AND UNUSED LINE FEES. Interest on
the Revolving Loans (including Agent Advances) and the Unused Line Fee
shall be allocated by the Agent to each Lender (i) in the case of
interest, in accordance with the
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Revolving Loans actually advanced by and repaid to such Lender and (ii)
in the case of the Unused Line Fee, in accordance with the
Proportionate Share of such Lender. Interest shall accrue from and
including the date Revolving Loans are advanced and to but excluding
the date such Revolving Loans are either repaid by the Borrower or, if
later, actually settled under this Section. Promptly after the end of
each month, the Agent shall distribute to each Lender its portion,
allocated as provided above, of the interest and Unused Line Fee
which has accrued during such month.
2.5 SHARING OF PAYMENTS. If any Lender shall obtain any payment (whether made
voluntarily or involuntarily, or through the exercise of any right of set-off,
or otherwise) on account of the Revolving Loans made by it or its participation
in the Letter of Credit Obligations in excess of its Proportionate Share of
payments on account of the Revolving Loans or Letter of Credit Obligations
obtained by all the Lenders, such Lender shall forthwith purchase from the
other Lenders such participations in the Revolving Loans made by them or in
their participation in Letters of Credit as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each Lender shall be
rescinded and each such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery, together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect to the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.5, to the fullest extent permitted by law, may
exercise all of its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
2.6 DEFAULTING LENDERS.
(a) A Lender who fails to pay the Agent its Proportionate Share
of any Revolving Loans (including Agent Advances) made available by
the Agent on such Lender's behalf, or who fails to pay any other
amounts owing by it to the Agent, is a "Defaulting Lender." The Agent
is entitled to recover from such Defaulting Lender all such amounts
owing by such Defaulting Lender on demand. If the Defaulting Lender
does not pay such amounts on the Agent's demand, the Agent shall
promptly notify the Borrower and the Borrower shall pay such amounts
within five (5) Business Days of its receipt of such notice. In
addition, the Defaulting Lender or the Borrower shall pay to the Agent
for its own account interest on such amount for each day from the date
it was made available by the Agent to the Borrower to the date it is
recovered by the Agent at a rate per annum equal to (x) the overnight
Federal Funds Rate, if paid by the Defaulting Lender, or (y) if not so
paid by the Defaulting Lender, the then applicable
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rate of interest calculated and payable under Section 4.1, to be paid
by the Borrower; plus, in each case, the Expenses and losses, if any,
incurred as a result of the Defaulting Lender's failure to perform its
obligations. Nothing herein shall be deemed to relieve any Lender of
its obligation to fulfill its commitments hereunder or to prejudice any
rights which the Borrower may have against any Lender as a result of
any default by such Lender hereunder, including, without limitation,
the right of the Borrower to seek reimbursement from any Defaulting
Lender for any amounts paid by the Borrower under clause (y) above on
account of such Defaulting Lender's default.
(b) The failure of any Lender to fund its Proportionate Share of a
Revolving Loan shall not relieve any other Lender of its obligation to
fund its Proportionate Share of a Revolving Loan. Conversely, no
Lender shall be responsible for the failure of another Lender to fund
its Proportionate Share of a Revolving Loan.
(c) The Agent shall not be obligated to transfer to a Defaulting
Lender any payments made by the Borrower to the Agent for the
Defaulting Lender's benefit; nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder. Amounts payable to
a Defaulting Lender shall instead be paid to or retained by the Agent.
The Agent may hold and, in its discretion, re-lend to the Borrower the
amount of all such payments received by it for the account of such
Lender. For purposes of voting or consenting to matters with respect
to the Credit Documents and determining Proportionate Shares, such
Defaulting Lender shall be deemed not to be a "Lender" and such
Lender's Commitment shall be deemed to be zero (-0-). This Section
shall remain effective with respect to such Lender until (x) the
Obligations under this Credit Agreement shall have been declared or
shall have become immediately due and payable or (y) the Majority
Lenders, the Agent and the Borrower shall have waived such Lender's
default in writing. The operation of this Section shall not be
construed to increase or otherwise affect the Commitment of any Lender,
or relieve or excuse the performance by the Borrower of its duties and
obligations hereunder.
ARTICLE 3
LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERES OF CREDIT. Subject to the terms and
conditions hereof and in reliance on the representations and warranties of the
Borrower set forth herein, the Agent shall cause the Issuing Bank to issue
Letters of Credit hereunder at the request of the Borrower and for its account,
as more specifically described below. The Agent shall not be obligated to
cause the Issuing Bank to issue any Letter of Credit if:
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(a) issuance of the requested Letter of Credit (i) would cause
the Letter of Credit Obligations then outstanding to exceed $25,000,000
or (ii) would cause the sum of the Revolving Loans PLUS the Letter of
Credit Obligations then outstanding to exceed the lesser of (x) the
Line of Credit then in effect and (y) the Borrowing Base then in
effect; or
(b) issuance of the Letter of Credit is enjoined, restrained or
prohibited by any Governmental Authority, Requirement of Law or any
request or directive of any Governmental Authority (whether or not
having the force of law) or would impose upon the Agent or the Issuing
Bank any material restriction, reserve, capital requirement, loss, cost
or expense (for which the Agent or the Issuing Bank is not otherwise
compensated) not in effect or known as of the Closing Date.
3.2 TERMS OF LETTERS OF CREDIT. The proposed amount, terms and
conditions, and form of each Letter of Credit (and of any drafts or acceptances
thereunder) shall be subject to approval by the Issuing Bank. The term of each
standby Letter of Credit shall not exceed 365 days, but may be subject to
annual renewal. The term of each documentary Letter of Credit shall not exceed
one hundred eighty (180) days. No Letter of Credit shall have an expiry date
later than five (5) Business Days prior to the Expiration Date.
3.3 NOTICE OF ISSUANCE. A request for issuance of a Letter of Credit
(a "Letter of Credit Request") may be given in writing or electronically and,
if requested by the Agent, promptly confirmed in writing. A Letter of Credit
Request must be received by the Agent no later than 1:00 P.M. Chicago time at
least five (5) Business Days (or such shorter period as may be agreed to by the
Issuing Bank) in advance of the proposed date of issuance.
3.4 LENDER'S PARTIPATION. Immediately upon issuance or amendment of
any Letter of Credit, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Bank, without recourse
or warranty, an undivided interest and participation in all rights and
obligations under such Letter of Credit (other than fees and other amounts
owing to the Issuing Bank) in accordance with such Lender's Proportionate
Share.
3.5 PAYMENTS OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. The Agent
shall notify the Borrower of the receipt by the Agent of notice from the
Issuing Bank of a draft or other presentation for payment or drawing under a
Letter of Credit not later than 11:00 A.M. Chicago time on the Business Day
immediately prior to the date on which the Issuing Bank intends to honor such
drawing. Unless the procedures set forth in Section 9.2(c) shall be
applicable, the Borrower shall be deemed to have concurrently given a Notice of
Borrowing to the Agent to make a Revolving Loan in the amount of and at the
time of such drawing, the
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proceeds of which shall be applied directly by the Agent to reimburse the
Issuing Bank for the amount of such drawing.
3.6 PAYMENT BY LENDENRS. If a Revolving Loan is not made in an amount
sufficient to reimburse the Issuing Bank in full for the amount of any draw
under a Letter of Credit, the Agent shall promptly notify each Lender of the
unreimbursed amount of such drawing and of such Lender's respective
participation therein. Each Lender shall make available to the Agent, for the
account of the Issuing Bank, the amount of its participation in immediately
available funds not later than 1:00 P.M. Chicago time on the next Business Day
after such Lender receives notice from the Agent of the amount of such Lender's
participation in such unreimbursed amount. If any Lender fails to make
available to the Agent the amount of such Lender's participation, the Issuing
Bank shall be entitled to recover such amount on demand from such Lender
together with interest at the Federal Funds Rate for the first three Business
Days and thereafter at the Prime Lending Rate. For each Letter of Credit, the
Agent shall promptly distribute to each Lender which has funded the amount of
its participation its Proportionate Share of all payments subsequently received
by the Agent from the Borrower in reimbursement of honored drawings.
3.7 OBLIGATIONS ABSOLUTE. The obligations of the Borrower to
reimburse the Lenders under Section 3.6 shall be unconditional and irrevocable
and shall be paid strictly in accordance with the terms of this Credit
Agreement under all circumstances including, without limitation, upon the
occurrence and during the continuance of an Event of Default.
3.8 AGENT'S EXECUTION OF APPLICATIONS AND OTHER ISSUING BANK
DOCUMENTATION: RELIANCE ON CREDIT AGREEMENT BY ISSUING BANK. The Agent shall
be authorized to execute, deliver and perform on behalf of the Lenders such
letter of credit applications, shipping indemnities, letter of credit
modifications and consents and other undertakings for the benefit of the
Issuing Bank as may be reasonably necessary or appropriate in connection with
the issuance or modification of Letters of Credit requested by the Borrower
hereunder. The Lenders, the Agent and the Borrower all expressly agree that
the terms of this Article 3 and various other provisions of this Credit
Agreement identifying the Issuing Bank are also intended to benefit the Issuing
Bank and the Issuing Bank shall be entitled to enforce the provisions hereof
which are for its benefit.
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ARTICLE 4
COMPENSATION, REPAYMENT
AND REDUCTION OF COMMITMENTS
4.1 INTEREST ON REVOLVING LOANS.
(a) Interest on the unpaid principal amount of Revolving Loans
which are Prime Rate Loans shall be payable monthly in arrears, on the
first Business Day of each month, at an interest rate per annum equal
to the Prime Lending Rate PLUS one percent (1%) calculated on the
unpaid principal amount of Revolving Loans owing to the Agent and the
Lenders at the close of business each day during such month. The rate
hereunder shall change each day the Prime Lending Rate changes.
(b) Interest on Revolving Loans which are LIBOR Rate Loans shall
be payable on the earlier to occur of (i) the last day of each Interest
Period with respect to such LIBOR Rate Loans, (ii) ninety (90) days
following the commencement of such LIBOR Rate Loans, (iii) the date of
conversion of such LIBOR Rate Loans (or a portion thereof) to a Prime
Rate Loan, and (iv) at maturity of such LIBOR Rate Loans at an interest
rate per annum equal during the Interest Period for such LIBOR Rate
Loans to the LIBOR Rate for the Interest Period in effect for such
LIBOR Rate Loans PLUS the then applicable LIBOR Rate Margin. After
maturity of such LIBOR Rate Loans (whether by acceleration or
otherwise), interest shall be payable upon demand. The Agent upon
determining the LIBOR Rate for any Interest Period shall promptly
notify the Borrower and the Lenders by telephone (confirmed promptly in
writing) or in writing thereof. Each determination by the Agent of an
interest rate hereunder shall be conclusive and binding for all
purposes, absent demonstrable error.
(c) Notwithstanding the provisions of Sections 4.1(a) and (b), the
Borrower shall pay to each Lender, so long as and to the extent such
Lender shall be required under regulations of the Board of Governors of
the Federal Reserve System to maintain reserves with respect to
liabilities or assets consisting of or including "Eurocurrency
Liabilities" (hereinafter defined), additional interest on the unpaid
principal amount of each Revolving Loan comprised of LIBOR Rate Loans
of such Lender, from the date of such LIBOR Rate Loan until such
principal amount is paid in full, at an interest rate per annum equal
at all times to the remainder obtained by subtracting (a) the LIBOR
Rate for the applicable Interest Period for such LIBOR Rate Loan from
(b) the rate obtained by dividing such LIBOR Rate by a percentage equal
to 1 MINUS the stated maximum rate (stated as a decimal) applicable two
(2) Business Days before the first day of such Interest Period of all
reserves, if any, required to be maintained against "Eurocurrency
Liabilities" as specified in Regulation D (or against any other
category
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of liabilities which includes deposits by reference to which the
interest rate on LIBOR Rate Loans is determined or any category of
extensions of credit or other assets which includes loans by a
non-United States office of any Lender to United States residents)
having a term equal to the Interest Period applicable to such LIBOR
Rate Loan. Such Lender shall as soon as practicable provide notice to
the Agent and the Borrower of any such additional interest arising in
connection with such LIBOR Rate Loan, which notice shall be conclusive
and binding, absent demonstrable error.
4.2 UNUSUED LINE FEE. The Borrower shall pay to the Agent, for the
ratable benefit of the Lenders, a non-refundable fee (the "Unused Line Fee")
equal to three-eights of one percent (3/8%) per annum of the unused portion of
the Line of Credit. The Unused Line Fee shall accrue daily from the Closing
Date until the Expiration Date, and shall be due and payable monthly in
arrears, on the first Business Day of each month and on the Expiration Date.
4.3 LETTER OF CREDIT FEES.
(a) The Agent, for the ratable benefit of the Lenders, shall be
entitled to charge to the account of the Borrower on the first Business
Day of each month, a fee (the "Letter of Credit Fee"), in an amount
equal to one half percent (1 1/2) per annum of the daily weighted
average undrawn amount of Letters of Credit outstanding during the
immediately preceding month. In addition, the Agent, for its own
account, shall be entitled to charge to the account of the Borrower on
the date of issuance of any standby Letter of Credit (but excluding any
guaranty of a foreign exchange contract), a facing fee equal to
one-half of one percent (1/2%) on the initial face amount of each such
Letter of Credit (the "L/C Facing Fee").
(b) The Agent shall also be entitled to charge to the account of
the Borrower, as and when incurred by the Agent or any Lender, the
customary charges, fees, costs and expenses charged to the Agent or any
Lender for the Borrower's account by any Issuing Bank (the "Issuing
Bank Fees") in connection with the issuance, transfer, drawing,
amendment or negotiation of any Letters of Credit by the Issuing Bank.
Each determination by the Agent of Letter of Credit Fees, L/C Facing
Fees, Issuing Bank Fees and other fees, costs and expenses charged
under this Section shall be conclusive and binding for all purposes,
absent manifest error.
4.4 INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF DEFAULT. From
the date of occurrence of an Event of Default until the earlier of the date
upon which (i) all Obligations shall have been paid and satisfied in full or
(ii) such Event of Default shall have been waived, interest on the Revolving
Loans and Letter of Credit Fees on Letter of Credit Obligations shall each be
payable on demand as a rate per annum equal to, with respect to the Revolving
Loans,
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the rate in effect under Section 4.1, plus two percent (2%), and with respect
to the Letter of Credit Obligations, the rate at which Letter of Credit Fees
are charged pursuant to the first sentence of Section 4.3(a), plus one percent
(1%).
4.5 COLLATERAL MONITORING FEE. The Borrower shall pay to the Agent,
for its own account, a non-refundable annual collateral monitoring fee (the
"Collateral Monitoring Fee") in the amount of $75,000. The Collateral
Monitoring Fee shall be fully earned and payable on the Closing Date and on
each anniversary thereof.
4.6 EXPENSES. The Borrower shall reimburse the Expenses of the Agent,
or any Lender, as the case may be, promptly upon demand.
4.7 MANDATORY PAYMENT: REDUCTIONS OF COMMITMENTS.
(a) Except during the period described in Section 2.2(b)(ii), the
aggregate outstanding principal amount of Revolving Loans plus Letter
of Credit Obligations at any time in excess of the lesser at such
time of (i) the Borrowing Base and (ii) the Line of Credit, shall be
immediately due and payable without the necessity of any demand.
(b) On the Expiration Date, the Commitment of each Lender shall
automatically reduce to zero (-0-) and may not be reinstated.
(c) The Borrower may reduce the Line of Credit at any time and
from time to time in part up to a maximum reduction amount of
$35,000,000 upon thirty (30) days prior written notice to Agent;
provided, that each such reduction must be in an amount equal to
$5,000,000 or multiples thereof. Once reduced, no portion of the Line
of Credit may be reinstated. If the Borrower seeks to reduce the Line
of Credit to an amount less than $100,000,000, then the Line of Credit
shall be reduced to zero (-0-). All such reductions hereunder shall
be without premium or penalty.
4.8 INTENTIONALLY DELETED.
4.9 MAINTENANCE OF LOAN ACCOUNT: STATEMENTS OF ACCOUNT. The Agent
shall maintain an account on its books in the name of the Borrower (the "Loan
Account") in which the Borrower will be charged with all loans and advances
made by the Lenders to the Borrower or for the account of the Borrower,
including the Revolving Loans, and all Letter of Credit Obligations, the Fees,
the Expenses and any other Obligations, as and when such payments become due.
The Loan Account will be credited with all payments received by the Agent from
the Borrower or for the account of the Borrower, including all amounts received
in the BT Account. After the end of each month, the Agent shall send the
Borrower a monthly statement accounting for the charges, loans, advances and
other transactions occurring among
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and between the Agent, the Lenders and the Borrower during that month,
provided, that the failure of the Agent to send such statement to the Borrower
shall not relieve the Borrower of any Obligations. Absent manifest error, each
monthly statement shall be an account stated and shall be final, conclusive and
binding on the Borrower.
4.10 PAYMENT PROCEDURES. Payments of principal, interest, Fees and
Expenses shall be made not later than 2:00 P.M. Chicago time on the day when
due, in immediately available dollars, to the offices of the Agent, at the
address set forth in Section 11.7, or as the Agent may otherwise direct the
Borrower. The Borrower hereby authorizes the Agent to charge the Loan Account
with the amount of all payments to be made hereunder and under the other Credit
Documents, including all Fees and Expenses, as and when such payments become
due. The obligation of the Borrower to the Lenders with respect to such
payments shall be discharged by making such payments to the Agent pursuant to
this Section or by the charging of the Loan Account by the Agent.
