FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended February 2, 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ___________ to ___________
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, Suite 200, Wheeling, Illinois 60090
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (847) 520-0100
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to section 12(g) of the Act:
Voting Common Stock, par value $.01
(Title of class)
Class A Common Stock, par value $.01
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of the Form 10-K or any amendment to this Form 10-K. [X]
As of April 15, 1997, the aggregate market value of the Voting
Common Stock held by non-affiliates of the registrant, based on the
closing sale price of the registrant's Voting Common Stock as quoted
on the Nasdaq National Market, was approximately $6,178,530 (for
purposes of calculating this amount only, directors, officers and
beneficial owners of 5% or more of the Voting Common Stock of the
registrant have been deemed affiliates). On April 15, 1997, there
were 12,843,568 shares of common stock outstanding, which amount
consists of 5,148,833.5 shares of Voting Common Stock and 7,694,734.5
shares of Class A Common Stock.
<PAGE>
Portions of the registrant's Proxy Statement for its Annual
Meeting of Stockholders, currently scheduled to be held on June 27,
1997, are incorporated by reference into Part III of this Report.
There are 47 pages in the sequentially numbered, manually signed
original. The exhibit index is located on page 45.
<PAGE>
PART I
ITEM 1. BUSINESS
General
Sportmart, Inc. (the "Company") is a leading sporting goods
superstore retailer, which pioneered the superstore concept in 1971.
As of February 2, 1997, the Company operated 70 stores, with 16
stores in the Chicago metropolitan area, 13 stores in the Los Angeles
metropolitan area, eleven stores in the San Francisco/Sacramento area,
eleven stores in Canada, five stores in the Minneapolis metropolitan
area, three stores in each of the Seattle and Columbus, Ohio
metropolitan areas, two stores in each of the San Diego, Milwaukee and
Portland areas and one store in each of the Cleveland and Des Moines
areas. On January 16, 1997, the Company announced the closing of the
eleven stores in Canada which were operated by its Canadian subsidiary
Sportdepot Stores Inc. The liquidation of the Canadian stores
inventory was completed in April 1997. The Company is limiting
expansion in 1997 in order to focus its resources on existing
operations in the United States.
Business Strategy
Key factors of Sportmart's ability to successfully compete in
the retail sporting goods industry include:
Merchandising
Sportmart is committed to providing both quality name-brand and
private-brand merchandise at everyday low prices, in a specialty
store, rather than a "warehouse" store, environment. The Company
believes that the breadth and depth of its in-stock merchandise
selection exceeds that which is generally available in specialty
stores, discount and department stores and other traditional sporting
goods chains and that it is able to offer customers convenient, one-stop
shopping for their complete sporting goods needs.
Customer Service
Fundamental to the Company's philosophy is a Company-wide culture
of customer service and customer satisfaction. Consequently, the
Company has implemented procedures and training programs to increase
its sales staff's responsiveness and knowledge aimed at exceeding the
customer's expectations.
Leading Position in Major Markets
Sportmart's aim is to be a leading sporting goods superstore
retailer in each of its developed markets. Management believes that
the superstore concept for sporting goods can be most effectively
carried out in major metropolitan areas which offer an adequate
population base and favorable demographic characteristic supplemented
by additional stores in smaller markets that can be serviced by the
same distribution centers.
<PAGE>
Economies of Scale
Sportmart has established itself in existing developed markets
by opening clusters of stores which can be serviced by a central
distribution center and which also provide economies of scale in
advertising, promotions and other overhead expenses. Additionally,
stores in smaller markets are also serviced by the same distribution
centers.
Merchandising
Sportmart's merchandising strategy focuses on offering in one
superstore a broad and deep selection of in-stock, quality, name-brand
and private-brand merchandise. The Company's comprehensive product
assortment is presented in the integrated "Four Worlds" format that
combines equipment and apparel by sport. The "Worlds"consist of team
sports, footwear, outdoors and fitness. Each store offers a wide
variety of sports equipment, apparel, footwear and accessories
designed to meet the total sporting goods needs of its customers, from
casual sports participants to serious athletes. In addition, the
in-store merchandise assortment is tailored to reflect the specific
regional and seasonal needs of each store.
The table below provides the percentage of Sportmart's sales
represented by each of the listed categories for the last three fiscal
years:
<TABLE>
Sales By Category
Fiscal Years Ended
Feb 2, Jan. 28, Jan. 29,
1997 1996 1995
<S> <C> <C> <C>
Soft Goods:
Sportswear and Athletic Apparel 28.5% 26.1% 26.3%
Athletic Footwear 23.0 20.8 21.2
Total Soft Goods 51.5 46.9 47.5
Hard Goods1 48.5 53.1 52.5
Total Sales 100.0% 100.0% 100.0%
</TABLE>
1 Hard goods generally consist of participation (club) equipment,
in-line skates, fitness equipment, field and stream and outdoor equipment.
In fiscal 1996, the Company purchased merchandise from
approximately 1000 vendors and, in fiscal 1996, the Company's largest
vendor, Nike, Inc., accounted for approximately 20% of its total
merchandise purchases.
Customer Service and Training
Customer service at Sportmart includes knowledgeable sales
associates, a liberal return policy, new product demonstrations and
"Tech Centers" for on-site customer services. Sportmart is expanding
customer service with a program that is adding certified sports
specialists for key sports in a growing number of store locations.
Management believes its continuing attention to customer service
enhances the Company's ability to attract and retain customers and
associates.
<PAGE>
The Company also places great emphasis on the training of store
level management and associates. Each store is staffed with one
manager, up to two assistant managers and three to six department
managers. Management associates are trained in a number of areas,
including sales techniques, management techniques and product
knowledge. The Company seeks to encourage responsiveness and
entrepreneurship at the store level by tying store manager bonuses to
store performance. Associates are also encouraged to participate in
Company sponsored clinics and product demonstrations to gain first-hand
product knowledge. Large vendors such as Nike, Wilson, Adidas
and Rollerblade conduct quarterly meetings to discuss new products and
product technologies with Sportmart associates.
The prototypical store has a visible "Tech Center" which offers a
wide range of on-site services by trained technicians. Customers can
purchase and watch racket stringing, golf club regripping, bowling
ball drilling, ski binding installation and bike assembly. Management
believes such services instill customer confidence that Sportmart's
merchandise will be "competition-ready" when it leaves the store.
Marketing
Sportmart's comprehensive marketing program includes an
integrated program of advertising, event marketing and public
relations. Sportmart's marketing program is administered by the
Company's marketing staff with support from an outside advertising
agency.
The advertising program is concentrated in extensive newspaper
advertising that provides a broad-based method of reaching existing
customers and prospecting new customers. This is supplemented by
television, radio and targeted direct mail advertising. Sportmart
advertises in major metropolitan newspapers as well as regional
newspapers circulated in areas surrounding Sportmart locations to
achieve maximum market coverage. Advertisements typically consist of
full-color Sunday newspaper inserts and weekly single-page
advertising. Television is generally concentrated in the two to three
weeks of peak selling periods such as Father's Day and Christmas.
Sportmart receives substantial vendor cooperative advertising
reimbursements.
Targeted direct mail advertising is implemented according to
specific customer information provided by Sportmart's Frequent Buyer
database, which rewards customers for loyalty and tracks customer
shopping patterns. Direct mail consists of sport-specific mailers
targeted during key "windows of opportunity" to customers who have
demonstrated the greatest propensity to purchase such goods. Direct
mail also supplements heightened newspaper and broadcast advertising
during peak selling periods such as Father's Day and Christmas. A
portion of the direct mail program is targeted to prospective
Sportmart customers matching specified demographics.