4.11 COLLECTION OF ACCOUNTS. Until instructed otherwise by the Agent,
the Borrower shall be entitled to receive Collections directly from account
debtors in accordance with its historical practices. All Collections and other
amounts received by the Borrower from any account debtor, in addition to all
other cash received from any other Collateral, shall upon receipt be wired (or
otherwise transferred in a manner acceptable to Agent) each Business Day into
an account (the "BT Account") maintained by the Agent at Bankers Trust Company.
Amounts received in the BT Account from the Borrower shall be credited on the
day of receipt of good funds to the Loan Account and distributed and applied as
set forth in Section 4.12.
4.12 DISTRIBUTION AND APPLICATION OF COLLECTIONS AND OTHER AMOUNTS.
All Collections received by the Agent, and all other amounts received by the
Borrower from any account debtor and delivered to the Agent, shall be credited
to the Loan Account, unless an Event of Default has occurred and is continuing,
in which case such Collections and other amounts shall be distributed and
applied in the following order: first, to the payment of any Fees, Expenses or
other Obligations due and payable to the Agent under any of the Credit
Documents, including Agent Advances and any other amounts advanced by the Agent
on behalf of the Lenders; second, to the payment of any Fees, Expenses or other
Obligations due and payable to the Issuing Bank under any of the Credit
Documents; third, to the ratable payment of any Fees, Expenses or other
Obligations due and payable to the Lenders under any of the Credit Documents
other than those Obligations specifically referred to in this Section; fourth,
to the ratable payment of interest due on the Revolving Loans; and, fifth, to
the ratable payment of principal due on the Revolving Loans.
4.13 CALCULATIONS. All calculations of (i) interest hereunder and
(ii) Fees, including, without limitation, Unused Line Fees and Letter of Credit
Fees, shall be made by the Agent, on the basis of a year of 360 days, or, if
such computation would cause the interest and fees
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chargeable hereunder to exceed the Highest Lawful Rate, 365/366 days, in each
case for the actual number of days elapsed (including the first day but
excluding the last day) occurring in the period for which such interest or Fees
are payable. Each determination by the Agent of an interest rate, Fee or other
payment hereunder shall be conclusive and binding for all purposes, absent
manifest error.
4.14 SPECIAL PROVISIONS RELATING TO LIBOR RATE LOANS.
(a) CONTINUATION. With respect to any Borrowing consisting of
LIBOR Rate Loans, the Borrower may, subject to the provisions of Section
4.14(c), elect to maintain such Borrowing or any portion thereof as
consisting of LIBOR Rate Loans by selecting a new Interest Period for
such Borrowing, which new Interest Period shall commence on the last day
of the immediately preceding Interest Period. Each selection of a new
Interest Period shall be made by notice given not later than noon
Chicago time on the third Business Day prior to the date of any such
continuation relating to LIBOR Rate Loans, by the Borrower to the
Agent. Such notice by the Borrower of a continuation (a "Notice of
Continuation") shall be by telephone or facsimile transmission, and if
by telephone, promptly confirmed in writing, substantially in the form
of Exhibit E, in each case specifying (i) the date of such
continuation, (ii) the Type of Revolving Loans subject to such
continuation, (iii) the aggregate amount of Revolving Loans subject to
such continuation and (iv) the duration of the selected Interest
Period. The Borrower may elect to maintain more than one Borrowing
consisting of LIBOR Rate Loans by combining such Borrowings into one
Borrowing and selecting a new Interest Period pursuant to this
Section 4.14(a). If the Borrower shall fail to select a new Interest
Period for any Borrowing consisting of LIBOR Rate Loans in accordance
with this Section 4.14(a), such Revolving Loans will automatically, on
the last day of the then existing Interest Period therefor, convert
into Prime Rate Loans. The Agent shall give each Lender prompt notice
by telephone or facsimile transmission of each Notice of Continuation.
(b) CONVERSION. The Borrower may on any Business Day (so long as
no Default or Event of Default has occurred and is continuing), upon
notice (each such notice, a "Notice of Conversion") given to the Agent,
and subject to the provisions of Section 4.14(c), convert the
entire amount of or a portion of all Revolving Loans of one Type
comprising the same Borrowing into Revolving Loans of another Type;
provided, that any conversion of any LIBOR Rate Loans into Revolving
Loans of another Type shall be made on, and only on, the last day of an
Interest Period for such LIBOR Rate Loans and, upon conversion of any
Prime Rate Loans into Revolving Loans of another Type, the Borrower
shall, at the request of Agent, pay accrued interest to the date of
conversion on the principal amount converted. Each such Notice of
Conversion shall be given not later than Noon Chicago time on the
Business Day
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prior to the date of any proposed conversion into Prime Rate Loans and
on the third Business Day prior to the date of any proposed conversion
into LIBOR Rate Loans. Subject to the restrictions specified above,
each Notice of Conversion shall be by telephone or facsimile
transmission, and if by telephone, promptly confirmed in writing,
substantially in the form of Exhibit F, in each case specifying (i) the
requested date of such conversion, (ii) the Type of Revolving Loans to
be converted (iii) the portion of such Type of Revolving Loan to be
converted, (iv) the Type of Revolving Loans such Revolving Loans are to
be converted into and (v) if such conversion is into LIBOR Rate Loans,
the duration of the Interest Period of such Loan. Each conversion
shall be in an aggregate amount for the Revolving Loans of not less
than $3,000,000 or an integral multiple of $1,000,000 in excess
thereof. The Borrower may elect to convert the entire amount of or a
portion of all Revolving Loans of one Type comprising more than one
Borrowing into Revolving Loans of another Type by combining such
Borrowings into one Borrowing.
(c) CERTAIN LIMITATIONS ON LIBOR RATE LOANS. The right of the
Borrower to maintain, select, continue or convert LIBOR Rate Loans
shall be limited as follows:
(i) If the Agent reasonably determines that adequate and fair
means do not exist for ascertaining the LIBOR Rate or LIBOR Rate
Loans comprising any requested Borrowing, continuation or
conversion, the right of the Borrower to select or maintain LIBOR
Rate Loans for such Borrowing or any subsequent Borrowing shall be
suspended until the Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer
exists, and each Revolving Loan shall be made as a Prime Rate
Loan.
(ii) If the Majority Lenders shall, at least one Business Day
before the date of any requested Borrowing, continuation or
conversion, notify the Agent that the LIBOR Rate for Revolving
Loans comprising such Borrowing will not adequately reflect the
cost to such Lenders of making or funding their respective
Revolving Loans for such Borrowing, the right of the Borrower to
select LIBOR Rate Loans for such Borrowing shall be suspended
until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist, and each
Revolving Loan comprising such Borrowing and each other Borrowing
requested during such period of suspension shall be made as a
Prime Rate Loan.
(iii) If at any time any Lender determines (which determination
shall, absent manifest error, be conclusive and binding on all
parties) that the making, continuation or conversion of any
Revolving Loan as a LIBOR Rate Loan by
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such Lender has become unlawful or impermissible by reason of
compliance by that Lender with any law, governmental rule,
regulation or order of any Governmental Authority (whether or not
having the force of law), then, and in any such event, such Lender
may give notice of that determination in writing, to the Agent and
the Borrower and the Agent shall promptly transmit the notice to
each other Lender. Until such Lender gives notice otherwise, the
right of the Borrower to select LIBOR Rate Loans from that Lender
shall be suspended and each Revolving Loan made by that Lender,
notwithstanding the Type of Revolving Loan made by the other
Lenders, shall be a Prime Rate Loan and each LIBOR Rate
outstanding from that Lender shall automatically, on the last day
of the existing Interest Period therefor (or earlier, if so
required under such law, rule, regulation or order), convert to a
Prime Rate Loan.
(iv) No Agent Advance shall be made as a LIBOR Rate Loan.
(v) No Revolving Loans may be made, continued by a Notice of
Continuation or converted by a Notice of Conversion as or to LIBOR
Rate Loans at any time that a Default or Event of Default shall
have occurred and be continuing.
(vi) The Borrower may not select a LIBOR Rate Loan prior to
the earlier to occur of (x) the completion of the syndication by
the Agent in the exercise of its sole discretion and (y) ninety
(90) days after the Closing Date.
(d) COMPENSATION.
(i) Each Notice of Continuation and Notice of Conversion
shall be irrevocable by and binding on the Borrower. In the case
of any Borrowing, continuation or conversion that the related
Notice of Borrowing, Notice of Continuation or Notice of
Conversion specifies is to be comprised of LIBOR Rate Loans, the
Borrower shall indemnify each Lender against any loss, cost or
expense incurred by such Person as a result of any failure to
fulfill, on or before the date for such Borrowing, continuation or
conversion specified in such Notice of Borrowing, Notice of
Continuation or Notice of Conversion, the applicable conditions
set forth in Article 5, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred
by reason of the liquidation or re-employment of deposits or other
funds acquired by such Lender to fund the Revolving Loan to be
made by such Lender as part of such Borrowing, continuation
or conversion.
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(ii) If any payment of principal of, or conversion or
continuation of, any LIBOR Rate Loan is made other than on the last day
of the Interest Period for such Loan as a result of a payment,
prepayment, conversion or continuation of such Loan or acceleration of
the maturity of the Revolving Notes or for any other reason, the
Borrower shall, upon demand by any Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such Lender
any amounts required to compensate such Lender for any additional
losses, costs or expenses which it may reasonably incur as a result of
such payment, including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds acquired by any
Lender to fund or maintain such Revolving Loan.
(iii) Calculation of all amounts payable to a Lender under this
Section 4.14(d) shall be made as though such Lender elected to fund all
LIBOR Rate Loans by purchasing United States dollar deposits in its
LIBOR Lending Office's interbank eurodollar market.
4.15 INDEMNIFICATION IN CETAIN EVENTS.
(a) INCREASED COSTS. If after the Closing Date, either (i) any
change in or in the interpretation of any law or regulation is
introduced, including, without limitation, with respect to reserve
requirements applicable to the Agent, to any of the Lenders, Bankers
Trust Company or any other banking or financial institution from whom
any of the Lenders borrows funds or obtains credit (a "Funding
Bank"), or (ii) the Agent, a Funding Bank or any of the Lenders
complies with any future guideline or request from any central bank or
other Governmental Authority proposed or promulgated after the date of
the Agreement or (iii) the Agent, a Funding Bank or any of the Lenders
reasonably determines that the adoption of any applicable law, rule or
regulation regarding capital adequacy or any change therein, or any
change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof announced after the date
of this Credit Agreement has or would have the effect described below,
or the Agent, a Funding Bank or any of the Lenders complies with any
request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable
agency announced after the date of this Credit Agreement and in the
case of any event set forth in this clause (iii), such adoption, change
or compliance has or would have the direct or indirect effect of
reducing the rate of return on any of such Person's capital as a
consequence of its obligations hereunder to a level below that which
such Person could have achieved but for such adoption, change or
compliance (taking into consideration such Person's policies with
respect to capital adequacy) by an amount reasonably deemed by such
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Person to be material, and any of the foregoing events described in
clauses (i), (ii) or (iii) increases the cost to the Agent, or any of
the Lenders of (A) funding or maintaining its Commitments or (B)
issuing, causing the issuance of making or maintaining any Letter of
Credit or of purchasing or maintaining any participation therein, or
reduces the amount receivable in respect thereof by the Agent or
any Lender, then the Borrower shall upon demand by the Agent at any
time within one hundred eighty (180) days after the date on which an
officer of the Agent, such Funding Bank or such Lender, as the case may
be, responsible for overseeing this Credit Agreement knows or has
reason to know of its right to additional compensation under this
Section 4.15(a), pay to the Agent, for the account of such Lender or,
as applicable, the Agent or a Funding Bank, additional amounts
sufficient to reimburse the Agent, such Funding Bank and such Lender
against such increase in cost or reduction in amount receivable;
provided, however, that if the Agent or any such Lender or Funding
Bank, as the case may be, fails to deliver such demand within such 180
day period, such entity shall only be entitled to additional
compensation for any such costs incurred from and after the date that
is one hundred eighty (180) days prior to the date the Borrower
receives such demand; and provided further, however, that before making
any such demand, the Agent and each Lender agree to use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) designate a different Applicable Lending Office if the
making of such a designation would avoid the need for, or reduce the
amount of, such increased cost and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender.
A certificate as to the amount of such increased cost, and setting
forth in reasonable detail the calculation thereof, shall be submitted
to the Borrower by the Agent, or the applicable Lender or Funding Bank,
and shall be conclusive absent demonstrable error.
(b) NOTICE. Each Lender will promptly notify the Borrower and the
Agent, and the Agent will promptly notify the Borrower, of any event of
which it has knowledge that would entitle such entity to additional
compensation under this Section 4.15. Neither the Agent nor any Lender
shall request any additional compensation under this Section 4.15
unless it is generally making similar requests of other borrowers
similarly situated, and the Agent and each Lender agrees to use a
reasonable basis for calculating amounts allocable to its commitment to
lend or its Revolving Loans and Letter of Credit obligations hereunder.
(c) TAX REIMBURSEMENT. If and to the extent that Agent
determines that as a result of the application of Section 212(1)(b) of
the Income Tax Act of Canada, or any successor statute, as in effect
from time to time and the Canada-United States Income Tax Convention
(the "Canadian Withholding Tax"), the net after-tax return realized by
the Lenders with respect to the transactions contemplated hereby is
reduced below the rate of return which would have been realized
by the Lenders but for the
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application of the Canadian Withholding Tax, Borrower shall promptly
pay to the Agent, for the benefit of the Lenders, upon its written
demand, such additional amount as is designated in writing by Agent as
being necessary to compensate the Lenders for such reduction in the
Lenders' rate of return.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO INITIAL REVOLVING LOAN AND LETTER OF
CREDIT. The obligation of each Lender to fund its Proportionate Share of the
initial Borrowing, or the obligation of the Agent to cause the issuance by the
Issuing Bank of the initial Letter of Credit, is subject to the satisfaction or
waiver of the following conditions precedent:
(a) CLOSING DOCUMENT LIST. The Agent and the Lenders shall have
received each of the agreements, opinions, reports, approvals,
consents, certificates and other documents set forth on the closing
document list attached hereto as Schedule A (the "Closing Document
List");
(b) MATERIAL ADVERSE CHANGE. (i) No event shall have occurred
since July 28, 1996, which has had or could reasonably be expected to
have a Material Adverse Effect; or (ii) there shall not have occurred
a substantial impairment of the financial markets generally that is
reasonably likely to materially and adversely affect the transactions
contemplated hereby, in each case as determined by the Agent and
each Lender in their reasonable discretion;
(c) FEES AND EXPENSES. All Fees and Expenses payable by the
Borrower hereunder on or before the Closing Date shall have been paid
in full; and
(d) BORROWING BASE; UNUSED AVAILABILITY. After giving pro forma
effect to the funding of the initial Revolving Loans, the issuance of
the initial Letters of Credit and the payment of all costs, fees
and expenses incurred by or for the account of the Borrower in
connection with the execution and delivery of this Credit Agreement and
the other Credit Documents, there shall be unused availability
under the Borrowing Base of at least $15,000,000.
5.2 CONDITIONS PRECEDENT TO ALL REVOLVING LOANS AND LETTERS OF CREDIT.
The obligation of each Lender to fund its Proportionate Share of any requested
Revolving Loan or of the Issuing Bank to issue any requested Letter of Credit
is subject to the satisfaction of the conditions precedent set forth below.
Each Notice of Borrowing, each Letter of Credit
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Request, and each issuance by the Borrower of a check drawn against, or request
for transfer from, the Disbursement Account shall constitute a representation
and warranty by the Borrower that such conditions are satisfied.
(a) All representations and warranties contained in this Credit
Agreement and the other Credit Documents are true and correct in all
material respects on and as of the date of such Notice of Borrowing,
Letter of Credit Request or issuance of a check drawn against or
request for transfer from the Disbursement Account, as if then made,
other than representations and warranties that relate solely to a date
other than the date of such Notice of Borrowing, Letter of Credit
Request or issuance of a check drawn against or request for transfer
from the Disbursement Account; and
(b) No Default or Event of Default shall have occurred or could
reasonably be expected to result from the making of the requested
Revolving Loan or the issuance of the requested Letter of Credit, which
has not been waived.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Credit Agreement
and to induce the Lenders to make the Revolving Loans and other financial
accommodations described herein, the Borrower hereby represents and warrants to
the Agent and the Lenders that the representations and warranties contained in
this Article 6 are true and correct as of the date hereof. Such
representations and warranties, and all other representations and warranties
made by the Borrower in any other Credit Documents, shall survive the execution
and delivery of this Credit Agreement and such other Credit Documents.
6.1 ORGANIZATION AND QUALIFICATION. The Borrower and each of its
Subsidiaries (i) are corporations duly organized, validly existing and in good
standing under the laws of the respective states or provinces of their
incorporation, (ii) have the power and authority to own their respective
properties and assets and to transact their respective businesses in which they
presently are, or propose to be, engaged and (iii) are duly qualified and are
authorized to do business and are in good standing in each of the respective
jurisdictions where they presently are, or propose to be, engaged in business.
Schedule B, Part 6.1 lists all jurisdictions in which the Borrower and each of
its Subsidiaries are qualified to do business as foreign corporations.
6.2 AUTHORITY. The Borrower and each of its Subsidiaries have the
requisite corporate power and authority to execute, deliver and perform the
respective Credit
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Documents to which they are parties. All corporate action necessary for the
execution, delivery and performance of any of the Credit Documents by the
Borrower and each of its Subsidiaries has been taken.
6.3 ENFORCEABILITY. This Credit Agreement and each of the other
Credit Documents are the legal, valid and binding obligations of the Borrower
and each of its Subsidiaries which are parties thereto, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency or similar laws affecting creditors'
rights generally, and (ii) general principles of equity.
6.4 NO CONFLICT. The execution, delivery and performance of each
Credit Document by the Borrower and each of its Subsidiaries which are parties
thereto are not in contravention of (i) the Governing Documents of such
Persons, or (ii) any Requirement of Law, or (iii) any indenture, contract,
agreement or instrument or other commitment to which any or all of such Persons
are parties or by which any of such Persons or any of its properties are bound,
and will not, except as contemplated herein, result in the imposition of any
Liens upon any of the properties of any of such Persons.
6.5 CONSENTS AND FILINGS. No consent, authorization, permit or filing
is required in connection with the execution, delivery and performance of this
Credit Agreement or any Credit Document by the Borrower and each of its
Subsidiaries which are parties thereto, or in connection with the continuing
operations of such Persons, except (i) those that have been obtained or made
(or where the failure to obtain or make could not reasonably be expected to
have a Material Adverse Effect) and (ii) filings necessary to create, perfect
or retain the perfection of Liens against the Collateral.
6.6 GOVERNMENT REGUALATION. Neither Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment
Company Act of 1940, or any other similar Requirement of Law that limits the
respective abilities of such Persons to incur indebtedness or consummate the
transactions contemplated in this Credit Agreement and the other Credit
Documents.
6.7 SOLVENCY. The fair saleable value of the assets of the Borrower
exceeds all its probable liabilities, including those to be incurred pursuant
to this Credit Agreement and the other Credit Documents. The Borrower (i) does
not have unreasonably small capital in relation to the business in which it is
or proposes to be engaged and (ii) has not incurred and does not believe that
it will incur, after giving effect to the transactions contemplated by this
Credit Agreement, debts beyond its ability to pay as such debts become due.
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6.8 RIGHTS IN COLLATERAL: PRIORITY OF LIENS. All property
constituting Collateral is owned or leased by the Borrower or SportDepot, free
and clear of any and all Liens in favor of third parties, other than Permitted
Liens. Upon the proper filing of the UCC financing statements (and termination
statements, if any) and Personal Property Security Act Registrations listed in
the Closing Document List, the security interests granted pursuant to the
Credit Documents constitute valid and enforceable first, prior (subject to
Permitted Liens) and perfected Liens on the Collateral, to the extent such
Liens can be perfected by the filing of such financing statements.
6.9 FINANCIAL DATA. The Borrower has provided to the Agent and each
of the Lenders complete and accurate copies of annual audited Financial
Statements for the Consolidated Entity for the fiscal years ended January 28,
1996 and unaudited Financial Statements for the six-month fiscal period ended
July 28, 1996. Such Financial Statements have been prepared in accordance with
GAAP consistently applied throughout the periods involved and fairly present
the respective consolidated financial positions, results of operations and cash
flows of the Consolidated Entity for each of the periods covered. The
Consolidated Entity has no material Contingent Obligation, or material
liability for taxes or long-term leases, which is not reflected in such
Financial Statements or the footnotes thereto, or is not otherwise disclosed on
Schedule B, Part 6.9.
6.10 LOCATIONS OF OFFICES, RECORDS AND INVENTORY. The address of the
principal place of business and chief executive office of the Borrower is set
forth on Schedule B, Part 6.10, as the same may be amended after the Closing
Date in accordance with Section 11.11. The books and records of the Borrower,
and all its chattel paper, if any, and records of Accounts, are maintained
exclusively at one or more of such locations. There is no jurisdiction in
which the Borrower has any Collateral (except for vehicles and Inventory in
transit) other than those jurisdictions identified on Schedule B, Part 6.10, as
the same may be amended after the Closing Date in accordance with Section
11.11. A complete list of the legal name and address of each warehouse at
which Inventory of the Borrower is stored is set forth on Schedule B, Part
6.10, as the same may be amended after the Closing Date in accordance with
Section 11.11. None of the receipts received and to be received by the
Borrower from any warehouseman state that the Inventory covered thereby is to
be delivered to bearer or to the order of a named Person or to a named Person
and such named Person's assigns, in each case other than the Borrower.
6.11 SUBSIDIARIES; OWNERSHIP OF STOCK. Except as otherwise disclosed
in writing to Agent prior to the date hereof, as of the Closing Date, (i) the
only direct or indirect Subsidiaries of the Borrower are those listed on
Schedule B, Part 6.11, (ii) the Borrower is the record and beneficial owner of
the respective shares of capital stock of each of its Subsidiaries listed on
Schedule B, Part 6.11, (iii) there are no proxies, irrevocable or otherwise,
with respect to such shares, and no equity securities of any of such
Subsidiaries are or may become
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required to be issued by reason of any options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any
capital stock of any such Subsidiary except as listed on Schedule B, Part 6.11,
and (iv) there are no contracts, commitments, understandings or arrangements by
which any such Subsidiary is or may become bound to issue additional shares of
its capital stock or securities convertible into or exchangeable for such
shares. All of such shares so owned by the Borrower are owned by the Borrower
free and clear of any Liens.
6.12 NO JUDGMENTS OF LITIGATION. Except as set forth on Schedule B,
Part 6.12, no judgments, orders, writs or decrees are outstanding against the
Borrower or any of its Subsidiaries, nor is there now pending or, to the best
of the Borrower's knowledge after diligent inquiry, threatened, any litigation,
contested claim, investigation, arbitration, or governmental proceeding by or
against the Borrower or any of its Subsidiaries, which could reasonably be
expected, either individually or in combination, to have a Material Adverse
Effect.
6.13 NO DEFAULTS. Neither the Borrower nor any of its Subsidiaries is
in default under any material term of any material indenture, contract, lease,
agreement, instrument or commitment to which any of them is a party or by which
any of them is bound. The Borrower knows of no material dispute regarding any
such indenture, contract, lease, agreement, instrument or other commitment.
6.14 LABOR MATTERS. Schedule B, Part 6.14 accurately sets forth all
labor contracts to which the Borrower or any of its Subsidiaries is a party as
of the Closing Date (including their dates of expiration). There are no
existing or, to the knowledge of the Borrower, threatened strikes, lockouts or
other disputes relating to any collective bargaining or similar agreement to
which the Borrower or any of its Subsidiaries is a party.
6.15 COMPLIANCE WITH LAW. Neither the Borrower nor any of its
Subsidiaries has violated or failed to comply with any Requirements of Law,
which violation or failure could reasonably be expected to give rise to a
Material Adverse Effect.
6.16 ERISA. None of the Borrower, any of its Subsidiaries or any
ERISA Affiliate maintains or contributes to any Plan other than those listed on
Schedule B, Part 6.16. Except as would not give rise to a Material Adverse
Effect, each Plan has been and is maintained and funded in accordance with its
terms and in compliance with all applicable provisions of ERISA and the
Internal Revenue Code and none of the Borrower, any of its Subsidiaries, any
ERISA Affiliate, or any fiduciary of any Plan has any direct or indirect
material liability with respect to any Plan under any Requirement of Law or
agreement. The Borrower, each Subsidiary of the Borrower and each ERISA
Affiliate has made all required contributions to each Plan (including
obligations related to the minimum funding standards of ERISA and the Internal
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Revenue Code). No Termination Event has occurred nor has any other event
occurred that could reasonably be expected to result in a Termination Event.
None of the Borrower, any of its Subsidiaries or any ERISA Affiliate is
required to provide security to any Benefit Plan under Section 401(a)(29) of
the Internal Revenue Code.
6.27 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed on
Schedule B, Part 6.17, (i) the operations of the Borrower and each of its
Subsidiaries comply with all applicable federal, state and local environmental,
health and safety statutes, regulations, directions, ordinances, criteria and
guidelines; (ii) the Borrower has not received notice that any of the
operations of the Borrower or any of its Subsidiaries is the subject of any
judicial or administrative proceeding alleging the violation of any federal,
state or local environmental, health or safety statute, regulation, direction,
ordinance, criteria or guideline; (iii) none of the operations of the Borrower
or any of its Subsidiaries is the subject of any federal or state investigation
evaluating whether the Borrower or any of its Subsidiaries disposed of any
hazardous or toxic waste, substance or constituent or other substance at any
site that may require remedial action, or any federal or state investigation
evaluating whether any remedial action is needed to respond to a release of any
hazardous or toxic waste, substance or constituent or other substance into the
environment; (iv) neither the Borrower nor any of its Subsidiaries has filed
any notice under any federal or state law indicating past or present treatment,
storage or disposal of a hazardous waste, substance or constituent or reporting
a spill or release of a hazardous or toxic waste, substance or constituent or
other substance into the environment; and (v) neither the Borrower nor any of
its Subsidiaries has any contingent liability of which the Borrower has
knowledge, or reasonably should have knowledge, in connection with any release
or potential release of any hazardous or toxic waste, substance or constituent
or other substance into the environment, nor has the Borrower or any of its
Subsidiaries received any notice, letter or other indication of potential
liability arising from the disposal of any hazardous or toxic waste, substance
or constituent or other substance into the environment.
6.18 INTELLECTUAL PROPERTY. The Borrower and each of its Subsidiaries
possesses such assets, licenses, patents, patent applications, copyrights,
service marks, trademarks and trade names as are necessary to continue to
conduct their respective present and proposed business activities.
6.19 LICENSES AND PERMITS. The Borrower and each of its Subsidiaries
has obtained and holds in full force and effect all franchises, licenses,
leases, permits, certificates, authorizations, qualifications, easements,
rights of way and other rights and approvals which are necessary for the
operation of its business as presently conducted and as proposed to be
conducted.
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6.20 TAXES AND TAX RETURNS
(a) Except as set forth on Schedule B, Part 6.20, the Borrower
and each Subsidiary of the Borrower has timely filed, without request
for extension, all income tax returns it is required to file. The
information filed is complete and accurate in all material respects.
All deductions taken in such income tax returns are appropriate and in
accordance with applicable laws and regulations, except deductions that
may have been disallowed but are being challenged in good faith and for
which adequate reserves have been made in accordance with GAAP.
(b) All taxes, assessments, fees and other governmental charges
for periods beginning prior to the date hereof, have been timely paid
and neither the Borrower nor any of its Subsidiaries has any
material liability for taxes in excess of the amounts so paid or
reserves so established.
(c) Except as set forth in Schedule B, Part 6.20, no material
deficiencies for taxes have been claimed, proposed or assessed by any
taxing or other Governmental Authority against the Borrower or any of
its Subsidiaries and no tax liens have been filed. Except as set forth
in Schedule B, Part 6.20, there are no pending or threatened audits,
investigations or claims for or relating to any liability for taxes and
there are no matters under discussion with any Governmental Authority
which could reasonably be expected to result in a material additional
liability for taxes. Except as set forth in Schedule B, Part 6.20,
either the federal income tax returns of the Borrower have been audited
by the Internal Revenue Service and such audits have been closed, or
the period during which any assessments may be made by the Internal
Revenue Service has expired without waiver or extension for all years
up to and including the fiscal year of the Consolidated Entity ended
January 31, 1991. Except as set forth in Schedule B, Part 6.20, no
extension of a statute of limitations relating to taxes, assessments,
fees or other governmental charges is in effect with respect to the
Borrower or any of its Subsidiaries.
(d) Except as set forth on Schedule B, Part 6.20, neither the
Borrower nor any of its Subsidiaries has any obligation under any
written tax sharing agreement or agreement regarding payments in lieu
of taxes.
6.21 MATERIAL CONTRACTS. Schedule B, Part 6.21, contains a true,
correct and complete list of all the Material Contracts currently in effect on
the Closing Date. Except as described on Schedule B, Part 6.21, none of the
Material Contracts contains any burdensome restrictions which could reasonably
be expected to have a Material Adverse Effect, all of the Material Contracts
are in full force and effect and no defaults currently exist thereunder.
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6.22 ACCURACY AND COMPLETENESS OF INFORAMTION. All factual
information furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to the Agent, any Lender, or the Auditors for purposes
of or in connection with this Credit Agreement or any Credit Documents or any
transaction contemplated hereby or thereby is or will be true and accurate in
all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact necessary
to make such information not misleading at such time.
6.23 NO CHANGE. Since July 28, 1996 no event has occurred which has
had or could reasonably be expected to have a Material Adverse Effect.
ARTICLE 7
AFFIRMATIVE COVENANTS
Until termination of the Commitments hereunder and payment and
satisfaction of all Obligations due hereunder:
7.1 FINANCIAL REPORTING. The Borrower shall timely deliver to each
Lender the following information:
(a) AUDITOR'S ENGAGEMENT LETTER. As soon as available, but in
any event not later than the earlier of (i) fifteen (15) days prior to
the end of each fiscal year or (ii) prior to the date the Auditors
commence work on the preparation of the annual audited Financial
Statement, a copy of the engagement letter between Borrower and
its Auditors, which engagement letter shall notify such Auditors that
such annual audited Financial Statement will be delivered by the
Borrower to the Agent and Lenders, and stating that Agent and Lenders
shall be entitled to rely thereon with respect to the transactions
which are the subject of this Agreement.
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available, but not
later than ninety (90) days after each fiscal year end: (i) the annual
audited consolidated, and unaudited consolidating, Financial Statements
of the Consolidated Entity; (ii) a comparison in reasonable detail to
the prior year annual audited and unaudited Financial Statements;
(iii) the Auditors' unqualified opinion, and statement indicating
whether the Auditors have obtained knowledge of the existence of any
Default or Event of Default during their audit; (iv) a narrative
discussion of the consolidated financial condition and results of
operations and the consolidated liquidity and capital resources of the
Consolidated Entity for such fiscal year, prepared by the chief
financial officer of the Borrower; and (v) a compliance certificate
substantially in the form of Exhibit G
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with an attached schedule of calculations demonstrating compliance with
the financial covenants set forth in Sections 8.1 and 8.4. In
addition, Borrower shall deliver to the Agent and the Lenders, within
fifteen (15) Business Days of its receipt thereof, a copy of its
Auditors' "Management Letter".
(c) MONTHLY AND ANNUAL PROJECTIONS. Not later than forty-five (45)
days after each fiscal year end, beginning with the fiscal year ended
February 2, 1997, monthly projections of the financial condition and
results of operations of the Consolidated Entity for the next
succeeding year, quarterly projections for the second succeeding year,
and annual projections for each succeeding fiscal year thereafter,
through and including the fiscal year in which the Expiration Date will
occur, in each case containing projected consolidating balance sheets,
statements of operations, statements of cash flows and statements of
changes in shareholders equity.
(d) QUARTERLY FINANCIAL STATEMENTS. As soon as available, but
not later than forty-five (45) days after the end of each of the first
three fiscal quarters, and ninety (90) days after the end of the last
fiscal quarter: (i) Financial Statements of the Consolidated Entity as
of the fiscal quarter then ended, and for the fiscal year to date;
(ii) a comparison in reasonable detail to the Financial Statements for
the corresponding periods of the prior fiscal year; (iii) the
certification of the chief executive officer, chief financial officer,
treasurer or chief accounting officer of the Borrower; that such
Financial Statements have been prepared in accordance with GAAP
(subject to year-end audit adjustments); (iv) a narrative discussion of
the consolidated financial condition and results of operations and the
consolidated liquidity and capital resources of the Consolidated Entity
for such fiscal quarter and fiscal year to date, prepared by the chief
financial officer of the Borrower; and (v) a compliance certificate
substantially in the form of Exhibit G with an attached schedule of
calculations demonstrating compliance with the financial
covenants set forth in Sections 8.1 and 8.4.
(e) MONTHLY FINANCIAL STATEMENTS. As soon as available, but not
later than thirty (30) days after the end of each fiscal month (other
than a fiscal month which is the last month of the first three fiscal
quarters, in which event forty-five (45) days after end of such month,
and ninety (90) days after the end of the last month of the fiscal
year): (i) a balance sheet for the Borrower as at the end of such month
and for the fiscal year to date and statements of operations and cash
flows for such month and for the fiscal year to date; (ii) a comparison
to the balance sheet, statement of operations and statement of cash
flows for the same periods in the prior year; (iii) a certification by
the chief executive officer, chief financial officer, treasurer or
chief accounting officer of the Borrower that such balance sheet,
statement of operations and statement of cash flows have been prepared
in accordance with GAAP (subject to year-end audit adjustments); and
(iv) a compliance certificate substantially in the form of Exhibit G
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with an attached schedule of calculations demonstrating compliance with
the financial covenants set forth in Sections 8.1 and 8.4.
(f) MONTHLY COMPARISON TO PRIOR PROJECTIONS. As soon as
available, but not later than thirty (30) days after the end of each
fiscal month (other than a fiscal month which is the last day of the
first three fiscal quarters, in which event forty-five (45) days
after the end of such month, and ninety (90) days after the end of the
last month of the fiscal year), a comparison of actual results of
operations, cash flow and capital expenditures for the Borrower for
such month and for the period from the beginning of the current fiscal
year through the end of such month with amounts previously projected
for those periods (see Section 7.1(c)) and with actual results for
corresponding periods in the previous fiscal year.