Sportmart also sponsors tournaments and amateur competitive
events in an effort to align itself with both the serious sports
enthusiast and the recreational athlete. Sportmart is also recognized
as a major sponsor of professional sport teams in its markets,
including, from time to time, the Bulls, White Sox, Cubs and Bears in
Chicago, the Dodgers in Los Angeles, the Supersonics in Seattle, the
Twins and Vikings in Minneapolis, and the Giants in San Francisco.
<PAGE>
Events marketing includes a targeted women's sports program
entitled "The Woman Athlete, Breaking the Myth". Sportmart has
identified this as a major company objective as participation in
women's sports continues to escalate and the loyalty of the female
customer is an important element in Sportmart's long term success. A
key component of this program is the Sportmart Women's Advisory Team,
or "SWAT". The Team is composed of five Olympic champions including
Janet Evans (four-time Olympic Gold Medalist in swimming), Mia Hamm
(Olympic Gold Medalist in soccer), Katrina McClain (two-time Olympic
Gold Medalist in basketball), Dot Richardson (Olympic Gold Medalist in
softball), and Willye White (two-time Silver Medalist in track and
field, and the first American to compete in five consecutive
Olympics). This stellar team of athletes, along with the prestigious
Women's Sports Foundation, guides Sportmart in the administration of
a scholarship program that awards eight scholarships to young women
athletes entering college. Applications are received from all
Sportmart markets. The Team also appears in key Sportmart advertising
to communicate the importance and benefits of sports participation for
all women. The SWAT Team will continue to guide Sportmart in its
merchandising and marketing to women.
Sportmart's marketing program provides a unique competitive
advantage through its Frequent Buyer Program. In the second quarter of
1997, the Company will enhance its current Frequent Buyer Program with
the PLAY!BUY!PLAY! Frequent Buyer Program. It will offer expanded
membership benefits including special mailings and promotional offers,
and a preferred pricing program exclusively for PLAY!BUY!PLAY!
members. This program positions Sportmart to build lifetime loyalty
and maximize the profitability of its most productive customers.
Expansion
The Company's growth strategy has been based primarily upon
opening clusters of stores in major metropolitan areas that are
serviced by central distribution centers and opening additional stores
in smaller markets that can be serviced by the same distribution
centers. In 1992, the Company adopted an aggressive expansion program
and, since the Company's initial public offering in October 1992, the
Company grew from 26 stores to 71 stores and entered the following
twelve new geographical markets: San Francisco/Sacramento,
Minneapolis, Seattle, Portland, Columbus, Cleveland, Des Moines,
Milwaukee and Calgary, Edmonton, Vancouver and Toronto, Canada. On
January 16, 1997, the Company announced its plan to close the eleven
stores in Canada. With these store closings and the closing of a
Wheeling, Illinois clearance center in the second quarter of 1996, the
Company operated 59 stores as of April 25, 1997.
In January 1995, the Company entered into a joint venture
agreement with Dovrat, Shrem & Co. Trading Ltd. ("Dovrat") under
which "Sportmart Israel Ltd." (the "Joint Venture") was formed as a
corporation under the laws of the State of Israel. Pursuant to this
agreement, the Company licensed the "Sportmart" name and certain
commercial and technical information to the Joint Venture. In fiscal
1996, the Joint Venture was restructured, so that Dovrat exited the
Joint Venture and Fishman Reshatot Ltd. took a controlling interest
in the Joint Venture (the "Restructed Venture"). The Company owns
approximately 15% of the Restructed Venture and has approximately
$100,000 remaining as its investment.
<PAGE>
In July 1995, the Company entered into an agreement to license
the "Sportmart" name to Nichii Co. Ltd. for use in Japan and to
provide retail consulting to such operations. In addition to an
initial fee paid to Sportmart for the license agreement, Nichii pays
Sportmart a royalty quarterly based upon gross sales for the preceding
quarter. The initial term of the license agreement will expire on
September 30, 1997, but the arrangement may be extended as a joint
venture at the mutual consent of the parties.
Store Operations
Stores
The Company believes that store design contributes significantly
to its overall merchandising strategy. The average store is
approximately 42,000 square feet. Each store is designed to provide
ample space for Sportmart's customers to shop the Company's extensive
product offerings. Generally, 85% of store space is dedicated to
selling while 15% is reserved for warehousing. Sportmart's prototype
store design has wide aisles, central checkouts and high ceilings, but
does not project a "warehouse" image. Because the Company does not
warehouse goods on its selling floor, its stores have greater
flexibility in utilizing and formatting their selling floor and
providing customers with effective sight lines to products on display.
The Company's merchandise assortment is presented in an integrated
"Four Worlds" format. The merchandise "Worlds" are team sports,
footwear, outdoors and fitness. In this format, the display of
equipment and apparel are integrated by sport and merchandised within
the Company's typical "racetrack" floor layout. In fiscal 1996, the
Company also rolled out its "Four Worlds" concept in a new prototype
design in the Company's Lombard location. In this new prototype
design rather than displaying merchandise in the Company's typical
"racetrack" layout, the new prototype integrates hard lines and soft
lines merchandise in four distinct areas of a store. The Company
anticipates some additional rollouts of this prototypical design in
fiscal 1997.
The Company operates stores in a variety of shopping environments.
The Company considers each of its stores to be a destination for its
customers, conveniently located in an identified trade area within one of
its markets.
Distribution
The Company utilizes a "hub and spoke" distribution system in
which a central distribution center serves surrounding regional
stores. Management believes that its distribution system has the
following advantages as compared to a direct delivery (i.e., drop
shipping) system utilized by other superstore and warehouse store
sporting goods chains: reduced individual store inventory investment;
more timely matching of store inventory needs; better use of
relatively higher cost store floor space; and easier returns to
vendors. This "hub and spoke" distribution system is utilized by many
major volume retailers such as Wal-Mart, Toys "R" Us and Circuit City.
<PAGE>
Sportmart distributes substantially all of its products to its
stores in California and the Pacific Northwest through a 202,500
square foot distribution center located in Fontana, California.
Substantially all of the merchandise flow for the stores in the
Midwest is being distributed through a 142,000 square foot distribution
center located in Woodridge, Illinois.
Information Services
In fiscal 1996, Sportmart focused its information systems
resources on automated replenishment, electronic commerce, merchandise
planning and inventory management. A centralized help desk function
was initiated to provide support for the stores, distribution centers
and home office users. The initial steps in upgrading the
communications network infrastructure began in the fall and will
continue throughout 1997. All systems currently are being reviewed
for year 2000 compliance.
Competition
The market for retail sporting goods is highly competitive,
fragmented and segmented. The Company competes with many different
types of retail stores, including full-line sporting goods chains,
warehouses, specialty stores, discount and department stores and other
superstores. Many of the Company's competitors are affiliated with
large national or regional chains that have substantially greater
resources than the Company. With respect to sportswear, athletic
apparel and athletic footwear, the Company competes with a number of
specialty footwear stores. While stores face competition in
individual markets from a variety of retailers, management believes
that the Company's greatest competition in the long-term is likely to
come from other superstores and from warehouse operations. Management
believes that the primary competitive factors in the retail sporting
goods industry include quality and assortment of merchandise, pricing,
image, specialized customer service and costs of operations. Several
of the Company's stores currently face direct competition from The
Sports Authority stores, and the Company expects to face increased
direct competition from other superstores and warehouse operations in
the near future.