7.2 COLLATERAL REPORTING. The Borrower shall timely deliver to the
Agent the following certificates and reports:
(a) WEEKLY AND MONTHLY BORROWING BASE CERTIFICATES. Weekly,
before 12:00 noon on the third Business Day of each week (except the
last week of each month), monthly, within three (3) Business Days after
the last Business Day of each month, and at any other time requested by
the Agent, a Borrowing Base Certificate, which shall be: (i)
substantially in the form of Exhibit A, detailing the Eligible Accounts
Receivable and Eligible Inventory as of each Friday of the immediately
preceding week (if a weekly Borrowing Base Certificate), or as of the
last Business Day of the immediately preceding month (if a monthly
Borrowing Base Certificate), or as of such other date as the Agent may
request; and (ii) prepared by or under the supervision of the chief
executive officer, chief financial officer, treasurer or chief
accounting officer of the Borrower and certified by such officer
subject only to adjustment upon completion of the normal annual audit
of physical inventory. Each Borrowing Base Certificate shall have
attached to it such additional schedules and other information as the
Agent may reasonably request, including, without limitation, a
summary listing of Inventory.
(b) APPRAISALS. When requested by the Agent, a report of Inventory
(which, if such request is made during the existence and continuance of
an Event of Default, shall be based upon a physical count), which shall
describe the Borrower's and SportDepot's Inventory by category and by
item (in reasonable detail) and report the then appraised value (at
lower of cost or market) of such Inventory.
(c) FURTHER ASSURANCES. When reasonably requested by the Agent,
any further information regarding the Collateral, business affairs and
financial condition of the Borrower or any of its Subsidiaries.
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7.3 NOTIFICATION REQUIREMENTS. The Borrower shall timely give to the
Agent and each of the Lenders the following notices:
(a) NOTICE OF DEFAULTS. Promptly, and in any event within two (2)
Business Days after becoming aware of the occurrence of a Default or
Event of Default, a certificate of the chief executive officer or chief
financial officer of the Borrower specifying the nature thereof and the
proposed response of the Borrower thereto, each in reasonable detail.
(b) PROCEEDINGS OR ADVERSE CHANGES. Promptly, and in any event
within five (5) Business Days after the Borrower becomes aware of (i)
any proceeding being instituted or threatened to be instituted by or
against the Borrower or any of its Subsidiaries in any federal, state,
local or foreign court or before any commission or other regulatory
body (federal, state, local or foreign) which, if adversely determined,
could reasonably be expected to have a Material Adverse Effect, (ii)
any order, judgment or decree in excess of $1,000,000 being entered
against the Borrower or any of its Subsidiaries or any of their
respective properties or assets or (iii) any actual or prospective
change, development or event which has had or could reasonably be
expected to have a Material Adverse Effect, a written statement
describing such proceeding, order, judgment, decree, change,
development or event and any action being taken with respect thereto by
the Borrower or any such Subsidiary.
(c) ERISA NOTICES. (i) Promptly, and in any event within ten (10)
Business Days after the Borrower, any of its Subsidiaries or any ERISA
Affiliate knows or has reason to know that a Termination Event has
occurred, a written statement of the chief financial officer of the
Borrower describing such Termination Event and any action that is being
taken with respect thereto by the Borrower, any such Subsidiary or
ERISA Affiliate, and any action taken or threatened by the Internal
Revenue Service, Department of Labor or Pension Benefit Guaranty
Corporation. The Borrower, such Subsidiary and the ERISA Affiliate
shall be deemed to know all facts known by the administrator of
any Benefit Plan of which it is the plan sponsor; (ii) promptly, and in
any event within three (3) Business Days after the filing thereof with
the Internal Revenue Service, a copy of each funding waiver request
filed with respect to any Benefit Plan and all communications received
by the Borrower, any of its Subsidiaries or any ERISA Affiliate with
respect to such request; and (iii) promptly, and in any event within
three (3) Business Days after receipt by the Borrower, any of its
Subsidiaries or any ERISA Affiliate, of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer
a Benefit Plan, copies of each such notice.
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(d) ENVIRONMENTAL AND HEALTH AND SAFETY NOTICES. Promptly, and
in any event within ten (10) Business Days after receipt by the
Borrower or any of its Subsidiaries of any notice, complaint or order
alleging any actual or prospective material violation of any
environmental, health or safety Requirement of Law or alleging
responsibility for costs of a cleanup, together with a copy of such
notice, complaint, or order and a written statement describing any
action being taken with respect thereto by the Borrower or any of its
Subsidiaries.
(e) MATERIAL CONTRACTS. Promptly, and in any event within ten (10)
Business Days after any Material Contract of the Borrower or any of its
Subsidiaries is terminated or amended or any new Material Contract is
entered into, a written statement describing such event, with copies of
amendments or new contracts, and an explanation of any actions being
taken with respect thereto. For purposes hereof, if more than six (6)
of Borrower's retail store leases within any state or province, and
eleven (11) in the aggregate in all states and provinces, are
simultaneously subject to termination by the landlords thereunder, such
event shall be deemed a termination of a Material Contract requiring
notice hereunder.
(f) COLLATERAL MATTERS. At least twenty (20) Business Days' prior
written notice to the Agent of any change in the location of any
Collateral or in the location of the chief executive office or place of
business of the Borrower or any of its Subsidiaries from the locations
specified in Schedule B, Part 6.10. At least ten (10) Business Days
prior to any such change, the Borrower shall cause to be executed and
delivered to the Agent any financing statements, Collateral Access
Agreements or other documents reasonably required by the Agent, in form
and substance satisfactory to the Agent.
7.4 CORPORATE EXISTENCE. The Borrower shall, and shall cause each of
its Subsidiaries to, (i) maintain its corporate existence (except that the
Borrower's Subsidiaries may merge with each other and with the Borrower,
provided, that the Agent receives five (5) Business Days' prior written notice
thereof), (ii) maintain in full force and effect all licenses, bonds,
franchises, leases, trademarks and qualifications to do business, and all
patents, contracts and other rights necessary for the profitable conduct of
their businesses, (iii) continue in, and limit their operations to, the same
general lines of business as presently conducted by them and (iv) in the case
of the Borrower, maintain all material terms and provisions of its corporate
charter and bylaws in the form in effect on the Closing Date.
7.5 BOOKS AND RECORDS: INSPECTIONS. The Borrower agrees to maintain,
and to cause each of its Subsidiaries to maintain, books and records pertaining
to the Collateral in such detail, form and scope as is consistent with good
business practice. The Borrower agrees that the Agent or its agents may enter
upon the premises of the Borrower or any of its Subsidiaries at any time and
from time to time, during normal business hours and upon
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reasonable notice under the circumstances, and at any time at all upon the
occurrence and during the continuance of an Event of Default, for the purposes
of (i) inspecting and verifying the Collateral, (ii) inspecting and/or copying
(at the expense of the Borrower) any and all records pertaining thereto, and
(iii) discussing the affairs, finances and business of the Borrower with any
officers, employees and directors of the Borrower or with the Auditors.
7.6 INSURANCE. The Borrower agrees to maintain, and to cause each of
its Subsidiaries to maintain, public liability insurance, third party property
damage insurance and replacement value insurance on the Collateral under such
policies of insurance, with such insurance companies, in such amounts and
covering such risks as are at all times satisfactory to the Agent in its
commercially reasonable judgment. Schedule B, Part 7.6 accurately describes
Borrower's current insurance program, including the terms of its self-insurance
program, which, for purposes of this Credit Agreement, is deemed satisfactory.
All policies covering the Collateral are to name the Agent as an additional
insured and/or the loss payee in case of loss, and are to contain such other
provisions as the Agent may reasonably require to fully protect the Agent's
interest in the Collateral and to any payments to be made under such policies.
7.7 TAXES. The Borrower agrees to pay, when due, and to cause each of its
Subsidiaries to pay when due, all taxes lawfully levied or assessed against the
Borrower, any of its Subsidiaries or any of the Collateral before any penalty
or interest accrues thereon; provided, that, unless such taxes have become a
federal tax or ERISA Lien on any of the assets of the Borrower or any of its
Subsidiaries, no such tax need be paid if the same is being contested, in good
faith, by appropriate proceedings promptly instituted and diligently conducted
and if an adequate reserve or other appropriate provision shall have been made
therefor as required in order to be in conformity with GAAP.
7.8 COMPLIANZE WITH LAWS. The Borrower agrees to comply, and to cause
each of its Subsidiaries to comply, with all Requirements of Law applicable to
the Collateral or any part thereof, or to the operation of its business or its
assets generally, unless (i) the Borrower contests any such Requirements of Law
in a reasonable manner and in good faith, or (ii) any such non-compliance could
not reasonably be expected to have a Material Adverse Effect.
7.9 USE OF PROCEEDS. Proceeds of the initial Revolving Loan shall be
used by the Borrower to refinance certain existing Indebtedness of the Borrower
and pay the costs and expenses of the transactions contemplated by this Credit
Agreement which are due and payable on the Closing Date, including without
limitation the Fees and Expenses due on the Closing Date pursuant to Article 4
hereof; and the proceeds of any subsequent Revolving Loans made hereunder shall
be used by the Borrower solely for ongoing working capital requirements and
other general corporate purposes. The Borrower shall not use any portion of
the proceeds of any Revolving Loans for the purpose of purchasing or carrying
any "margin stock" (as defined
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in Regulation G or U) in any manner which violates the provisions of Regulation
G, U or X or of the terms and conditions of this Credit Agreement or any other
Credit Document.
7.10 FISCAL YEAR. The Borrower agrees to maintain its fiscal year as
a year ending either on the Saturday or Sunday closest to January 31 of each
year during the term hereof.
7.11 MAINTENANCE OF PROPERTY. The Borrower agrees to keep, and to
cause each of its Subsidiaries to keep, all property useful and necessary to
their respective businesses in good working order and condition (ordinary wear
and tear excepted) in accordance with their past operating practices and not to
commit or suffer any waste with respect to any of their properties.
7.12 ERISA DOCUMENTS. The Borrower will cause to be delivered to the
Agent, upon the Agent's request, each of the following: (i) a copy of each
Plan (or, where any such plan is not in writing, complete description thereof)
(and if applicable, related trust agreements or other funding instruments) and
all amendments thereto, all written interpretations thereof and written
descriptions thereof that have been distributed to employees or former
employees of the Borrower or any of its Subsidiaries; (ii) the most recent
determination letter issued by the Internal Revenue Service with respect to
each Plan; (iii) for the three (3) most recent plan years, Annual Reports on
Form 5500 Series required to be filed with any governmental agency for each
Plan; (iv) all actuarial reports prepared for the last three (3) plan years for
each Plan; (v) a listing of all Multiemployer Plans, with the aggregate amount
of the most recent annual contributions required to be made by the Borrower or
any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to the Borrower or any ERISA Affiliate regarding withdrawal liability
under any Multiemployer Plan; and (vii) the aggregate amount of the most recent
annual payments made to former employees of the Borrower or any ERISA Affiliate
under any Retiree Health Plan.
7.13 ENVIRONMENT AND OTHER MATTERS.
(a) The Borrower and each of its Subsidiaries will conduct their
businesses so as to comply in all material respects with all
environmental, land use, occupational, safety or health laws,
regulations, directions, ordinances, criteria and guidelines in all
jurisdictions in which any of them is or may at any time be doing
business, except to the extent that the Borrower or such Subsidiary is
contesting, in good faith by appropriate legal proceedings, any such
law, regulation, direction, ordinance, criteria, guideline, or
interpretation thereof or application thereof; provided, that the
Borrower and each of its Subsidiaries shall comply with the order of
any court or other Governmental Authority relating to such laws unless
the Borrower or such Subsidiary shall currently be prosecuting an
appeal or proceedings for review and shall have
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secured a stay of enforcement or execution or other arrangement
postponing enforcement or execution pending such appeal or proceedings
for review.
(b) If the Agent reasonably believes, or the Majority Lenders
reasonably believe, that the facts or circumstances evidence or suggest
that the Borrower or any of its Subsidiaries is in material
non-compliance with any environmental law and that such non-compliance
could reasonably be expected to have a Material Adverse Effect, then at
the written request of the Agent or the Majority Lenders, which request
shall specify in reasonable detail the basis therefor, at any time and
from time to time, the Borrower will provide at its sole cost and
expense an environmental site assessment report concerning the site
owned, operated or leased by the Borrower or such Subsidiary in respect
of which such material non-compliance is believed to have occurred and
be continuing, such report to be prepared by an environmental
consulting firm approved by the Agent and the Majority Lenders,
indicating the presence, release or absence of hazardous materials on
or from such site and the potential cost of any removal, remedial or
corrective action in connection with any such hazardous materials on
such site.
7.14 FURTHER ASSURANCES. The Borrower shall take, and shall cause
each of its Subsidiaries to take, all such further actions and execute all such
further documents and instruments as the Agent may at any time reasonably
determine in the exercise of its sole discretion to be necessary or desirable
to further carry out and consummate the transactions contemplated by the Credit
Documents, to cause the execution, delivery and performance of the Credit
Documents to be duly authorized and to perfect or protect the Liens (and the
priority status thereof) of the Agent on the Collateral.
ARTICLE 8
NEGATIVE COVENANTS
Until termination of the Commitments and payment and satisfaction of
all Obligations due hereunder, the Borrower shall comply with, and, where
required, shall cause each of its Subsidiaries to comply with, the following
covenants:
8.1 CONSOLIDATED BOOK NET WORTH. The Borrower shall maintain at all
times during the term hereof a Consolidated Book Net Worth of not less than
$75,000,000.
8.2 INTENTIONALLY DELETED.
8.3 INTENTIONALLY DELETED.
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8.4 CAPITAL EXPENDITURES. The Borrower shall not make payments for
Capital Expenditures in excess of [$ ] per fiscal year. To the
extent that all or any portion of such amount is not used in any fiscal year,
fifty percent (50%) of such amount may be carried forward to the immediately
following fiscal year to be used for Capital Expenditures. In addition to the
foregoing, to the extent Borrower receives the proceeds of any equity offering
during the term hereof, Borrower shall be permitted to use an amount equal to
up to 75% of the net proceeds thereof for Capital Expenditures at any time
thereafter during the term hereof. The Borrower shall not make any Capital
Expenditures that are not directly related to the business conducted on the
Closing Date by the Borrower. The effect of the reclassification of any "Assets
Held for Sale," as reflected on Borrower's books and records on the date
hereof, shall not be considered in determining Borrower's compliance with this
Section 8.4.
8.5 ADDITIONAL INDEBTEDNESS. Neither the Borrower nor any of its
Subsidiaries shall directly or indirectly incur, create, assume or suffer to
exist any Indebtedness other than:
(a) Indebtedness under the Credit Documents;
(b) Indebtedness in the ordinary course of business under
Interest Rate Agreements in form and substance reasonably satisfactory
to the Agent;
(c) Indebtedness of any Subsidiary of the Borrower to the
Borrower or any other Subsidiary of the Borrower, which, with respect
to SportDepot, shall not in any event exceed the Inter-Company Loan,
and with respect to any other Subsidiaries, shall not exceed the
limitations set forth in Section 8.10(b) hereto.
(d) Indebtedness described on Schedule B, Part 8.5, and any
refinancing of such Indebtedness, so long as the aggregate principal
amount of the Indebtedness so refinanced shall not be increased and
the refinancing shall be on terms and conditions no more restrictive
than the terms and conditions of the Indebtedness to be refinanced;
(e) Indebtedness secured by purchase money Liens on equipment
acquired after the date of this Credit Agreement not to exceed
$2,500,000 in the aggregate outstanding at any one time ("Purchase
Money Liens") so long as (i) such Indebtedness shall be from parties
and on terms and conditions reasonably satisfactory to the Agent,
(ii) each Purchase Money Lien shall attach only to the property to be
acquired, (iii) a description shall have been furnished to the Agent
for any item of equipment for which the purchase price is greater than
$1,000,000, and (iv) the debt incurred shall not exceed one hundred
percent (100%) of the purchase price of the item or items of equipment
purchased;
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(f) Subordinated Indebtedness not to exceed $25,000,000 in the
aggregate outstanding at any one time; and
(g) Additional unsecured Indebtedness not otherwise set forth in
subsections (a) through (f) above in an amount not in excess of
$1,000,000 in the aggregate outstanding at any one time.
8.6 LIENS. Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly create, incur, assume, or suffer to exist any Lien on any
of its property now owned or hereafter acquired except:
(a) Liens granted to the Lenders under the Credit Documents;
(b) Liens listed on Schedule B, Part 8.6;
(c) Purchase Money Liens;
(d) Liens of warehousemen, mechanics, materialmen, workers,
repairmen, common carriers, or landlords, liens for taxes, assessments
or other governmental charges, and other similar Liens arising by
operation of law for amounts that are not yet due and payable or that
are being diligently contested in good faith by the Borrower, so
long as the Agent has been notified thereof and adequate reserves are
maintained by the Borrower for their payment;
(e) Attachment or judgment Liens not to exceed an aggregate of
$1,000,000.00, excluding amounts (i) bonded to the reasonable
satisfaction of the Agent or (ii) covered by insurance to the reasonable
satisfaction of the Agent;
(f) Deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, under unemployment
insurance, or to secure public or statutory obligations not to exceed an
aggregate of $2,000,000 (exclusive of any Letters of Credit to secure
such obligations);
(g) Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like
nature arising in the ordinary course of business not to exceed an
aggregate of $5,000,000;
(h) Easements, rights-of-way, restrictions and other similar
encumbrances on title to, or restrictions on the use of, real property,
which, in the aggregate, in the opinion of the Agent, are not
substantial in amount and which do not materially detract from the
value of the property subject thereto or materially interfere with
the ordinary conduct of the business of the Borrower or any of its
Subsidiaries;
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(i) Liens granted by SportDepot to Borrower to secure the
Inter-Company Loan; and
(j) Extensions and renewals of any of the foregoing so long as the
aggregate amount of extended or renewed Liens are not increased and are
on terms and conditions no more restrictive than the terms and
conditions of the Liens extended or renewed.