Associates
Sportmart refers to all of its non-management employees as
"associates." As of February 2, 1997, Sportmart had approximately
1,875 full-time associates and 2,371 part-time associates in the
United States and Canada. None of the associates are unionized. The
Company considers its relationship with its associates to be
excellent.
Tradenames
"Sportmart" and Sportmart's corporate logo are federally
registered servicemarks of the Company. Additionally, the Company has
registered other trademarks and service marks used in connection with
its operations and has trademark and servicemark registration
applications pending in the U.S. and other nations. Management
believes the strength of each of its servicemarks and trademarks is of
considerable value to its business and will seek to promote and
protect its servicemarks and trademarks as it deems appropriate.
<PAGE>
Sportdepot Stores Inc. Subsidiary
On January 16, 1997, the Company announced its decision to close
its eleven Canadian based stores. The closing of the Canadian stores
allows the Company to focus resources on its core U.S. markets. The
Company completed the liquidation of its inventory in Canada in early
April 1997. Finally, as of May 1, 1997 the Company has surrendered or
will surrender pursuant to agreements three locations and a portion
of a fourth location to Landlords in Canada in exchange for releases
from the Company's lease obligations. The Company has also signed a
leasehold purchase agreement for another location which is contingent
upon certain landlord and municipal approvals. The Company is actively
marketing the remaining locations.
ITEM 2. PROPERTIES
Of the Company's 59 U.S. stores, 16 stores are located in the
Chicago metropolitan area, 13 stores are located in the Los Angeles
metropolitan area, eleven stores are located in the San
Francisco/Sacramento area, five stores are located in the Minneapolis
metropolitan area, three stores are located in each of the Seattle and
Columbus, Ohio metropolitan areas, two stores are located in each of
the San Diego, Milwaukee and Portland areas and one store is located
in each of the Cleveland and Des Moines areas.
The Company leases all of its stores in the United States. As of
February 2, 1997, eight of the leases were with partnerships, the
partners of which are certain officers of the Company and their
family members. In April 1997 the parcel of land upon which the
Company's Vernon Hills store is located was sold to an unrelated third
party. In connection with the sale, the lease for the Vernon Hills
store was also assigned to the purchaser. Thus, the Company currently
has seven leases with the partnerships as described above. Typically
the Company occupies its stores under long-term leases which generally
provide for an initial term of at least 15 years with multiple five-
year renewal options. The Company's leases typically provide for the
payment of minimum annual rent with periodic adjustments, plus other
charges, including a proportionate share of taxes, insurance and
common area maintenance. In addition, the Company owns its location in
Edmonton, Canada, and lease the remaining Canadian locations. The
Company is currently marketing these locations as a result of the
closing of its Canadian subsidiary. The Company also owns
approximately 6 acres of land in Orland Park, Illinois, upon which the
Company anticipates it will relocate its current Orland Park location.
The Company leases a distribution center located in a 202,500
square foot facility in Fontana, California. The term of that lease
expires September 30, 2008, assuming all options are exercised. The
Company also leases a distribution center in Woodridge, Illinois in a
142,000 square foot facility. The term of this lease expires April
27, 2007, assuming all options are exercised.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various routine legal proceedings
incidental to the conduct of its business. Management believes that
none of these legal proceedings will have a material adverse impact on
the financial condition or results of operations of the Company.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of security holders during
the fourth quarter of fiscal 1996.
<PAGE>
ITEM 5. MARKET FOR THE COMPANY'S COMMON SHARES AND RELATEd
SHAREHOLDER MATTERS
The Company's common shares are traded on the Nasdaq National
Market under the symbol "SPMT" for the Voting Common Stock and "SPMTA"
for the Class A Common Stock. As of April 15, 1997, there were
approximately 195 holders of record of the Company's Voting Common
Stock and approximately 199 holders of record of the Company's Class A
Common Stock. The number of holders of record for both the Voting and
Class A Common Stock does not include the beneficial owners of common
shares whose shares are held in the name of banks, brokers, nominees
or other fiduciaries.
The following table lists the reported high and low closing sales
prices as quoted on the Nasdaq National Market for the last two years
for the Company's Voting Common Stock and Class A Common Stock.
<TABLE>
Voting Common Stock Class A Common Stock
Price Range Price Range
High Low High Low
<S> <C> <C> <C> <C>
Fiscal 1995
First Quarter $ 10.75 $ 8.13 $ 9.38 $ 6.00
Second Quarter 10.88 8.38 7.75 5.50
Third Quarter 11.00 7.63 7.75 4.88
Fourth Quarter 8.50 4.75 5.38 3.02
Fiscal 1996
First Quarter $ 6.25 $ 4.00 $ 4.00 $ 2.88
Second Quarter 5.75 3.50 4.13 2.44
Third Quarter 4.75 3.25 3.75 2.63
Fourth Quarter 4.50 3.13 3.63 2.38
</TABLE>
The Company did not pay cash dividends or distributions on its
capital stock during fiscal 1996, 1995 or 1994. The Company currently
intends to retain its cash flow from operations to improve its
existing operations and to finance future growth and; therefore, does
not anticipate paying any cash dividends in the foreseeable future.
The payment of any future dividends will be determined by the Board of
Directors in light of conditions then existing, including, the
Company's earnings, financial condition and requirements, restrictions
of financing agreements, business conditions and other factors. At
present, the Company's revolving credit facility with its banks does
not allow for the payment of cash dividends.
<PAGE>
PART II
ITEM 6. SELECTED FINANCIAL DATA
Financial Highlights
(Dollar amounts in thousands, except share data)
<TABLE>
Fiscal Year Ended Feb 2, 1997(1) Jan. 28,1996 Jan. 29,1995 Jan. 30,1994 Jan. 31,1993
<S> <C> <C> <C> <C> <C>
Net Sales $514,611 $492,179 $413,337 $328,119 $244,467
Non-recurring charges(2) 33,224 5,711
Income from continuing operations
for U.S. operations(3)(4) 413 1,757 9,510 8,415 6,110
Loss from continuing operations
for Canadian operations (5,902) (2,508)
(Loss) income from continuing
operations(3) (26,507) (4,121) 9,510 8,415 6,110
Income Per Share from continuing
operation for U.S.
operations(3)(4) .03 .14 .87 .82 .69
Loss Per Share from continuing
operations for Canadian
operations (.46) (.20)
(Loss) income Per Share from
continuing operations(3) (2.06) (.32) .87 .82 .69
Total Assets(5) 266,597 287,499 226,812 170,907 110,570
Long Term Debt(6) 3,409 52,808 31,114 34,501 15,146
Shares of Common Stock Outstanding
at Year End 12,826,360 12,774,371 12,751,075 10,235,000 10,235,000
Sportmart Superstores in Operation
at Year End(2) 70 67 53 42 31
</TABLE>
(1) Fiscal 1996 refers to the 53 weeks ended February 2, 1997.
(2) Non-recurring charge for fiscal 1996 is the result of the decision
to exit the Canadian market which includes closing 11 of the 70
superstores in operation at year end February 2, 1997.
(3) Restated for No Contest discontinued operations for fiscal years
ended January 29, 1995, January 30, 1994 and January 31, 1993; pro
forma for income taxes for the fiscal year ended January 31, 1993.
(4) Includes net income (loss) from continuing operations before any
non-recurring charges and results from foreign operations.
(5) Certain fiscal 1993 and 1994 amounts have been reclassified to
conform to the fiscal 1994 and 1995 presentations.