8.7 CONTINGENT OBLIGATIONS. Neither the Borrower nor any of its
Subsidiaries shall directly or indirectly incur, assume, or suffer to exist any
Contingent Obligation, excluding indemnities given in connection with the sale
of Inventory or other asset dispositions permitted hereunder and Contingent
Obligations for Indebtedness permitted to be incurred under Section 8.5, and
Investments permitted under Section 8.10.
8.8 SALE OF ASSETS. Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, sell, lease, assign, transfer or
otherwise dispose of any assets other than (i) Inventory in the ordinary course
of business; (ii) items of Collateral with a book value of less than $1,000,000
in the aggregate during any fiscal year, (iii) obsolete or worn out property
disposed of in the ordinary course of business; and (iv) dispositions of assets
not otherwise permitted under this Section 8.8, provided, that, (a) such
dispositions are for fair value, (b) the aggregate consideration is paid in
full in cash at the time of disposition and is thereupon (I) reinvested in the
business of the Borrower or its Subsidiaries or (II) delivered to the Agent, in
which case such consideration will be applied to repay the Revolving Loans and
(c) the aggregate amount of all such dispositions does not exceed $10,000,000
in the aggregate for any fiscal year.
8.9 RESTRICTED PAYMENTS. Except with respect to certain employee
stock plans and agreements more fully described in Schedule B, Part 8.9, the
Borrower shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, (a) declare or pay any dividend (other than dividends payable
solely in capital stock of such Person) on, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of capital stock of such Person or any warrants, options or rights to
purchase any such capital stock, whether now or hereafter outstanding, or make
any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of such Person or any of its
Subsidiaries; (b) make any optional payment or prepayment on or redemption
(including, without limitation, by making payments to a sinking or analogous
fund) or repurchase of any Indebtedness in excess of $1,000,000 on a cumulative
basis over the term of this Agreement (other than Indebtedness pursuant to
this Credit Agreement); provided, that, notwithstanding the foregoing, any
Subsidiary of the Borrower may (i) make payments on account of
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Indebtedness owing to the Borrower or any Subsidiary of the Borrower and (ii)
declare and pay dividends to the Borrower or any other Subsidiary of the
Borrower.
8.10 INVESTMENTS. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, make any Investment in any Person,
whether in cash, securities, or other property of any kind including, without
limitation, any Subsidiary or Affiliate of the Borrower, other than:
(a) Advances or loans not to exceed $500,000 outstanding at any
time to any one Person and $2,000,000 in the aggregate outstanding at
any one time;
(b) Loans, investments and advances between the Borrower and its
Subsidiaries (i) in existence as of the date hereof and described on
Schedule B, Part 8.10 and (ii) additional loans, investments and
advances not exceeding $1,000,000 in the aggregate.
(c) Cash Equivalents;
(d) Deposits with financial institutions, disclosed in Schedule
B, Part 8.10, and which are insured by the Federal Deposit Insurance
Corporation ("FDIC") or a similar governmental insurance program;
provided, that the Borrower may, in the ordinary course of its
business, maintain in its disbursement accounts from time to time
amounts in excess of then applicable FDIC or other program insurance
limits; and
(e) Such other Investments as the Agent may approve in writing
in the exercise of its sole discretion.
8.11 AFFILIATE TRANSACTIONS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, enter into any
transaction with (including, without limitation, the purchase, sale or exchange
of property or the rendering of any service to) any Subsidiary or Affiliate of
the Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business, as the case may
be, and upon fair and reasonable terms no less favorable to the Borrower or
such Subsidiary than could be obtained in a comparable arm's-length transaction
with an unaffiliated Person, except for transactions otherwise permitted under
Sections 8.9 and 8.10;
8.12 ADDITIONAL BANK ACCOUNTS. Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, open, maintain or
otherwise have any checking, savings or other accounts at any bank or other
financial institution, or any other account where money is or may be deposited
or maintained with any Person, other than the Disbursement Account,
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the accounts set forth on Schedule B, Part 8.12, and such additional accounts of
which Borrower notifies Agent in writing no less frequently than monthly.
8.13 EXCESS CASH. The Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, maintain in the aggregate in all
deposit accounts of the Borrower and its Subsidiaries (other than the
Disbursement Account and payroll accounts), total cash balances and Investments
as permitted by Sections 8.10(c), (d) and (e), in excess of $10,000,000 at any
time during which any Revolving Loans are outstanding hereunder.
8.14 ADDITIONAL NEGATIVE PLEDGES. The Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective, or permit any of its
Subsidiaries to create or otherwise cause or suffer to exist or become
effective, directly or indirectly, (i) any prohibition or restriction (including
any agreement to provide equal and ratable security to any other Person in the
event a Lien is granted to or for the benefit of the Agent and the Lenders) on
the creation or existence of any Lien upon the assets of the Borrower or its
Subsidiaries, other than Permitted Liens; or (ii) any contractual obligation
which may restrict or inhibit the Agent's rights or ability to sell or otherwise
dispose of the Collateral or any part thereof after the occurrence of an Event
of Default.
8.15 ADDITIONAL SUBSIDIARIES. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, form or acquire any
new Subsidiaries.
ARTICLE 9
EVENTS OF DEFAULTL AND REMEDIES
9.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an event of default (each an "Event of Default") hereunder:
(a) FAILURE TO PAY. The Borrower shall fail to pay any
Obligation when the same shall become payable.
(b) BREACH OF CERTAIN COVENANTS.
(i) The Borrower shall fail to comply with Section 7.9
hereof or any covenant contained in Article 8;
(ii) The Borrower shall fail to comply with Sections 7.2(a)
or 7.3 hereof and such failure shall continue unremedied until
two (2) Business Days
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after a senior officer of the Borrower knowledgeable of the
requirements of this Credit Agreement (including, without
limitation, the chief financial officer, treasurer, controller, or
chief accounting officer of the Borrower) knows of such failure;
and
(iii) The Borrower shall fail to comply with Section 7.1
hereof or any failure pursuant to Section 7.6 hereof to maintain
the insurance required pursuant to such Section (as distinguished
from changing any such insurance following any request by Agent to
effect such change) and such failure shall continue unremedied
until five (5) Business Days after the Agent's delivery of notice
to the Borrower of such failure.
(c) BREACH OF REPRESENTATION OR WARRANTY. Any material
representation or warranty made or deemed to be made by the Borrower in
this Credit Agreement or in any other Credit Document (and in any
statement or certificate given under this Credit Agreement or any other
Credit Document), shall be false or misleading in any material respect
when made or deemed to be made.
(d) BREACH OF OTHER COVENANTS. The Borrower shall fail to
comply with any covenant contained in this Credit Agreement or any other
Credit Document, other than as set forth in Section 9.1(b), and such
failure shall continue for thirty (30) days after Agent's delivery of
notice to the Borrower of such failure.
(e) DISSOLUTION. The Borrower or SportDepot shall dissolve,
wind up or otherwise cease its business.
(f) INSOLVENCY EVENT. Borrower or SportDepot shall become the
subject of an Insolvency Event.
(g) CHANGE OF CONTROL. A Change of Control shall occur.
(h) CROSS DEFAULT. A default or event of default shall occur (and
continue beyond any applicable grace period) under any note, agreement
or instrument evidencing any other Indebtedness of the Borrower or any
Subsidiary of the Borrower, which results in the acceleration of its
maturity, provided, that the aggregate principal amount of all such
Indebtedness for which the default or event of default has occurred
exceeds $1,500,000.
(i) FAILURE OF ENFORCEABILITY OF CREDIT DOCUMENTS; SECURITY. Any
covenant, agreement or obligation of any Credit Party contained in or
evidenced by any of the Credit Documents shall cease to be enforceable,
or shall be determined to be
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unenforceable, in accordance with its terms; any Credit Party shall deny
or disaffirm its obligations under any of the Credit Documents or any
Liens granted in connection therewith; or, any Liens granted in any of
the Collateral shall be determined to be void, voidable, invalid or
unperfected, are subordinated or not given the priority contemplated by
this Credit Agreement.
9.2 ACCELERATION, TERMINATION OF COMMITMENTS AND CASH
COLLATERALIZATION.. Upon the occurrence and during the continuance of any Event
of Default, without prejudice to the rights of the Agent or any Lender to
enforce its claims against the Borrower:
(a) ACCELERATION. Upon the written request of the Majority
Lenders, and by delivery of written notice to the Borrower from the
Agent, all Obligations shall be immediately due and payable (except with
respect to any Event of Default set forth in Section 9.1(f), in
which case all Obligations shall automatically become immediately due
and payable without the necessity of any request of the Majority Lenders
or notice or other demand to the Borrower) without presentment, demand,
protest or any other action or obligation of the Agent or any
Lender.
(b) TERMINATION OF COMMITMENTS. Upon the written request of the
Majority Lenders, and by delivery of written notice to the Borrower from
the Agent, the Commitments shall be immediately terminated and, at all
times thereafter, all Revolving Loans made by any Lender pursuant to
this Credit Agreement shall be at such Lender's sole discretion, unless
such Event of Default is waived in accordance with Section 11.11, in
which case the Commitments shall be automatically reinstated.
(c) CASH COLLATERALIZATION. On demand of the Agent or the
Majority Lenders, the Borrower shall immediately deposit with the Agent
for each Letter of Credit then outstanding, cash or Cash Equivalents in
an amount equal to 110% of the greatest amount drawable thereunder.
Such deposit shall be held by the Agent and used to reimburse the
Issuing Bank for the amount of each drawing made under such Letters of
Credit, as and when each such drawing is made.
9.3 RESCISSION OF ACCELERATION. After acceleration of the maturity of
the Obligations, if the Borrower pays all accrued interest and all principal due
(other than by reason of the acceleration) and all Defaults and Events of
Default are waived in accordance with Section 11.11, the Majority Lenders may
elect in their sole discretion, to rescind the acceleration and return to the
Borrower any cash collateral deposited with the Agent pursuant to Section
9.2(c). (This Section is intended only to bind all of the Lenders to a decision
of the Majority Lenders and not to confer any right on the Borrower, even if the
described conditions for the Majority Lenders' election may be met.)
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9.4 REMEDIES. Upon the occurrence and during the continuance of an
Event of Default, upon the written request and at the direction of the Majority
Lenders, the Agent may exercise any rights and remedies available to it under
applicable law (including under the Code) and under the Collateral Documents.
The foregoing rights and remedies are not intended to be exhaustive and the full
or partial exercise of any right or remedy shall not preclude the full or
partial exercise of any other right or remedy available under this Credit
Agreement, any other Credit Document, at equity or at law.
9.5 RIGHT OF SETOFF. In addition to and not in limitation of all
rights of offset that any Lender may have under applicable law, upon the
occurrence of any Event of Default, and whether or not any Lender has made any
demand or the Obligations of any Credit Party have matured, each Lender shall
have the right to appropriate and apply to the payment of the Obligations of
such Credit Party all deposits and other obligations then or thereafter owing by
such Lender to such Credit Party. Each Lender exercising such rights shall
notify the Agent thereof and any amount received as a result of the exercise of
such rights shall be shared by the Lenders in accordance with Section 2.5.
9.6 LICENSE OF USE OF SOFTWARE AND OTHER INTELLECTUAL PROPERTY. Unless
expressly prohibited by the licenser thereof, if any, the Agent is hereby
granted a license to use all computer software programs, data bases, processes
and materials used by the Borrower in connection with its businesses or in
connection with the Collateral. The Agent agrees not to use any such license
prior to the occurrence of an Event of Default without giving the Borrower prior
notice.
9.7 APPLICATION OF PROCEEDS; SURPLUS; DEFICIENCIES. The net cash
proceeds resulting from the Agent's exercise of any of the foregoing rights
against any Collateral (after deducting all of the Agent's Expenses related
thereto) shall be applied by the Agent to the payment of the Obligations,
whether due or to become due, in the order set forth in Section 4.12. The
Borrower shall remain liable to the Agent and the Lenders for any deficiencies,
and the Agent and the Lenders in turn agree to remit to the Borrower or its
successors or assigns, any surplus resulting therefrom.
ARTICLE 10
THE AGENT
10.1 APPOINTMENT OF AGENT.
(a) Each Lender hereby designates BTCC as Agent to act as herein
specified. Each Lender hereby irrevocably authorizes, and each holder
of any
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Revolving Note, by the acceptance of such Revolving Note, shall be
deemed irrevocably to authorize the Agent to take such action on its
behalf under the provisions of this Credit Agreement and the other
Credit Documents and any other instruments and agreements referred to
herein and therein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto. The Agent shall hold all
Collateral and all payments of principal, interest, Fees, (other than
Fees that are exclusively for the account of the Agent), charges and
Expenses received pursuant to this Credit Agreement or any other Credit
Document for the ratable benefit of the Lenders. The Agent may perform
any of its duties hereunder by or through its agents or employees.
(b) Other than the Borrower's rights under Section 10.9, the
provisions of this Article 10 are for the benefit of the Agent and the
Lenders only and none of the Credit Parties or any other Persons shall
have any rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Credit
Agreement and the other Credit Documents, the Agent shall act only for
the Lenders and does not assume and shall not be deemed to have assumed
any obligation toward or relationship of agency or trust with or for any
Credit Party.
10.2 NATURE OF DUTIES OF AGENT. The Agent has no duties or
responsibilities except those expressly set forth in the Credit Documents.
Neither the Agent nor any of its officers, directors, employees or agents shall
be liable for any action taken or omitted hereunder or in connection herewith,
unless caused by its or their gross negligence or willful misconduct. The
duties of the Agent shall be mechanical and administrative in nature; the Agent
shall not have by reason of this Credit Agreement or any of the other Credit
Documents a fiduciary relationship in respect of any Lender or any participant
of any Lender; and nothing in this Credit Agreement or any other Credit
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Credit Agreement or any
other Credit Document, except as expressly set forth herein or therein.
10.3 LACK OF RELIANCE ON AGENT.
(a) Independently and without reliance upon the Agent, each
Lender, to the extent it deems appropriate, has made and shall continue
to make (i) its own independent investigation of the financial or other
condition and affairs of each Credit Party in connection with the taking
or not taking of any action in connection herewith and (ii) its own
appraisal of the creditworthiness of each Credit Party, and, except as
expressly provided in this Credit Agreement, the Agent shall have no
duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any
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credit or other information with respect thereto, whether coming into
its possession before the making of the Revolving Loans or at any
time or times thereafter.
(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, priority or sufficiency of this Credit
Agreement or any of the other Credit Documents or the financial or other
condition of any Credit Party. The Agent shall not be required to make
any inquiry concerning either the performance or observance of any other
terms, provisions or conditions of this Credit Agreement or any of the
other Credit Documents, or the financial condition of any Credit Party,
or the existence or possible existence of any Default or Event of
Default, unless specifically requested to do so in writing by any
Lender.
10.4 CERTAIN RIGHTS OF THE AGENT. The Agent shall have the right to
request instructions from the Majority Lenders by notice to each of the
Lenders. If the Agent shall request instructions from the Majority Lenders
with respect to any act or action (including the failure to act) in connection
with this Credit Agreement, the Agent shall be entitled to refrain from such
act or taking such action unless and until the Agent shall have received
instructions from the Majority Lenders, and the Agent shall not incur liability
to any Person by reason of so refraining. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting hereunder in accordance with the
instructions of the Majority Lenders. The Agent may give any notice required
under Article 9 hereof without the consent of any of the Lenders unless
otherwise directed by the Majority Lenders in writing and will, at the
direction of the Majority Lenders, give any such notice required under Article
9.
10.5 RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other documentary, teletransmission or telephone
message believed by it to be genuine and correct and to have been signed, sent
or made by the proper person. The Agent may consult with legal counsel
(including counsel for the Borrower with respect to matters concerning the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
10.6 INDEMNIFICATION OF AGENT. To the extent the Agent is not
reimbursed and indemnified by the each Lender will reimburse and indemnify the
Agent, in proportion to its respective Commitment, for and against all
liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, costs, expenses (including
counsel fees and disbursements) or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent
in performing its duties hereunder, in any way relating to or arising out
of this Credit Agreement; provided, that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct.
10.7 THE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its
obligation to lend under this Credit Agreement, the Revolving Loans made by it
and the Revolving Notes issued to it and its participation in Letters of Credit
issued hereunder, the Agent shall have the same rights and powers hereunder as
any other Lender or holder of a Revolving Note or participation interests and
may exercise the same as though it was not performing the duties specified
herein; and the terms "Lenders," "Majority Lenders," "holders of Revolving
Notes," or any similar terms shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity. The Agent may accept
deposits from, lend money to, acquire equity interests in, and generally engage
in any kind of banking, trust, financial advisory or other business with the
Borrower or any Affiliate of the Borrower as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Borrower for services in connection with this Credit Agreement and otherwise
without having to account for the same to the Lenders.