(6) Including the long term portion of capitalized lease obligations.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth, for the fiscal years indicated,
certain income and expense items expressed as a percentage of net
sales and the number of stores open at the end of each period:
<TABLE> Fiscal Year Ended
February 2, January 28, January 29,
Income Statement Data: 1997 1996 1995
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales, including
buying,distribution and
occupancy 77.9 77.4 75.5
Gross profit 22.1 22.6 24.5
Operating expenses: Store expenses 18.0 18.1 16.4
General and administrative
expenses 3.9 3.2 2.8
Non-recurring charge 6.5 1.2 -
Store pre-opening expenses .3 .8 .6
Interest expense (1.7) (1.0) (1.0)
Other income 0.0 0.3 0.1
(Loss) income before income
taxes,discontinued operations
and extraordinary item (8.3) (1.4) 3.8
(Benefit) provision for
income taxes (3.1) (0.6) 1.5
Net (loss) income from
continuing operations (5.2)% (0.8)% 2.3%
Number of stores at end of
period 70 67 53
</TABLE>
Fiscal Year Ended February 2, 1997 Compared to Fiscal Year Ended
January 28, 1996
During fiscal 1996, the Company opened four new Sportmart
superstores and closed the Wheeling, Illinois location. The Company
also decided to close its 11 Canadian-based stores at the end of
fiscal 1996. The Company engaged an independent company to liquidate
the Canadian inventories beginning in mid-January 1997 which was
completed in mid-April 1997. These stores are still classified as
open at the end of fiscal 1996 in the table above, as the stores were
still operating during the liquidation process. During fiscal 1995,
the Company opened 16 new stores and closed two stores, one in West
Covina, California, and one in Chicago, Illinois (River North). As of
February 2, 1997, the Company operated 70 stores (11 in the process of
liquidation) as compared to 67 stores as of January 28, 1996.
Net sales from continuing operations in fiscal 1996 (a 53 week
period) increased 4.6% to $514.6 million from $492.2 million in fiscal
1995 (a 52 week period). The increase in net sales is due to sales
contributions from the new stores opened during fiscal 1996 and 1995.
The sales volumes in the eleven Canadian locations opened during fiscal
1996 and 1995 were less than those typically realized for new stores
opened in the United States and less than the Company's expectations.
The Company believes that the lower volumes in Canada resulted from
significantly increased competition and declining demand in the Canadian
sporting goods market during fiscal 1996.
<PAGE>
Comparable store sales decreased 6.8% for a comparable 52 week
period versus the prior year. A store is included in comparable
stores sales in its thirteenth month of operation. Management
believes that comparable store sales in fiscal 1996 were impacted by
increased competition, cooler weather in the Midwest for the spring
season along with the re-positioning of the Company into businesses
that historically have generated higher gross margins. The Company's
strategy is to evolve from a sports generalist toward four strong
specialty businesses, or "Four Worlds"; team sports, footwear, fitness
and outdoor lifestyle. Within each world, floor space and inventory
dollars are being allocated to better reflect the consumer's interest
and maximize profitability per square foot. The results of the
Company's apparel and footwear businesses have improved, particularly
sales of private brand merchandise; however, these results were not
enough to offset declines in hardlines merchandise. In an effort to
improve its sales performance during fiscal 1997, the Company has
increased advertising spending, added direct mail pieces and enhanced
its frequent buyer program through promotional offers and a preferred
pricing program.
Gross profit from continuing operations, after buying,
distribution, and occupancy costs,increased 2.7% from $111.0 million
in fiscal 1995 to $114.0 million in fiscal 1996, due primarily to a
higher level of sales. Gross profit as a percentage of net sales
decreased from 22.6% to 22.1% primarily due to higher occupancy costs
as a result of the significant number of new store openings during the
past few years coupled with a significant increase in the merchandise
cost of goods sold for the Canadian locations. In the U.S., however,
overall gross profit increased 0.2% from the prior year. The
Company's U.S. results reflect an improvement in the cost of
merchandise sold net of the impact of the higher than expected
shrinkage recorded in the fourth quarter. In response, the Company
plans to install electronic article surveillance equipment in the
stores which currently do not have it (approximately 24 stores) and to
intensify its store audit programs. Finally, the Company is
continuing to expand its private brand business in fiscal 1997 which
historically has generated higher gross margins.
Store expenses increased 4.5% from $89.0 million in fiscal 1995
to $93.0 million in fiscal 1996. As a percentage of net sales, store
expenses decreased slightly from 18.1% to 18.0%. Store expenses for
the U.S. locations decreased in both dollars and as a percentage of
net sales. The decrease was due mainly to decreases in net
advertising expenses as well as improved efficiencies in overall
regional expense categories.
General and administrative expenses increased to $19.9 million in
fiscal 1996 from $15.9 million in fiscal 1995, a 25.2% increase. This
increase was due primarily to replacing and hiring additional
personnel and information system related costs (computer equipment
depreciation and lease costs) to support the Company's strategic
goals. As a percentage of net sales, general and administrative
expenses increased to 3.9% of net sales for fiscal 1996 versus 3.2%
for fiscal 1995.
<PAGE>
Store pre-opening expenses decreased from $3.8 million in fiscal
1995 to $1.7 million in fiscal 1996, a 55.3% decrease. Store pre-opening
expenses in fiscal 1996 reflect the opening of four new
locations along with the remodeling of the Lombard, Illinois location
at an average cost per store of approximately $340,000. Store pre-opening
expenses in fiscal 1995 reflect the opening of sixteen new
stores at an average cost per store of $237,000. The average cost per
store increased over the prior year mainly due to the occupancy costs
paid at the Canadian locations before the stores opened for business.
The average cost per store in the U.S. for the two new locations and
the one remodel was approximately $226,000.
A pre-tax charge of $33.2 million for non-recurring items was
recorded during the fourth quarter of fiscal 1996 primarily in
conjunction with closing the eleven Canadian locations. The Company
engaged an outside service to liquidate the inventory beginning in
mid-January 1997 and the liquidation was completed by mid-April 1997.
The closing of these eleven locations will result in personnel
reductions of approximately 600 people. Upon completion of the
closings, the Company expects to realize approximately $3.5 to $4.5
million (net of tax) of annual cost savings.
Operating loss in fiscal 1996 was $33.9 million as compared to
$3.4 million in fiscal 1995 due to a combination of the factors
described above including the non-recurring charge, comparable store
sales declines and the poor results in Canada.
Interest expense as a percentage of net sales increased from 1.0%
for fiscal 1995 to 1.7% for fiscal 1996. The increase over the prior
year was due to increased borrowings related to funding Canada and
partially to increased interest rates. Other income/expense
decreased from income of $1.4 million for fiscal 1996 to expense of
$21,000 for fiscal 1996. The decrease in other income is due to the
addition of bank commitment fees, the recognition of the Company's
portion of the loss in its joint venture in Israel during the year
coupled with a decrease in the revenue received from landlords for
late opening penalties.
Income tax benefit as a percentage of loss from continuing
operations was 38.1% for fiscal 1996, as compared to an income tax
expense of 42.2% in fiscal 1995. This decrease in the effective
income tax rate is primarily due to the elimination of the higher
federal and provincial statutory rates in Canada. Included in the
February 2, 1997 Consolidated Balance Sheet, the Company had an income
tax refund receivable of $11.0 million, primarily as a result of the
income tax benefit recorded for fiscal 1996. As of April 25, 1997,
$10.7 million of the currently refundable income taxes had been
received. As of February 2, 1997, the Company has available federal
and state net operating loss carry forwards of approximately $19.0
million for offset against taxable income. Based on the Company's
business plan and the timing of the reversals of temporary
differences, management believes the Company will be able to realize
the benefit of the net deferred tax asset on the Consolidated Balance
Sheet as of February 2, 1997.