10.8 HOLDERS OF REVOLVING NOTES. The Agent may deem and treat the
payee of any Revolving Note as the owner thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is the
holder of any Revolving Note, shall be conclusive and binding on any subsequent
holder, transferee or assignee of such Revolving Note or of any Revolving Note
or Notes issued in exchange therefor.
10.9 SUCCESSOR AGENT.
(a) The Agent may, upon five (5) Business Days' notice to the
Lenders and the Borrower, resign at any time (effective upon the
appointment of a successor Agent pursuant to the provisions of this
Section 10.9) by giving written notice thereof to the Lenders
and the Borrower. Upon any such resignation, the Majority Lenders
shall have the right, upon five (5) days' notice and approval by the
Borrower (which approval shall not be unreasonably withheld or
delayed), to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Majority Lenders and accepted such
appointment, within thirty (30) days after the retiring Agent's giving
of notice of resignation, then, upon five (5) days' notice and approval
by the Borrower
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(which approval shall not be unreasonably withheld or delayed), the
retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a bank or a trust company or other financial
institution which maintains an office in the United States, or a
commercial bank organized under the laws of the United States of
America or of any State thereof, or any Affiliate of such bank or trust
company or other financial institution which is engaged in the banking
business, having a combined capital and surplus of at least
$500,000,000.
(b) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, 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 under this Credit Agreement and the other Credit
Documents. After any retiring Agent's resignation hereunder as Agent,
the provisions of this Article 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under or
in connection with this Credit Agreement.
10.10 COLLATERAL MATTERS.
(a) Each Lender authorizes and directs the Agent to enter into
the Collateral Documents for the benefit of the Lenders. Each Lender
hereby agrees, and each holder of any Revolving Note by the acceptance
thereof will be deemed to agree, that, except as otherwise set forth
herein, any action taken by the Majority Lenders in accordance with the
provisions of this Credit Agreement or any of the Credit Documents, and
the exercise by the Majority Lenders of the powers set forth herein or
therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all of the Lenders. The
Agent is hereby authorized on behalf of all of the Lenders, without the
necessity of any notice to or further consent from any Lender, from
time to time prior to an Event of Default, to take any action with
respect to any Collateral or Collateral Documents which may be
necessary to perfect and maintain the perfection of the Liens upon the
Collateral granted pursuant to the Collateral Documents.
(b) The Lenders hereby authorize the Agent, at its option and in
its discretion, to release any Lien granted to or held by the Agent
upon any Collateral (i) upon termination of the Commitments and payment
and satisfaction of all of the Obligations at any time arising under or
in respect of this Credit Agreement or the Credit Documents or the
transactions contemplated hereby or thereby or (ii) if approved,
authorized or ratified in writing by the Majority Lenders, unless such
release is required to be approved by all of the Lenders pursuant to
Section 11.11. Upon request by the Agent at any time, the Lenders will
confirm in writing the Agent's
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authority to release particular types or items of Collateral pursuant to
this Section 10.10.
(b) The Agent shall have no obligation whatsoever to the Lenders
or to any other Person to assure that the Collateral exists or is
owned by the Borrower or is cared for, protected or insured or that the
Liens granted to the Agent in or pursuant to any of the Collateral
Documents have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular
priority, or to exercise or to continue exercising at all or in any
manner or under any duty of care, disclosure or fidelity any of the
rights, authorities and powers granted or available to the Agent in this
Section 10.10 or in any of the Collateral Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission or
event related thereto, the Agent may act in any manner it may deem
appropriate, in its sole discretion, given the Agent's own interest in
the Collateral as one of the Lenders and that the Agent shall have no
duty or liability whatsoever to the Lenders, except for its gross
negligence or willful misconduct. The Agent agrees to conduct or cause
to be conducted at least one audit of the Collateral during each year
that this Credit Agreement shall remain in effect.
10.11 ACTIONS WITH RESPECT TO DEFAULTS. In addition to the Agent's
right to take actions on its own accord as permitted under this Credit
Agreement, the Agent shall take such action with respect to a Default or Event
of Default as shall be directed by the Majority Lenders; provided, that until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable and in the best
interests of the Lenders.
10.12 DELIVERY OF INFORMATION. The Agent shall not be required to
deliver to any Lender originals or copies of any documents, instruments,
notices, communications or other information received by the Agent from the
Borrower, any Subsidiary of the Borrower, the Majority Lenders, any Lender or
any other Person under or in connection with this Credit Agreement or any other
Credit Document except (i) as specifically provided in this Credit Agreement or
any other Credit Document and (ii) as specifically requested from time to time
in writing by any Lender with respect to a specific document, instrument, notice
or other written communication received by and in the possession of the Agent at
the time of receipt of such request and then only in accordance with such
specific request.
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ARTICLE 11
MISCELLANEOUS
11.1 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS CREDIT AGREEMENT AND THE REVOLVING NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
11.2 SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG THE BORROWER AND
THE LENDERS (OR THE AGENT ACTING ON THEIR BEHALF), WHETHER SOUNDING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS
LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE
TAKEN; PROVIDED, HOWEVER, THAT THE AGENT, ON BEHALF OF THE LENDERS, SHALL HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
BORROWER OR ITS RESPECTIVE PROPERTIES IN ANY LOCATION REASONABLY SELECTED BY THE
AGENT IN GOOD FAITH TO ENABLE THE AGENT TO REALIZE ON SUCH PROPERTY, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT. THE BORROWER
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
AGENT HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
11.3 SERVICE OF PROCESS. THE BORROWER AND AGENT EACH HEREBY
IRREVOCABLY AGREE THAT SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE AFFECTED BY
MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
BORROWER OR AGENT AT THEIR RESPECTIVE ADDRESSES SET FORTH IN SECTION 11.7.
11.4 JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS EACH HEREBY
WAIVES ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN
A BENCH TRIAL.
11.5 LIMITATION OF LIABILITY. NEITHER THE AGENT NOR ANY LENDER SHALL
HAVE ANY LIABILITY TO THE BORROWER (WHETHER SOUNDING IN TORT, CONTRACT, OR
OTHERWISE) FOR LOSSES SUFFERED BY THE BORROWER IN CONNECTION WITH, ARISING OUT
OF, OR IN ANY WAY
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RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS CREDIT
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER
BINDING ON THE AGENT OR ANY SUCH LENDER, THAT THE LOSSES WERE THE RESULT OF ACTS
OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11.6 DELAYS. No delay or omission of the Agent or the Lenders to
exercise any right or remedy hereunder shall impair any such right or operate as
a waiver thereof.
11.7 NOTICES. Except as otherwise provided herein, all notices and
correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, if to the Agent or any of the Lenders, then to BT
Commercial Corporation, 233 South Wacker Drive, Chicago, Illinois 60606,
Attention: Credit Department, if to the Borrower, then to Sportmart, Inc. at
1400 South Wolf Road, Suite 200, Wheeling, Illinois 60090, Attention: Chief
Financial Officer, or by facsimile transmission, promptly confirmed in writing
sent by first class mail, if to the Agent, or any of the Lenders, at (312)
993-8096 and if to the Borrower at (847) 520-1928. All such notices and
correspondence shall be deemed given (i) if sent by certified or registered
mail, three Business Days after being postmarked, (ii) if sent by overnight
delivery service, when received at the above stated addresses or when delivery
is refused and (iii) if sent by telex or facsimile transmission, when receipt of
such transmission is acknowledged.
11.8 ASSIGNMENTS AND PARTICIPATIONS.
(a) BORROWER ASSIGNMENT. The Borrower shall have no right to
assign this Credit Agreement, or any rights or obligations hereunder,
without the prior written consent of the Agent and the Lenders.
(b) LENDER ASSIGNMENTS. Each Lender may assign to one or more
banks or other financial institutions all or a portion of its rights and
obligations under this Credit Agreement, the Revolving Notes and the
other Credit Documents with the consent of the Agent with respect to an
assignment to any financial institution previously identified by Agent
in a letter to Borrower dated September 3, 1996 ("Approved Lenders"),
and with the consent of the Agent and the consent of the Borrower
(which consent shall not be unreasonably withheld), with respect to an
assignment to any financial institution which is not an Approved Lender;
and upon execution and delivery to the Agent, for its acceptance and
recording in the Register, of an agreement in substantially the form of
Exhibit H (an "Assignment and Assumption Agreement"), together with
surrender of any Revolving Note or Revolving Notes subject to such
assignment and a processing and recordation fee of $2,500.00. No such
assignment shall be for less than
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$10,000,000 of the Commitments unless it is to another Lender or is an
assignment of all of such Lender's rights and obligations under this
Credit Agreement. (This Section does not apply to branches and
Affiliates of a Lender, it being understood that a Lender may make,
carry or transfer Revolving Loans at or for the account of any of its
branch offices or Affiliates without consent of the Borrower, the
Agent or any other Lender).
(c) AGENT'S REGISTER. The Agent shall maintain a register of the
names and addresses of the Lenders, their Commitments, and the principal
amount of their Revolving Loans (the "Register") at the address
specified for the Agent in Section 11.7. The Agent shall also
maintain a copy of each Assignment and Assumption Agreement delivered to
and accepted by it and modify the Register to give effect to each
Assignment and Assumption Agreement. Upon its receipt of each
Assignment and Assumption Agreement and surrender of the affected
Revolving Note or Revolving Notes, the Agent will give prompt notice
thereof to the Borrower and deliver to the Borrower a copy of the
Assignment and Assumption Agreement and the surrendered Revolving Note
or Revolving Notes. Within five Business Days after its receipt of such
notice, the Borrower shall execute and deliver to the Agent a substitute
Revolving Note or Revolving Notes to the order of the assignee in the
amount of the Commitment or Commitments assumed by it and to the
assignor in the amount of the Commitment or Commitments retained by it,
if any. Such substitute Revolving Note or Revolving Notes shall
re-evidence the Indebtedness outstanding under the surrendered Revolving
Note or Revolving Notes and shall be dated as of the Closing Date. The
Agent shall be entitled to rely upon the Register exclusively for
purposes of identifying the Lenders hereunder. The Register shall be
available for inspection by the Borrower and the Lenders (or any of
them) at any reasonable time and from time to time upon reasonable
notice to the Agent.
(d) LENDER PARTICIPATIONS. Each Lender may sell participations
(without the consent of the Agent, the Borrower or any other Lender) to
one or more parties in or to all or a portion of its rights and
obligations under this Credit Agreement, the Revolving Notes and the
other Credit Documents. Notwithstanding a Lender's sale of a
participation interest, its obligations hereunder shall remain
unchanged. The Borrower, the Agent, and the other Lenders shall
continue to deal solely and directly with such Lender. No
participant shall have rights to approve any amendment or waiver of this
Credit Agreement or any of the other Credit Documents except to the
extent such amendment or waiver would (i) increase the participant's
obligation in respect of the Commitment of the Lender from whom the
participant purchased its participation interest; (ii) reduce the
principal of, or stated rate or amount of interest on, the Revolving
Loans subject to such participation, (iii) postpone any maturity date
fixed for final payment of principal of the Revolving Loans subject to
the participation
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interest, and (iv) release any guarantor of the Obligations or all or a
substantial portion of the Collateral, other than when otherwise
permitted hereunder.
11.0 CONFIDENTIALITY. Each Lender agrees that it will use its
reasonable best efforts not to disclose without the prior consent of the
Borrower any information with respect to the Borrower or any of its Subsidiaries
which is furnished pursuant to this Credit Agreement and which is designated by
the Borrower to the Lenders in writing as confidential, provided, that, each
Lender may disclose any such information (a) to its employees, auditors, or
counsel, or to another Lender if the disclosing Lender or such disclosing
Lender's holding or parent company in its sole discretion determines that any
such party should have access to such information, (b) as has become generally
available to the public, (c) as may be required or appropriate in any report,
statement or testimony submitted to any Governmental Authority having or
claiming to have jurisdiction over such Lender, (d) as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation, (e) in order to comply with any Requirement of Law, and (f) to any
such prospective or actual transferee or participant in connection with any
contemplated transfer or participation of any of the Revolving Notes or
Commitments or any interest therein by such Lender.
11.10 INDEMNIFICATION. The Borrower hereby indemnifies and agrees to
defend and hold harmless the Agent and each of the Lenders and their respective
directors, officers, agents, employees and counsel from and against any and all
losses, claims, damages, liabilities, deficiencies, judgments or expenses
incurred by any of them (except to the extent that it is finally judicially
determined to have resulted from their own gross negligence or willful
misconduct) arising out of or by reason of (a) any litigations, investigations,
claims or proceedings which arise out of or are in any way related to (i) this
Credit Agreement or the transactions contemplated hereby, (ii) the issuance of
the Letters of Credit, (iii) the failure of the Issuing Bank to honor a drawing
under any Letter of Credit, as a result of any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto government or
Governmental Authority, (iv) any actual or proposed use by the Borrower of the
proceeds of the Revolving Loans or (v) the Agent's or the Lenders' entering into
this Credit Agreement, the other Credit Documents or any other agreements and
documents relating hereto, including, without limitation, amounts paid in
settlement, court costs and the fees and disbursements of counsel incurred in
connection with any such litigation, investigation, claim or proceeding or any
advice rendered in connection with any of the foregoing and (b) any remedial or
other action taken by the Borrower or any of the Lenders in connection with
compliance by the Borrower or any of its Subsidiaries, or any of their
respective properties, with any federal, state or local environmental laws,
acts, rules, regulations, orders, directions, ordinances, criteria or
guidelines.
11.11 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
of this Credit Agreement, any part of Schedule B, or any other Credit Document
shall be effective
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unless in writing and signed by the Majority Lenders (or by the Agent on
their behalf), except that:
(a) the consent of all the Lenders is required to (i) increase the
Commitments, (ii) reduce the principal of, or interest on, the Revolving
Notes, any Letter of Credit reimbursement obligations or any Fees
hereunder (other than Fees that are exclusively for the account of the
Agent), (iii) postpone any date fixed for any payment in respect of
principal of, or interest on, the Revolving Notes, any Letter of Credit
reimbursement obligations or any Fees hereunder, (iv) change the
percentage of the Commitments, or any minimum requirement necessary for
the Lenders or the Majority Lenders to take any action hereunder, (v)
amend or waive this Section 11.11(a), or change the definition of
Majority Lenders or (vi) except as otherwise expressly provided in this
Credit Agreement, and other than in connection with the financing,
refinancing, sale or other disposition of any asset of the Borrower
permitted under this Credit Agreement, release any Liens in favor of the
Lenders on any of the Collateral; and
(b) the consent of the Agent shall be required for any amendment,
waiver or consent affecting the rights or duties of the Agent under any
Credit Document, in addition to the consent of the Lenders otherwise
required by this Section.
The consent of the Borrower shall not be required for any amendment,
modification or waiver of the provisions of Article 10 (other than Section
10.9). The Borrower and the Lenders each hereby authorize the Agent to modify
this Credit Agreement by unilaterally amending or supplementing Annex I to
reflect assignments of the Commitments. Notwithstanding the foregoing, the
Borrower may amend Schedule B, Parts 6.1, 6.10, and 6.14, without the consent of
the Majority Lenders.
11.12 COUNTERPARTS AND EFFECTIVENESS. This Credit Agreement and any
waiver or amendment hereto may be executed in any number of counterparts and by
the different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. This Credit Agreement shall become
effective on the date on which all of the parties hereto shall have signed a
copy hereof (whether the same or different copies) and shall have delivered the
same to the Agent pursuant to Section 11.7 or, in the case of the Lenders, shall
have given to the Agent written, telecopied or telex notice (actually received)
at such office that the same has been signed and mailed to it.
11.13 SEVERABILITY.. In case any provision in or obligation under this
Credit Agreement or the Revolving Notes or the other Credit Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining
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provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
11.14 MAXIMUM RATE. Notwithstanding anything to the contrary contained
elsewhere in this Credit Agreement or in any other Credit Document, the
Borrower, the Agent and the Lenders hereby agree that all agreements among them
under this Credit Agreement and the other Credit Documents, whether now existing
or hereafter arising and whether written or oral, are expressly limited so that
in no contingency or event whatsoever shall the amount paid, or agreed to be
paid, to the Agent or any Lender for the use, forbearance, or detention of the
money loaned to the Borrower and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstance whatsoever,
fulfillment of any provisions of this Credit Agreement or any of the other
Credit Documents at the time performance of such provision shall be due shall
exceed the Highest Lawful Rate, then, automatically, the obligation to be
fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance any
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder or
on account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to the Borrower. All sums paid or agreed to be paid to
the Agent or any Lender for the use, forbearance, or detention of the
Obligations and other Indebtedness of the Borrower to the Agent or any Lender,
to the extent permitted by applicable law, shall be amortized, prorated,
allocated and spread throughout the full term of such Indebtedness, until
payment in full thereof, so that the actual rate of interest on account of all
such Indebtedness does not exceed the Highest Lawful Rate throughout the entire
term of such Indebtedness. The terms and provisions of this Section shall
control over every other provision of this Credit Agreement, the other Credit
Documents, and all agreements among the Borrower, the Agent and the Lenders.
11.15 ENTIRE AGREEMENT: SUCCESSORS ADN ASSIGNS. This Credit Agreement
and the other Credit Documents constitute the entire agreement among the
Borrower, the Agent and the Lenders, supersede any prior agreements among them,
and shall bind and benefit each of such Persons and their respective successors
and permitted assigns.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 74
IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement
to be executed and delivered in Chicago, Illinois by their proper and duly
authorized officers as of the date first set forth above.
BORROWER:
SPORTMART, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
AGENT:
BT COMMERCIAL CORPORATION,
as Agent
By:
--------------------------
Name:
------------------------
Title:
-----------------------
LENDERS:
BT COMMERCIAL CORPORATION
By:
--------------------------
Name:
------------------------
Title:
-----------------------
68
<PAGE> 1
EXHIBIT 10.40
SPORTMART INC.
1996 RESTRICTED STOCK PLAN
<PAGE> 2
SPORTMART INC.
1996 RESTRICTED STOCK PLAN
TABLE OF CONTENTS
PAGE
ARTICLE I
ESTABLISHMENT 1
1.1 Purpose 1
ARTICLE II
DEFINITIONS 1
2.1 "Affiliate" 1
2.2 "Agreement" or "Award Agreement" 1
2.3 "Award" 1
2.4 "Board of Directors" or "Board" 1
2.5 "Cause" 2
2.6 "Change in Control" 2
2.7 "Code" or "Internal Revenue Code" 2
2.8 "Commission" 2
2.9 "Committee" 2
2.10 "Common Stock" 2
2.11 "Company" 2
2.12 "Disability" 2
2.13 "Disinterested Person" 3
2.14 "Effective Date" 3
2.15 "Exchange Act" 3
2.16 "Extraordinary Termination of Employment" 3
2.17 "Grant Date" 3
2.18 "Participant" 3
2.19 "Plan" 3
2.20 "Representative" 3
2.21 "Restricted Stock" 3
2.22 "Retirement" 3
2.23 "Rule 16b-3 and "Rule 16a-1(c)(3)" 4
2.24 "Securities Act" 4
2.25 "Termination of Employment" 4
-i-
<PAGE> 3
ARTICLE III
ADMINISTRATION 5
3.1 Committee Structure and Authority 4
ARTICLE IV
STOCK SUBJECT TO PLAN 6
4.1 Number of Shares 6
4.2 Release of Shares 6
4.3 Restrictions on Shares 7
4.4 Stockholder Rights 7
4.5 Best Efforts To Register 7
4.6 Anti-Dilution 7
ARTICLE V
ELIGIBILITY 8
5.1 Eligibility 8
ARTICLE VI
RESTRICTED STOCK 8
6 .1 General 8
6.2 Awards and Certificates 9
6.3 Terms and Conditions 9
6.4 Transfer of Shares 10
6.5 Limited Transfer During Offering 10
6.6 Committee Discretion 10
ARTICLE VII
CHANGE IN CONTROL PROVISIONS 11
7.1 Impact of Event 11
7.2 Definition of Change in Control 11
ARTICLE VIII
MISCELLANEOUS 13
8.1 Amendments and Termination 13
8.2 Status of Awards Under Code Section 162(m) 13
8.3 General Provisions 13
8.4 Mitigation of Excise Tax 15
8.5 Rights with Respect to Continuance of Employment 15
8.6 Awards in Substitution for Awards Granted by Other
Corporations 15
-ii-
<PAGE> 4
8.7 Procedure for Adoption 16
8.8 Procedure for Withdrawal 16
8.9 Delay 16
8.10 Headings 16
8.11 Severability 16
8.12 Successors and Assigns 16
8.13 Entire Agreement 17
-iii-
<PAGE> 5
SPORTMART INC.
1996 RESTRICTED STOCK PLAN
ARTICLE I
ESTABLISHMENT
1.1 Purpose.
The Sportmart Inc. 1996 Restricted Stock Plan ("Plan") is hereby
established by Sportmart Inc. ("Company"). The purpose of this Plan is to
promote the overall financial objectives of the Company and its stockholders by
motivating those persons selected to participate in this Plan to achieve
long-term growth in stockholder equity in the Company and by retaining the
association of those individuals who are instrumental in achieving long-term
growth in shareholder equity. This Plan and the grant of awards hereunder are
expressly conditioned upon the Plan's approval by the security holders of the
Company to the extent determined by the Committee prior to the first annual
meeting to occur after July 1, 1996. If such approval is not obtained, then
this Plan and all Awards hereunder shall be null and void ab initio. This Plan
is adopted effective as of July 1, 1996.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
association, joint-stock company, limited liability company, trust,
unincorporated association or other entity (other than the Company) that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company including, without
limitation, any member of an affiliated group of which the Company is a common
parent corporation as provided in Section 1504 of the Code.
2.2 "Agreement" or "Award Agreement" means, individually or collectively,
any agreement entered into pursuant to this Plan pursuant to which an Award is
granted to a Participant.
2.3 "Award" means a grant of Restricted Stock.
2.4 "Board of Directors" or "Board" means the Board of Directors of the
Company.
<PAGE> 6
2.5 "Cause" shall mean, for purposes of whether and when a Participant has
incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for "cause" as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause,"
then "cause" shall mean (a) any act or failure to act deemed to constitute
cause under the Company's established practices, policies or guidelines
applicable to the Participant or (b) the Participant's act or omission to act
constituting gross misconduct with respect to the Company or an Affiliate in
any material respect.
2.6 "Change in Control" has the meaning set forth in Section 7.2.
2.7 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, final Treasury Regulations thereunder and any subsequent
Internal Revenue Code.
2.8 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.9 "Committee" means the person or persons appointed by the Board of
Directors to administer this Plan, as further described herein.
2.10 "Common Stock" means either the shares of (a) the Voting Common
Stock, $.01 par value per share or (b) the Class A Common Stock, $.01 par value
per share, whichever the Committee determines, whether presently or hereafter
issued, and any other stock or security resulting from adjustment thereof as
described hereinafter or the common stock of any successor to the Company which
is designated for the purpose of this Plan.
2.11 "Company" means Sportmart Inc., a Delaware corporation, and includes
any successor or assignee corporation or corporations into which the Company
may be merged, changed or consolidated; any corporation for whose securities
all or substantially all of the securities of the Company shall be exchanged;
and any assignee of or successor to substantially all of the assets of the
Company.
2.12 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable
of performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan
if it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness; or (ii) an injury or disease contracted, suffered, or
incurred while participating in a criminal offense. The determination of
Disability shall be made by the Committee. The determination of Disability for
purposes of this Plan shall not be construed to be an admission of disability
for any other purpose.
2
<PAGE> 7
2.13 "Disinterested Person" shall have the meaning set forth in Rule
16b-3, and shall mean a person who is also an "outside director" under Section
162(m) of the Code.
2.14 "Effective Date" means July 1, 1996.
2.15 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.16 "Extraordinary Termination of Employment" means the Termination of
Employment of the Participant due to death, Disability or Retirement.
2.17 "Grant Date" means the date that as of which an Award is granted
pursuant to this Plan.
2.18 "Participant" means a person who satisfies the eligibility conditions
of Article V and to whom an Award has been granted by the Committee under this
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of
the Participant, a partnership the interest of which we held by or for the
benefit of the Participant, the Participant's parents, spouse or descendants,
or a custodian under a uniform gifts to minors act or similar statute for the
benefit of the Participant's descendants, to the extent permitted by the
Committee and not inconsistent with Rule 16b-3. Notwithstanding the foregoing,
the term "Termination of Employment" shall mean the Termination of Employment
of the employee.
2.19 "Plan" means this Sportmart Inc. 1996 Stock Restricted Plan, as the
same may be amended from time to time.
2.20 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of
the Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
beneficiary of theParticipant upon or following the Participant's death; or (d)
any person to whom an Option has been transferred with the permission of the
Committee or by operation of law; provided that only one of the foregoing shall
be the Representative at any point in time as determined under applicable law
and recognized by the Committee.
2.21 "Restricted Stock" means shares of Common Stock granted pursuant to
Article VI.
2.22 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of at least 20 years of service.
3
<PAGE> 8
2.23 "Rule 16b-3 and "Rule 16a-1(c)(3)"2.23 Rule 16b-3 and Rule
16a-1(c)(3); means Rule 16b-3 and Rule 16a-1(c)(3), as from time to time in
effect and applicable to the Plan and Participants, promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange Act.
2.24 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
2.25 "Termination of Employment" means the occurrence of any act or event
whether pursuant to an employment agreement or otherwise that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, director or employee of the Company or
of any Affiliate, or to be an officer, independent contractor, director or
employee of any entity that provides services to the Company or an Affiliate,
including, without limitation, death, Disability, dismissal, severance at the
election of the Participant, Retirement, or severance as a result of the
discontinuance, liquidation, sale or transfer by the Company or its Affiliates
of all businesses owned or operated by the Company or its Affiliates. With
respect to any person who is not an employee with respect to the Company or an
Affiliate, the Agreement shall establish what act or event shall constitute a
Termination of Employment for purposes of this Plan. A transfer of employment
from the Company to an Affiliate, or from an Affiliate to the Company, shall
not be a Termination of Employment, unless expressly determined by the
Committee. A Termination of Employment shall occur to an employee who is
employed by an Affiliate if the Affiliate shall cease to be an Affiliate and
the Participant shall not immediately thereafter become an employee of the
Company or an Affiliate.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. This Plan shall be administered by
the Committee which shall be comprised of one or more persons. The Committee
shall be the Compensation Committee of the Board of Directors, unless such
committee does not exist or the Board establishes a committee whose purpose is
the administration of this Plan. In the absence of an appointment, the Board
or the portion thereof that is a Disinterested Person (if determined relevant
by the Board) shall be the Committee. A majority of the Committee shall
constitute a quorum at any meeting thereof (including telephone conference) and
the acts of a majority of the members present, or acts approved in writing by a
majority of the entire Committee without a meeting, shall be the acts of the
Committee for purposes of this Plan. The Committee may authorize any one or
more of its members or an officer of the Company to execute and deliver
documents on behalf of the Committee. If determined applicable by the Board,
the Committee shall be comprised of such number of Disinterested Persons as is
required for application of Rule 16b-3 and the deduction of compensation under
Section 162(m) of the Code. A member of the Committee shall not exercise any
discretion respecting himself or herself under this Plan. The Board shall have
4
<PAGE> 9
the authority to remove, replace or fill any vacancy of any member of the
Committee upon notice to the Committee and the affected member. Any member of
the Committee may resign upon notice to the Board. The Committee may allocate
among one or more of its members, or may delegate to one or more of its agents,
such duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of this Plan:
(a) to select those persons to whom Awards may be granted from time
to time;
(b) to determine the number of shares of Common Stock to be covered
by each Award granted hereunder;
(c) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, any restriction or limitation
and any acceleration or forfeiture waiver regarding any shares of Common
Stock);
(d) to adjust the terms and conditions, at any time or from time to
time, of any Award, subject to the limitations of Section 8.1;
(e) to determine under what circumstances an Award may be settled in
cash or Common Stock.
(f) to provide for the forms of Agreement to be utilized in
connection with this Plan;
(g) to determine whether a Participant has a Disability or a
Retirement;
(h) to determine what securities law requirements are applicable to
this Plan, Awards, and the issuance of shares of Common Stock and to
require of a Participant that appropriate action be taken with respect to
such requirements;
(i) to cancel, as provided in this Plan or an Agreement, outstanding
Awards;
(j) to interpret and make a final determination with respect to the
remaining number of shares of Common Stock available under this Plan;
(k) to require as a condition of the issuance or transfer of a
certificate of Common Stock, the withholding from a Participant of the
amount of any federal, state or local taxes as may be necessary in order
for the Company or any other employer to obtain a deduction or as may be
otherwise required by law;
(l) to determine whether and with what effect an individual has
incurred a Termination of Employment;
5
<PAGE> 10
(m) to determine whether the Company or any other person has a right
or obligation to purchase Common Stock from a Participant and, if so, the
terms and conditions on which such Common Stock is to be purchased;
(n) to determine the restrictions or limitations on the transfer of
Common Stock;
(o) to determine whether an Award is to be adjusted, modified or
purchased, under this Plan or the terms of an Agreement;
(p) to adopt, amend and rescind such rules and regulations as, in
its opinion, may be advisable in the administration of this Plan; and
(q) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of
this Plan and any Award issued under this Plan (and any Agreement) and to
otherwise supervise the administration of this Plan. The Committee's policies
and procedures may differ with respect to Awards granted at different times or
to different Participants.
Any determination made by the Committee pursuant to the provisions of this
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of this Plan or an Agreement, at
any time thereafter. All decisions made by the Committee pursuant to the
provisions of this Plan shall be final and binding on all persons, including
the Company and Participants. Any determination shall not be subject to de
novo review if challenged in court.
ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Awards under this Plan shall be 400,000 shares of Common Stock
authorized for issuance on the Effective Date. The Committee in its discretion
may determine whether an Award will be Voting Common Stock or Class A Common
Stock, or a combination for purposes of an Award. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares.
4.2 Release of Shares. The Committee shall have full authority to
determine the number of shares of Common Stock available for Award, and in its
discretion may include (without limitation) as available for distribution any
shares of Common Stock that have ceased to be subject to an Award, any shares
of Common Stock subject to any Award that are forfeited, any Award that
6
<PAGE> 11
otherwise terminates without issuance of shares of Common Stock being made to
the Participant, or any shares (whether or not restricted) of Common Stock that
are received by the Company, including any shares received in satisfaction of a
tax withholding obligation. If any shares could not again be available for
Awards to a particular Participant under any applicable law, such shares shall
be available exclusively for Awards to Participants who are not subject to such
limitations.
4.3 Restrictions on Shares. Shares of Common Stock issued upon
exercise of an Award shall be subject to the terms and conditions specified
herein and to such other terms, conditions and restrictions as the Committee in
its discretion may determine or provide in the Award Agreement. The Company
shall not be required to issue or deliver any certificates for shares of Common
Stock, cash or other property prior to (i) the listing of such shares on any
stock exchange (or other public market) on which the Common Stock may then be
listed (or regularly traded), (ii) the completion of any registration or
qualification of such shares under federal or state law, or any ruling or
regulation of any government body which the Committee determines to be
necessary or advisable, and (iii) the satisfaction of any applicable
withholding obligation in order for the Company or an Affiliate to obtain a
deduction with respect to an Award. The Company may cause any certificate for
any share of Common Stock to be delivered to be properly marked with a legend
or other notation reflecting the limitations on transfer of such Common Stock
as provided in this Plan or as the Committee may otherwise require. The
Committee may require any person exercising an Award to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares of Common Stock in
compliance with applicable law or otherwise. Fractional shares shall not be
delivered, but shall be rounded to the next lower whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder
as to shares of Common Stock subject to an Award until, after proper exercise
of the Award or other action required, such shares shall have been recorded on
the Company's official stockholder records as having been issued and
transferred. No adjustment shall be made for cash dividends or other rights
for which the record date is prior to the date such shares are recorded as
issued and transferred in the Company's official stockholder records, except as
provided herein or in an Agreement.
4.5 Best Efforts To Register. The Company will register under the
Securities Act the Common Stock delivered or deliverable pursuant to Awards on
Commission Form S-8 if available to the Company for this purpose (or any
successor or alternate form that is substantially similar to that form to the
extent available to effect such registration), in accordance with the rules and
regulations governing such forms, as soon as such forms are available for
registration to the Company for this purpose. The Company will use its best
efforts to cause the registration statement to become effective as soon as
possible and will file such supplements and amendments to the registration
statement as may be necessary to keep the registration statement in effect
until the earlier of (a) the date the Company is no longer a reporting company
under the Exchange Act and (b) the date all Participants have disposed of all
shares delivered pursuant to any Award. The Company may delay the foregoing
obligation if the Committee reasonably determines that any such registration
would materially and adversely affect the Company's interests or if there is no
material benefit to Participants.
7
<PAGE> 12
4.6 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale
by the Company of all or a substantial portion of its assets (measured on
either a stand-alone or consolidated basis), reorganization, rights offering, a
partial or complete liquidation, or any other corporate transaction, Company
share offering or event involving the Company and having an effect similar to
any of the foregoing, then the Committee may adjust or substitute, as the case
may be, the number of shares of Common Stock available for Awards under this
Plan, the number and class of shares of Common Stock covered by outstanding
Awards, and any other characteristics or terms of the Awards as the Committee
shall deem necessary or appropriate to reflect equitably the effects of such
changes to the Participants; provided, however, that the Committee may limit
any such adjustment so as to maintain the deductibility of the Awards under
Section 162(m) of the Code, and that any fractional shares resulting from such
shall be eliminated by rounding to the next lower whole number of shares with
appropriate payment for such fractional share as shall reasonably be
determined by the Committee.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in this Plan and be granted Awards shall be those
persons who are officers, employees and consultants of the Company or any
subsidiary of the Company, who shall be in a position, in the opinion of the
Committee, to make contributions to the growth, management, protection and
success of the Company and its subsidiaries. Of those persons described in the
preceding sentence, the Committee may, from time to time, select persons to be
granted Awards and shall determine the terms and conditions with respect
thereto. In making any such selection and in determining the form of the
Award, the Committee may give consideration to the functions and
responsibilities of the person's contributions to the Company and its
subsidiaries, the value of the individual's service to the Company and its
subsidiaries and such other factors deemed relevant by the Committee. The
Committee may designate any person who is not eligible to participate in this
Plan if such person would otherwise be eligible to participate in this Plan
(and members of the Committee are expressly excluded to the extent such persons
are intended to be Disinterested Persons).