<PAGE>
The net loss from continuing operations for fiscal 1996 and 1995
was $26.5 million and $4.1 million, respectively, as a result of the
items discussed above including the non-recurring charge, comparable
store sales declines and the poor results in Canada. The net income
for the U.S. operations, excluding non-recurring charges and results
from foreign operations, was $413,000 for the fiscal year ended
February 2, 1997.
During fiscal 1995, the Company closed its No Contest division
and established an after-tax reserve of $1.7 million for discontinued
operations. During fiscal 1996, an additional after-tax charge of
$90,000 was recorded as discontinued operations as a result of
increased costs associated with the No Contest closing.
During the third quarter of fiscal 1996, the Company incurred an
extraordinary charge of approximately $460,000, net of income taxes of
$335,000, as a result of the termination of the previous revolving
credit facility with a syndicate of banks and the Senior Notes from
Allstate Insurance Co.
Fiscal Year Ended January 28, 1996 Compared to Fiscal Year Ended
January 29, 1995
During fiscal 1995, the Company opened 16 new Sportmart
superstores and closed two stores, one in West Covina, California, and
one in Chicago, Illinois (River North). The Company also announced
plans to close another store in Chicago (Wheeling, Illinois) in early
1996. During fiscal 1994, the Company opened 12 new stores, relocated
one store and closed one store located in Glendale, California. As of
January 28, 1996, the Company operated 67 stores as compared to 53
stores as of January 29, 1995.
Net sales from continuing operations for fiscal 1995 increased
19.1% to $492.2 million from $413.3 million in fiscal 1994. The
increase in sales was due to sales contributions from the new stores
opened during fiscal 1995 and 1994. The sales volumes in the nine
Canadian locations opened during fiscal 1995 were less than those
typically realized for new stores opened in the United States and less
than the Company's expectations. The Company believes that the lower
volumes in Canada resulted from significantly increased competition
from additional sporting goods superstores opened in the Toronto metro
market during the second half of fiscal 1995.
Comparable store sales decreased 4.3% during fiscal 1995 versus
fiscal 1994. Management believes that comparable store sales in
fiscal 1995 were modestly impacted by cannibalization from new stores
which overlapped the customer base of existing stores as a result of
the Company's strategy to dominate certain markets. Additionally,
comparable store sales were adversely affected by increased
competition and a weak Southern California retail environment.
Finally, comparable store sales were negatively impacted by lower than
anticipated sales of ski related merchandise during the fourth
quarter, particularly on the West Coast. Several personnel and
organizational changes were made during fiscal 1995 to address the
Company's comparable store sales. These include new senior executives
in merchandising, store operations and inventory management and a new
organization of the buying staff.
<PAGE>
Gross profit from continuing operations, after buying,
distribution, and occupancy costs increased 9.5% from $101.4 million
in fiscal 1994 to $111.0 million in fiscal 1995, due primarily to a
higher level of sales. Gross profit as a percentage of net sales
decreased from 24.5% to 22.6% primarily due to higher occupancy costs
as a result of the significant number of new store openings during the
past few years and markdowns necessary to achieve targeted levels of
inventories. The personnel and organizational changes discussed above
were also made to address the Company's goal of improving gross
margins.
Store expenses increased 31.8% from $67.5 million in fiscal 1994
to $89.0 million in fiscal 1995. As a percentage of net sales, store
expenses increased from 16.4% to 18.1% primarily due to higher
advertising expenditures and increased store salaries as a percentage
of sales. The higher advertising expenditures resulted from the
increased promotional nature of retailing during the holiday season
while the higher store salaries rate was related to the lower sales
achieved in both the new stores recently opened and the comparable
store sales decline.
General and administrative expenses increased to $15.9 million in
fiscal 1995 from $11.7 million in fiscal 1994, a 35.9% increase. This
increase was due primarily to expenditures related to replacing and
hiring additional personnel to support the Company's strategic goals.
As a percentage of net sales, general and administrative expenses
increased to 3.2% of net sales for fiscal 1995 versus 2.8% for fiscal
1994.
Store pre-opening expenses increased to $3.8 million in fiscal
1995 from $2.6 million in fiscal 1994, a 46.2% increase. Store pre-opening
expenses in fiscal 1995 reflected the opening of sixteen new
stores at an average cost per store of approximately $237,000. Store
pre-opening expenses in fiscal 1994 reflect the opening of twelve new
stores and the relocation of one store at an average cost per store of
approximately $197,000. The average costs per store increased over
the prior year due to additional start-up costs associated with
entering the Canadian market.
A pre-tax reserve of $5.7 million for non-recurring charges was
established during the fourth quarter of fiscal 1995 to provide for
the costs associated with closing the River North store (located near
downtown Chicago) and a clearance center store (located in Wheeling,
Illinois) along with a reserve primarily for severance pay. The River
North location was closed as of the end of fiscal 1995 and the
Wheeling store is expected to be closed during the second quarter of
fiscal 1996. The closing of these two locations will result in
personnel reductions of approximately 80 people. Upon completion of
the closings and severance amounts, the Company expects to realize
approximately $1.1 million (net of tax) of annual cost savings.
Operating loss in fiscal 1995 was $3.4 million as compared to
operating income in fiscal 1994 of $19.6 million due to a combination
of the factors described above including the non-recurring charge,
comparable store sales declines and the lower than expected sales for
the new Canadian stores.
<PAGE>
Net interest expense as a percentage of net sales remained
unchanged at 1.0% for both fiscal 1995 and fiscal 1994. Other income
increased to $1.4 million in fiscal 1995 from $.4 million in fiscal
1994. The increase in other income is primarily due to the
introduction of a new branded credit card program and an increase in
the revenue received from landlords for late opening penalties.
Income tax benefit as a percentage of loss from continuing
operations was 42.2% for fiscal 1995, as compared to an income tax
expense of 39.5% in fiscal 1994. This increase in the effective
income tax rate is primarily due to the higher federal and provincial
statutory rates in Canada.
As a result of the Company's strategy to concentrate on its
Sportmart superstore operations, the Company decided to close it's No
Contest division at the end of fiscal 1995. Accordingly, an after-tax
reserve of $1.7 million was established in fiscal 1995 for costs
associated with the closing of the division. Net loss from
discontinued operations remained constant at approximately $.6 million
for both fiscal 1995 and 1994.
Liquidity and Capital Resources
As of February 2, 1997, the Company had working capital of $9.2
million as compared with $80.3 million as of January 28, 1996. The
significant decrease in working capital is mainly due to the
reclassification of the bank borrowings from long-term debt to current
liabilities in compliance with Emerging Issues Task Force Issue No.
95-22 and the $20.2 million payoff of the long-term debt in
conjunction with a new line of credit facility established in
September, 1996. Net cash used in operating activities was
approximately $5.2 million in fiscal 1996 versus net cash provided by
operating activities of approximately $4.5 million in fiscal 1995 and
net cash used in operating activities of approximately $25.1 million
in fiscal 1994. The net loss of $27.1 million, the decrease in
accounts payable of $22.4 million and the $6.8 million increase in
income tax receivable due to the income tax benefit recorded for the
exiting of Canada was partially offset by the decrease in merchandise
inventories of $12.0 million, the increase in accrued expenses of
$23.2 million, the $11.8 million in depreciation expense and the $7.2
million decrease in prepaid expenses and other assets due to the
closing of the Canadian operations coupled with the $2.3 million
payment from the liquidator for the closing of the No Contest division
resulting in net cash used in operating activities of $5.2 million for
fiscal 1996. The $4.5 million net cash provided by operating
activities for fiscal 1995 was the result of the $31.6 million
increase in accounts payable and $11.9 million increase in accrued
expenses and the $8.8 million in depreciation expenses partially
offset by a $33.1 million increase in merchandise inventories and the
$6.4 million net loss for the year.
Net cash used in investing activities decreased from $28.1
million in fiscal 1995 to $13.9 million in fiscal 1996. The net cash
used in investing activities in fiscal 1996 was primarily the result
of $14.6 million in capital expenditures relating to the four new
stores and the one remodel. The net cash used in investing activities
in fiscal 1995 was primarily the result of $29.3 million in capital
expenditures relating to the 16 new stores and $3.5 million increase
in assets held for sale (expenditures for the purchase and construction of
<PAGE>
certain properties for store locations which the Company intends to sell
and leaseback from unaffiliated third parties) offset by $5.5 million in
proceeds from the sale and leaseback of assets.
Net cash provided by financing activities decreased from $24.5
million in fiscal 1995 to $17.9 million in fiscal 1996. The net cash
provided by financing activities in fiscal 1996 was primarily the
result of $45.0 million net advances on lines of credit partially
offset by the $20.2 million early extinguishment of long-term debt
along with the $5.4 million of principal payments under long-term
debt. The net cash provided by financing activities in fiscal 1995
was primarily the result of $29.4 million net advances on lines of
credit partially offset by $3.4 million payment on construction loans.
On September 6, 1996, the Company entered into, and subsequently
amended certain provisions of, a $135.0 million revolving credit
agreement with a syndicate of banks. This revolving line of credit
expires in September 2001 and funds both seasonal and general capital
requirements. Inventory and personal property of the Company have
been pledged as collateral for this line of credit. The line of
credit provides for monthly interest payments on outstanding cash
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
(8.25% at February 2, 1997) plus 1.00%. In addition, the facility
also provides for the issuance of letters of credit, not to exceed
$25.0 million, for a fee equal to 1.5% per annum. This revolving line
of credit requires the maintenance of minimum net worth and maximum
debt to inventory ratios and prohibits the payment of cash dividends.
The new facility provides the Company with less restrictive covenants
and greater borrowing availability than the previous revolving credit
facility. As of April 25, 1997, approximately $82.0 million in cash
borrowings and $4.5 million in letters of credit (to support imported
merchandise and certain real estate transactions) were outstanding
under this line of credit. The proceeds from this new credit facility
were used to repay all borrowings outstanding under the previous
revolving credit facilities and the Senior Notes payable to Allstate
Life Insurance Co.
In order to comply with Emerging Issues Task Force Issue No. 95-22
regarding classification of certain debt instruments, the borrowings under
this revolving line of credit have been classified as current liabilities.
However, based on the terms of the agreement and the Company's business plan,
the Company believes the amount outstanding under the revolving line of
credit will be due and payable on its stated maturity in September, 2001.
The Company's primary ongoing cash requirements relate mainly to
the improvement of existing operations. The Company anticipates
opening one store during fiscal 1997. The capital expenditures
related to this opening are estimated to be approximately $750,000.
In addition, the Company plans on investing approximately $5.8 million
in the renovation of existing stores and distribution centers and
approximately $1.4 million to upgrade its management information
systems. The Company expects to be able to fund its working capital
requirements and expansion plans with a combination of anticipated
cash flows from operations, normal trade credit agreements and bank
borrowings.
<PAGE>
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 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
foreign currency 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 foreign currency contracts are recognized in income as
offsets to gains and losses resulting from the underlying hedged
transaction. As of February 2, 1997, the Company had approximately
$38.0 million of open foreign currency contracts with various
settlement dates prior to March, 1997.
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 to the Company. For
fiscal years 1996, 1995, and 1994, the second and fourth fiscal
quarters combined accounted for approximately 56%, 58% and 57%,
respectively, of the Company's fiscal year net sales. In fiscal year
1994 substantially all of the Company's income from continuing
operations before income taxes was earned in the second and fourth
fiscal quarters. However, in both fiscal 1996 and 1995, the fourth
fiscal quarter was significantly impacted by the non-recurring charges
and the discontinued operations. In contrast, the Company has
consistently experienced net losses in the third quarter and it
anticipates that such trend may continue through fiscal 1997.
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 year ended February 2, 1997.
Geographic Segment Information
The Company's major operations are in the United States, however
as of February 2, 1997, the Company operated eleven locations in
Canada which were liquidated in the first quarter of fiscal 1997. The
revenues, operating loss after non-recurring expenses and identifiable
assets relating to the Canadian operations for fiscal 1996 were $49.9
million, ($39.0) million and $24.0 million, respectively.
<PAGE>
Impact of Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128, Earnings
Per Share (FAS 128). FAS 128 is designed to improve the EPS
information provided in financial statements by simplifying the
existing computational guidelines, revising the disclosure
requirements, and increasing the comparability of EPS data on an
international basis. FAS 128 is effective for financial statements
issued for periods ending after December 15, 1997. The Company has
not yet determined the impact that adoption of FAS 128 will have on
the financial statements.
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 129, Disclosure
of Information about Capital Structure (FAS 129). FAS 129 establishes
standards for disclosing information about an entity's capital
structure. This Statement is effective for financial statements for
periods ending after December 15, 1997. It contains no change in
disclosure requirements for entities that were previously subject to
the requirements of Opinions No. 10 (Omnibus Opinion--1966) and No. 15
(Earnings per Share) and Statement No. 47 (Disclosure of Long-Term
Obligations). Thus the Company does not anticipate any impact from
this pronouncement as it is complying with the disclosure requirements
for Opinion No. 15 (Earnings per Share).
Private Securities Litigation Reform Act of 1995
The statements which are not historical facts contained in this
Annual Report Form 10-K are forward looking statements that involve
risks and uncertainties. The risks and uncertainties contained in this
Annual Report include but are not limited to, product demand and
market acceptance risks, the effect of economic conditions generally,
and retail and sporting goods business conditions specifically, the
impact of competition, development of private brand products, customer
acceptance of the Four Worlds concept, commercialization and
technological difficulties, capacity and supply constraints or
difficulties, the results of financing efforts, changes in consumer
preferences and trends, the adequacy of reserves for discontinued
operations, the ability to settle lease obligations for closed stores,
the effect of the Company's accounting policies, weather conditions,
and other risks detailed in the Company's Security and Exchange
Commission filings. The words "projected", "believes", "estimates" used
in this Annual Report as they relate to the Company or its Management are
generally intended to identify such forward looking statements.
Effect of Compliance with Environmental Protection Provisions
Compliance with Federal, State and local provisions that have
been enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment,
has not had, and is not expected to have, a material adverse effect on the
capital expenditures, net income or competitive position of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item 8 is set forth in Item 14 of Part IV hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors of the Company is
hereby incorporated herein by reference to the sections, "Election of
Directors - Nominees", "-Other Directors" and "Executive Officers", in
the Company's Proxy Statement.