ARTICLE VI
RESTRICTED STOCK
6.1 General. The Committee shall have authority to grant Restricted Stock
under this Plan at any time or from time to time. The Committee shall
determine the persons to whom and the time or times at which grants of
Restricted Stock will be awarded, the number of shares of Restricted Shares to
be awarded to any Participant, the time or times within which such Awards
8
<PAGE> 13
may be subject to forfeiture and any other terms and conditions of the
Award. Each Award shall be confirmed by, and be subject to the terms of, an
Agreement. The Committee may condition the grant of Restricted Stock upon the
Participant's completing a period of service or attainment of specified
performance goals by the Participant or by the Company or an Affiliate
(including a division or department of the Company or an Affiliate) for or
within which the Participant is primarily employed or upon such other factors or
criteria as the Committee shall determine. The provisions of Awards need not be
the same with respect to any Participant.
6.2 Awards and Certificates. Restricted Stock granted under the Plan may
be evidenced in such manner as the Committee shall determine. Each Participant
receiving an Award of Restricted Stock may be issued a certificate in respect
of such shares of Restricted Stock. Such certificate shall be registered in
the name of such Participant and shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Award as determined
by the Committee. The Committee may require that the certificates evidencing
such shares be held in custody by the Company until the restrictions thereon
shall have lapsed and that, as a condition of any Award of Restricted Stock,
the Participant shall have delivered a stock power, endorsed in blank, relating
to the Common Stock covered by such Award.
6.3 Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(a) Limitations on Transferability. The purchase price for shares
of Restricted Stock shall be set by the Committee and may be zero.
Restricted Stock shall be subject to such restrictions on
transferability, risk of forfeiture and other restrictions, if any, as
the Committee may impose, which restrictions may lapse separately or in
combination at such times, under such circumstances (including
achievement of performance goals and/or future service requirements), in
such installments or otherwise, as the Committee may determine at the
Grant Date or thereafter. Subject to the provisions of this Plan and the
Agreement, during a period set by the Committee, commencing with the
Grant Date (the "Restriction Period"), the Participant shall not be
permitted to sell, assign, margin, transfer, pledge or encumber any
interest in shares of Restricted Stock; provided, however, to the extent
that the Company would not be entitled to deduct the Award under Section
162(m) of the Code, the Restriction Period (and any restrictions
regarding the Restricted Stock) shall be extended to the extent and until
the Award would be deductible under Section 162(m) of the Code.
(b) Rights. Except to the extent restricted under the terms of the
Plan and any Award Agreement, and except as provided in Section 6.3(a),
the Participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a stockholder of Common Stock, including, if
applicable, the right to vote the shares and the right to receive any
cash dividends. Unless otherwise determined by the Committee and subject
to this Plan, cash dividends on Common Stock shall be automatically
reinvested in additional shares of Restricted Stock.
(c) Criteria. Based on service, performance by the Participant or
by the Company or the Affiliate, including any division or department for
which the Participant
9
<PAGE> 14
is employed or such other factors or criteria as the Committee may
determine, the Committee may provide for the lapse of restrictions and may
accelerate the vesting of all or any part of any Award and waive the
restrictions for all or any part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs an Extraordinary
Termination of Employment during the Restriction Period, the restrictions
shall lapse and the Participant shall be fully vested in the Restricted
Stock. Except to the extent otherwise provided in the applicable
Agreement and this Plan, upon a Participant's Termination of Employment
for any reason during the Restriction Period other than an Extraordinary
Termination of Employment, all shares of Restricted Stock still subject
to restriction shall be forfeited by the Participant, except the
Committee shall have the discretion to waive in whole or in part any or
all remaining restrictions with respect to any or all of such
Participant's shares of Restricted Stock.
(e) Delivery. If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates for such shares shall be delivered to the
Participant.
(f) Election. A Participant may elect to further defer receipt of
the Restricted Stock for a specified period or until a specified event,
subject in each case to the Committee's approval and to such terms as are
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made one (1) year prior to completion of
the Restriction Period.
6.4 Transfer of Shares. Unless otherwise provided in an Agreement, a
Participant may at any time make a transfer of shares of Common Stock received
pursuant to the exercise of an Award to his parents, spouse or descendants, to
any trust for the benefit of the foregoing or to a partnership the interests of
which are principally for the foregoing or to a custodian under a uniform gifts
to minors act or similar statute for the benefit of any of the Participant's
descendants. Any transfer of shares received pursuant to the exercise of an
Award shall not be permitted or valid unless and until the transferee agrees to
be bound by the provisions of this Plan, and any provision respecting Common
Stock under the Agreement, provided that "Termination of Employment" shall
continue to refer to the Termination of Employment of the employee.
6.5 Limited Transfer During Offering. In the event there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters
managing the registered public offering, effect any public sale or distribution
of shares received directly or indirectly pursuant to an Award.
6.6 Committee Discretion. The Committee may in its sole discretion
include in any Agreement an obligation that the Company purchase a
Participant's shares of Common Stock received upon the exercise of an Award, or
may obligate a Participant to sell shares of Common
10
<PAGE> 15
Stock to the Company upon such terms and conditions as the Committee may
determine and set forth in an Agreement.
ARTICLE VII
CHANGE IN CONTROL PROVISIONS
7.1 Impact of Event. Notwithstanding any other provision of this Plan to
the contrary, in the event of a Change in Control (as defined in Section 7.2),
the Committee shall have full discretion, notwithstanding anything herein or in
an Agreement to the contrary, to do any or all of the following with respect to
an outstanding Award:
(a) to provide that the limitations applicable to the Award shall
lapse, and such Restricted Stock shall become free of all restrictions
and become fully vested and transferrable to the full extent of the
original grant;
(b) to cause any Award to be cancelled, provided notice of at least
15 days thereof is provided before the date of cancellation;
(c) to provide that the securities of another entity be substituted
hereunder for the Common Stock and to make equitable adjustment with
respect thereto;
(d) to grant the Participant the right to elect by giving notice
during a set period of time from and after a Change in Control to
surrender all or part of the Award to the Company and to receive cash in
an amount equal to the fair market value of the Common Stock granted
under the Award; and
(e) to take any other action the Committee determines to take.
7.2 Definition of Change in Control. For purposes of this Plan, a "Change
in Control" shall mean the happening of any of the following events:
(a) (i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of twenty-five percent (25%) or more of either (A) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the"Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change in Control of the Company: (1) any acquisition
directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (2) any acquisition by the Company,
(3) any acquisition by any employee benefit play (or
11
<PAGE> 16
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (4) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation, if,
following such reorganization, merger or consolidation, the conditions
described in clauses (A), (B) and (C) of subsection (c) of this Section
are satisfied; or
(b) Individuals who, as of the effective date of this Plan,
constitute the Board of Directors of the Company (the "Incumbent Board of
the Company") cease for any reason to constitute at least a majority of
the Board of Directors of the Company; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board of the Company shall be considered as
though such individual were a member of the Incumbent Board of the
Company, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as contemplated by Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board of Directors of the Company; or
(c) Approval by the shareholders of the Company of a reorganization
(including a plan of reorganization under applicable bankruptcy law),
merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (A) more than seventy-five
percent (75%) of, respectively, the then outstanding share of common
stock of the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company, any employee benefit plan (or related trust) of
the Company or such corporation resulting from such reorganization,
merger or consolidation and any Person beneficially owning immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, twenty five percent (25%) or more of the Outstanding Company
Common Stock or Outstanding Voting Securities, as the case may be)
beneficially owns, directly or indirectly, twenty-five percent (25%) or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
board of directors of the corporation resulting from such reorganization,
merger or consolidation were members of the Incumbent Board of the
Company at the time of the execution of the initial agreement providing
for such reorganization, merge or consolidation; or
12
<PAGE> 17
(d) Approval by the shareholders of the Company of the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, (A) more than seventy-five percent (75%)
of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company, any employee benefit plan (or related trust) of
the Company or such corporation and any Person beneficially owning,
immediately prior to such sale or other disposition, directly or
indirectly, twenty-five percent (25%) or more of the Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, twenty-five percent (25%) or more of, respectively, the
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors and (3) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board of the
Company at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of assets of
the Company.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendments and Termination. The Board or the Committee may amend,
waive, alter, discharge, terminate or discontinue the Plan or any Award at any
time even with prejudice to the Participant. Notwithstanding anything in the
Plan to the contrary, if any right under this Plan would cause a transaction to
be ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee may modify
or adjust the right so that pooling of interest accounting shall be available.
8.2 Status of Awards Under Code Section 162(m). It is the intent of the
Company that Awards granted to persons who are "covered "employees within the
meaning of Code Section 162(m) shall be fully deductible under Code Section
162(m). Accordingly, the provisions of the Plan shall be interpreted in a
manner consistent with Code Section 162(m). If any provision of the Plan or
any agreement relating to such an Award does not comply or is inconsistent with
the requirements of Code Section 162(m), such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.
13
<PAGE> 18
8.3 General Provisions.
(a) Representation. The Committee may require each person
purchasing or receiving shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the
shares without a view to the distribution thereof. The certificates for
such shares may include any legend which the Committee deems appropriate
to reflect any restrictions on transfer.
(b) No Additional Obligation. Nothing contained in this Plan shall
prevent the Company or an Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to any Award, the Participant shall pay
to the Company (or other entity identified by the Committee), or make
arrangements satisfactory to the Company or other entity identified by
the Committee regarding the payment of, any Federal, state, local or
foreign taxes of any kind required by law to be withheld with respect to
such amount required in order for the Company or an Affiliate to obtain a
current deduction. Unless otherwise determined by the Committee,
withholding obligations may be settled with Common Stock, including
Common Stock that is part of the Award that gives rise to the withholding
requirement provided that any applicable requirements under Section 16 of
the Exchange Act are satisfied. The obligations of the Company under
this Plan shall be conditional on such payment or arrangements, and the
Company and its Affiliates shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to the
Participant.
(d) Reinvestment. The reinvestment of dividends in additional
Restricted Stock at the time of any dividend payment shall only be
permissible if sufficient shares of Common Stock are available for such
reinvestment.
(e) Representation. The Committee shall establish such procedures
as it deems appropriate for a Participant to designate a Representative
to whom any amounts payable in the event of the Participant's death are
to be paid.
(f) Controlling Law. This Plan and all Awards made and actions
taken thereunder shall be governed by and construed in accordance with
the laws of the State of Delaware (other than its law respecting choice
of law). This Plan shall be construed to comply with all applicable law,
and to avoid liability to the Company, an Affiliate or a Participant,
including, without limitation, liability under Section 16(b) of the
Exchange Act.
(g) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the
value of any shares of Common Stock, cash or other thing of value under
this Plan or an Agreement to be transferred to the Participant, and no
shares of Common Stock, cash or other thing of value under this Plan
14
<PAGE> 19
or an Agreement shall be transferred unless and until all disputes
between the Company and the Participant have been fully and finally
resolved and the Participant has waived all claims to such against the
Company or an Affiliate.
(h) Fail-Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable
by the Committee. Moreover, in the event the Plan does not include a
provision required by Rule 16b-3 to be stated herein, such provision
shall be deemed to be incorporated by reference into the Plan with
respect to Participants subject to Section 16.
(i) Right to Capitalize. The grant of an Award shall in no way
affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge,
consolidation, dissolve, liquidate or sell or transfer all or any part of
its business or assets.
8.4 Mitigation of Excise Tax. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 8.4),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments") would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment or right shall be reduced to the largest
amount or greatest right that will result in no portion of the amount payable
or right accruing under this Plan being subject to an excise tax under Section
4999 of the Code or being disallowed as a deduction under Section 280G of the
Code. The determination of whether any reduction in the rights or payments
under this Plan is to apply shall be made by the Committee in good faith after
consultation with the Participant, and such determination shall be conclusive
and binding on the Participant. The Participant shall cooperate in good faith
with the Committee in making such determination and providing the necessary
information for this purpose.
8.5 Rights with Respect to Continuance of Employment. Nothing
contained herein shall be deemed to alter the relationship between the Company
or an Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or
an Affiliate shall have no obligation to retain the Participant in its employ
or service as a result of this Plan. There shall be no inference as to the
length of employment or service hereby, and the Company or an Affiliate
reserves the same rights to terminate the Participant's employment or service
as existed prior to the individual becoming a Participant in this Plan.
8.6 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under this Plan from time to time in substitution for
awards held by employees, directors or service providers of other corporations
who are about to become officers, directors or employees
15
<PAGE> 20
of the Company or an Affiliate as the result of a merger or consolidation of
the employing corporation with the Company or an Affiliate, or the acquisition
by the Company or an Affiliate of the assets of the employing corporation, or
the acquisition by the Company or Affiliate of the stock of the employing
corporation, as the result of which it becomes a designated employer under this
Plan. The terms and conditions of the Awards so granted may vary from the terms
and conditions set forth in this Plan at the time of such grant as the majority
of the members of the Committee may deem appropriate to conform, in whole or in
part, to the provisions of the awards in substitution for which they are
granted.
8.7 Procedure for Adoption. Any Affiliate of the Company may by
resolution of such Affiliate's board of directors, with the consent of the
Board of Directors and subject to such conditions as may be imposed by the
Board of Directors, adopt this Plan for the benefit of its employees as of the
date specified in the board resolution.
8.8 Procedure for Withdrawal. Any Affiliate which has adopted this Plan
may, by resolution of the board of directors of such direct or indirect
subsidiary, with the consent of the Board of Directors and subject to such
conditions as may be imposed by the Board of Directors, terminate its adoption
of this Plan.
8.9 Delay. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under this Plan or an Agreement to
the extent necessary to avoid the imposition of liability shall be suspended
and delayed during the period the Participant would be subject to such
liability, but not more than six (6) months and one (1) day. The Company shall
have the right to suspend or delay any time period described in this Plan or an
Agreement if the Committee shall determine that the action may constitute a
violation of any law or result in liability under any law to the Company, an
Affiliate or a stockholder of the Company until such time as the action
required or permitted shall not constitute a violation of law or result in
liability to the Company, an Affiliate or a stockholder of the Company. The
Committee shall have the discretion to suspend the application of the
provisions of this Plan required solely to comply with Rule 16b-3 if the
Committee shall determine that Rule 16b-3 does not apply to this Plan.
8.10 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
8.11 Severability. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
8.12 Successors and Assigns. This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all
16
<PAGE> 21
rights granted to the Company hereunder, shall be binding upon the
Participant's heirs, legal representatives and successors.
8.13 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between this Plan and the Agreement, the
terms and conditions of the Agreement shall control.
Executed as of the 1st day of July, 1996.
SPORTMART INC.
By__________________________________
17
<PAGE> 1
EXHIBIT 11
SPORTMART, INC. AND SUBSIDIARY
COMPUTATION OF INCOME PER SHARE
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
Financial statement computations:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------- ------------------------
JULY 28, JULY 30, JULY 28, JULY 30,
1996 1995 1996 1995
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Income from continuing operations before income taxes $7,646 $9,251 $6,126 $7,500
Income tax provision 3,211 3,908 2,568 3,142
------ ------ ------ ------
Income from continuing operations 4,435 5,343 3,558 4,358
Loss from discontinued operations - (153) - (311)
------ ------ ------ ------
Net income $4,435 $5,190 $3,558 $4,047
====== ======= ====== ======
Net income per share:
Shares used in primary earnings per share computation:
Weighted average shares outstanding 12,835 12,774 12,818 12,769
Net additional shares assuming options exercised and
proceeds used to purchase treasury shares (1) - - - -
------ ------ ------ ------
Common and common equivalent shares 12,835 12,774 12,818 12,769
====== ====== ====== ======
Primary earnings per share from continuing operations $ .35 $ .42 $ .28 $ .34
Primary loss per share from discontinued operations - (.01) - (.02)
------ ------ ------ ------
Primary earnings per share $ .35 $ .41 $ .28 $ .32
====== ====== ====== ======
Shares used in fully diluted earnings per share computation:
Weighted average shares outstanding 12,835 12,774 12,818 12,769
Net additional shares assuming options exercised and
proceeds used to purchase treasury shares (1) - - - -
------ ------ ------ ------
Common and common equivalent shares 12,835 12,774 12,818 12,769
====== ====== ====== ======
Fully diluted earnings per share from continuing operations $ .35 $ .42 $ .28 $ .34
Fully diluted loss per share from discontinued operations - (.01) - (.02)
------ ------ ------ ------
Fully diluted earnings per share $ .35 $ .41 $ . 28 $ .32
====== ====== ====== ======
</TABLE>
(1) Certain common stock equivalents are antidilutive and therefore are not
included in the calculation.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-02-1997
<PERIOD-START> JAN-29-1996
<PERIOD-END> JUL-28-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 179,714,614
<CURRENT-ASSETS> 205,199,412
<PP&E> 107,203,424
<DEPRECIATION> (33,576,272)
<TOTAL-ASSETS> 284,809,578
<CURRENT-LIABILITIES> 126,551,882
<BONDS> 0
0
0
<COMMON> 128,352
<OTHER-SE> 104,354,194
<TOTAL-LIABILITY-AND-EQUITY> 284,809,578
<SALES> 262,004,861
<TOTAL-REVENUES> 262,288,824
<CGS> 199,576,001<F1>
<TOTAL-COSTS> 199,576,001
<OTHER-EXPENSES> 52,673,272
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,913,348
<INCOME-PRETAX> 6,126,203
<INCOME-TAX> (2,568,597)
<INCOME-CONTINUING> 3,557,606
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,557,606
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
<FN>
<F1>CGS includes merchandise cost of goods sold, buying and benefits cost,
distribution expenses and occupancy cost.
</FN>
</TABLE>