Information with respect to required Section 16(a) disclosure is
incorporated herein by reference to the section "Executive Officers-Compliance
with Section 16(a) of The Securities Exchange Act of 1934",
in the Company's Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is hereby
incorporated herein by reference to the section "Executive
Compensation", in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information with respect to security ownership of certain
beneficial owners and management is herein incorporated by reference
to the section "Principal Stockholders and Management Ownership", in
the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related
transactions is hereby incorporated herein by reference to the section
"Certain Transactions", in the Company's Proxy Statement.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) (1) Consolidated Financial Statements
Page
24 Report of Independent Accountants
25 Consolidated Balance Sheets
26 Consolidated Statements of Operations
27 Consolidated Statements of Stockholders' Equity
28 Consolidated Statements of Cash Flows
29-44 Notes to Consolidated Financial Statements
All other schedules have been omitted because they are
inapplicable, not required, or the information is included elsewhere
in the financial statements or notes thereto.
(3) See accompanying Index to Exhibits. The Company will
furnish to any stockholder, upon written request, any exhibit listed
in the accompanying Index to Exhibits upon payment by such stockholder
of the Company's reasonable expenses in furnishing any such exhibit.
(b) Reports on Form 8-K
Form 8-K, dated January 31, 1997<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Sportmart, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of
Sportmart, Inc. and Subsidiary as of February 2, 1997 and January 28,
1996 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three fiscal years
in the period ended February 2, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Sportmart, Inc. and Subsidiary as of February 2, 1997 and January
28, 1996 and the results of its operations and its cash flows for each
of the three fiscal years in the period ended February 2, 1997 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 28, 1997
<PAGE>
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE> ASSETS
February 2, January 28,
1997 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,816,087 $ 4,017,420
Due from related parties 624,399 1,348,313
Merchandise inventories, net 162,913,179 174,951,521
Prepaid expenses and other assets 5,035,202 12,199,582
Income taxes receivable 11,044,279 4,242,469
Advertising co-op receivable, net 2,337,508 5,546,783
Assets held for sale 2,631,333 2,882,734
Deferred income taxes 6,299,611 4,347,320
Total current assets 193,701,598 209,536,142
Property and equipment, net 61,749,865 72,039,670
Other asset 3,867,585 3,745,555
Deferred income taxes 7,278,258 2,178,000
$ 266,597,306 $287,499,367
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit due 2001
(See Note 5) $ 93,174,941 $ -
Bank notes payable - 18,212,709
Current portion of capitalized
lease obligations and long-term
debt 306,619 7,221,468
Accounts payable 44,921,555 67,297,146
Accrued expenses 46,097,999 36,482,064
Total current liabilities 184,501,114 129,213,387
Long-term bank notes payable - 30,000,000
Long-term debt, net of current portion - 18,800,000
Capitalized lease obligations, net of
current portion 3,409,039 4,007,924
Other long-term liabilitie 4,768,447 4,682,491
192,678,600 186,703,802
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
February 2, 1997 and
January 28, 1996 51,489 51,489
Class A common stock, non-voting;
$.01 par value; 50,000,000 shares
authorized; 7,694,734 and
7,625,538 shares issued and
outstanding on February 2, 1997
and January 28, 1996, respectively 76,948 76,256
Additional paid-in capital 79,841,586 79,636,703
Cumulative translation adjustment (35,709) (12,005)
Retained earnings (6,015,608) 21,043,122
Total stockholders' equity 73,918,706 100,795,565
$ 266,597,306 $287,499,367
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
February 2, January 28, January 29,
1997 1996 1995
(53 Weeks) (52 Weeks) (52 Weeks)
<S> <C> <C> <C>
Net sales $ 514,611,087 $ 492,179,244 $413,336,902
Cost of sales, including buying,
distribution and occupancy 400,637,243 381,145,692 311,947,093
Gross profit 113,973,844 111,033,552 101,389,809
Operating expenses:
Store expenses 92,978,378 89,006,466 67,523,438
General and administrative
expenses 19,938,082 15,921,301 11,713,206
Non-recurring charges 33,224,480 5,711,000 -
Store pre-opening expenses 1,698,777 3,791,284 2,554,541
Operating (loss) income (33,865,873) (3,396,499) 19,598,624
Other (expense) income:
Other (expense) income (21,371) 1,439,665 440,141
Interest expense (8,888,505) (5,168,071) (4,317,211)
(8,909,876) (3,728,406) (3,877,070)
(Loss) income from continuing
operations before income taxes (42,775,749) (7,124,905) 15,721,554
(Benefit) provision for income taxes (16,269,202) (3,004,114) 6,211,328
(Loss) income from continuing
operations (26,506,547) (4,120,791) 9,510,226
Discontinued operations:
Loss from discontinued operations,
(net of income tax benefit of
$385,150 in 1995 and $375,419 in
1994) - (577,726) (575,008)
Loss from disposal of discontinued
operations net of income tax benefit
of $60,000 in 1996 and $1,164,000
in 1995) (90,000) (1,746,000) -
Loss from discontinued operations (90,000) (2,323,726) (575,008)
(Loss) income before
extraordinary item (26,596,547) (6,444,517) 8,935,218
Extraordinary item (net of
income tax benefit of $334,684) (462,183) - -
Net (loss) income $ (27,058,730) $(6,444,517) $8,935,218
(Loss) income per share from
continuing operations $ (2.06) $ (0.32) $ 0.87
Loss per share from discontinued
operations (.01) (0.18) (0.05)
(Loss) income per share before
extraordinary item (2.07) (0.50) 0.82
Loss per share from extraordinary item (.04) - -
Net (loss) income per share $ (2.11) $ (0.50) $ 0.82
Weighted average number of common
and common equivalent shares
outstanding 12,826,360 12,771,911 10,910,797
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
Voting Class A Additional Cumulative Total
Common Stock Common Stock Paid-in Translation Retained Stockholders'
Shares Amount Shares Amount Capital Adjusment Earnings Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 30, 1994 10,235,000 $102,350 - - $46,941,900 - $18,552,421 $65,596,671
Issuance of 16,075 common
shares under stock
purchase plan 16,075 161 - - 217,072 - - 217,233
Reclassification of Voting
common stock into Class A
common stock (5,125,538) (51,256) 5,125,538 51,256 - - - -
Issuance of 2,500,000 Class A
common shares, net of
stock offering costs - - 2,500,000 25,000 32,272,500 - - 32,297,500
Net income, fiscal 1994 - - - - - - 8,935,218 8,935,218
Balances, January 29, 1995 5,125,537 51,255 7,625,538 76,256 79,431,472 - 27,487,639 107,046,622
Issuance of 23,296 Voting
common shares under stock
purchase plan 23,296 234 - - 205,231 - - 205,465
Cumulative translation adjustment - - - - - (12,005) - (12,005)
Net loss, fiscal 1995 - - - - - - (6,444,517) (6,444,517)
Balances, January 28, 1996 5,148,833 51,489 7,625,538 76,256 79,636,703 (12,005) 21,043,122 $100,795,565
Issuance of 60,766 Class A
common shares under stock
purchase plan - - 60,766 608 173,355 - - 173,963
Exercise of stock options - - 8,430 84 31,528 - - 31,612
Cumulative translation adjustment - - - - - (23,704) - ( 23,704)
Net loss, fiscal 1996 - - - - - - (27,058,730) (27,058,730)
Balances, February 2, 1997 5,148,833 51,489 7,694,734 76,948 79,841,586 (35,709) (6,015,608) 73,918,706
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
SPORTMART, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
February 2, January 28, January 29,
1997 1996 1995
(53 Weeks) (52 Weeks) (52 Weeks)
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income from continuing
operations $ (26,506,547) $ (4,120,791) $ 9,510,226
Loss from discontinued operations,
net of tax - (577,726) (575,008)
Loss on disposal of discontinued
operations, net of tax (90,000) (1,746,000) -
Loss from extraordinary item (462,183) - -
Adjustments to reconcile net
income to net cash(used in)
provided by operating activities:
Depreciation and amortization 11,769,733 8,763,656 6,369,835
(Gain) loss on disposition of
property and equipment and
capital lease - 59,490 (200,466)
Deferred tax provision (7,052,549) (4,225,320) (1,370,050)
Net decrease (increase) in assets:
Merchandise inventories 12,038,342 (33,095,266) (36,995,352)
Prepaid expenses and other assets 7,164,380 (2,343,472) (2,612,631)
Income taxes receivable (6,801,810) (4,242,469) 34,951
Advertising co-op receivable 3,209,275 4,214,756 (4,949,860)
Other assets - noncurrent 543,205 (2,723,494) (387,107)
Net (decrease) increase in liabilities:
Accounts payable (22,375,591) 31,638,539 (1,554,231)
Accrued expenses 23,228,375 11,942,696 6,437,456
Other long-term liabilities 85,956 995,174 1,144,162
Net cash (used in) provided by
operating activities (5,249,414) 4,539,773 (25,148,075)
Cash flows from investing activities:
Purchase of property and equipment (14,570,689) (29,268,095) (20,356,107)
Purchase of assets held pending
sale and leaseback (46,176) (3,498,852) (13,478,508)
Proceeds from sale and leaseback
of assets - 5,467,675 19,135,000
Advances to related parties (287,566) (1,062,227) (327,234)
Repayment of advances to related
parties 1,011,480 218,178 1,346,497
Net cash used in investing
activities (13,892,951) (28,143,321) (13,680,352)
Cash flows from financing activities:
Proceeds from issuance of common stock 205,575 205,466 217,233
Proceeds from sale of common
stock, net - - 32,297,500
Principal payments under capital lease
obligations (276,774) (405,535) (608,520)
Principal payments under long-term debt (5,400,000) (1,400,000) -
Early extinguishment of debt (20,200,000) - -
Debt issuance costs (1,350,000) - -
Proceeds from construction loans - - 10,758,242
Payments on construction loans - (3,357,013) (10,566,095)
Advances on lines of credit 264,665,231 212,751,000 137,200,000
Repayments on lines of credit (219,703,000) (183,338,291) (127,000,000)
Bank overdraft, net - - (304,592)
Net cash provided by financing activities 17,941,032 24,455,627 41,993,768
<PAGE>
Net (decrease) increase in cash
and cash equivalents (1,201,333) 852,079 3,165,341
Cash and cash equivalents at
beginning of period 4,017,420 3,165,341 -
Cash and cash equivalents at end
of period $ 2,816,087 $ 4,017,420 $ 3,165,341
Supplemental disclosures of cash
flow information:
Interest paid $ 8,363,871 $ 5,381,780 $ 4,283,550
Income taxes (refunded) paid (2,849,588) 4,842,438 6,639,774
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
SPORTMART, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Sportmart, Inc. and Subsidiary (the "Company") operates in one
business segment which is the retail sporting goods business. As
of February 2, 1997, the Company operated 59 superstores located
in the United States plus eleven locations in the process of
liquidation in Canada.
2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of
Sportmart, Inc. and Sportdepot Stores, Inc., it's wholly-owned
subsidiary. Sportmart Canada, Inc. was incorporated in April
1994 and the first store 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.
Fiscal Year
The Company maintains a 52-53 week fiscal year, with the
fiscal year ending on the Sunday closest to the end of January.
The fiscal year ended February 2, 1997 (fiscal 1996) included 53
weeks. Fiscal years ended January 28, 1996 (fiscal 1995) and
January 29, 1995 (fiscal 1994) included 52 weeks.
Merchandise Inventories
The Company's inventories are valued at the lower of cost or
market with cost being determined on a first-in, first-out (FIFO)
method.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and
amortization of property and equipment are computed principally
by the straight-line method over the estimated useful lives of
the related assets, ranging from three to fifteen years, or the
terms of the related leases for leasehold improvements, if
shorter. Upon retirement or other disposal of property and
equipment, the asset costs and the related accumulated
depreciation are eliminated from the accounts. The difference,
if any, between the net asset value and the proceeds is adjusted
to income.
Maintenance and repairs, which neither materially add to the
value of the property nor appreciably prolong its life, are
charged to expense as incurred.
<PAGE>
Long-Lived Assets
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 121 "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" in fiscal 1995.
The adoption had no impact on the financial results. When facts and
circumstances indicate potential impairment, the Company evaluates
the recoverability of long-lived asset carrying values using estimates
of undiscounted future cash flows over remaining asset lives. When
impairment is indicated, any impairment loss is measured by the excess of
carrying values over fair values.
Sale/leasebacks
Any loss on a sale/leaseback transaction is recognized
immediately and any gains are deferred and recognized over the
term of the future lease.
Advertising
Advertising costs are expensed in the period in which the
advertising occurs. A receivable is recorded at that time for
the estimated amount of cooperative advertising reimbursements to
be received from vendors. Gross advertising spent in fiscal
1996, 1995 and 1994 was $21,577,000, $25,363,000 and $21,425,000,
respectively.
Store Pre-Opening Costs
Non-capital expenditures incurred prior to the opening of a
new store are charged to expense ratably from the date the store
is opened through the end of the fiscal year in which the store
is opened.
Capitalized Interest
Interest costs incurred during the construction period of
significant capital projects are capitalized. The total interest
capitalized by the Company was $20,230 in fiscal year 1996,
$152,000 in fiscal year 1995 and $555,000 in fiscal year 1994.
Income Taxes
Deferred income taxes are recognized for the tax consequences
in future years of differences between the tax basis of assets
and liabilities and their financial reporting amounts based on
enacted tax laws and statutory tax rates applicable to the
periods in which the differences are expected to affect taxable
earnings. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Substantially all cash and cash equivalents are concentrated with
two banks located in Chicago, Illinois and in Toronto, Canada.
<PAGE>
Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
Net (Loss) Income Per Share
Loss per share from continuing operations, loss per share from
discontinued operations, loss per share before extraordinary
item, loss per share from extraordinary item and net loss per
share for the fiscal year ended February 2, 1997 are based on
12,826,360 weighted average shares outstanding.
Loss per share from continuing operations, loss per share from
discontinued operations, loss per share before extraordinary item
and net loss per share for the fiscal year ended January 28, 1996
are based on 12,771,911 weighted average shares outstanding.
Income per share from continuing operations, loss per share
from discontinued operations, income per share before
extraordinary item and net income per share for the fiscal year
ended January 29, 1995 are based on 10,910,797 weighted average
shares outstanding.
Foreign Currency Translation
The consolidated financial statements and transactions of the
Company's Canadian subsidiary are maintained in its 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 fiscal
year end. 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.
Derivative Financial Instruments
Derivative financial instruments are utilized by the Company to reduce
interest rate and foreign exchange risks. The Company does not use
derivatives for speculative trading purposes.
Interest Rate Contracts - The differential to be received or paid under
contracts designated as hedges is recognized as an adjustment to interest
expense in the period incurred.
Foreign Currency Contracts - Realized and unrealized gains and losses
arising from foreign currency contracts are recognized in income as offsets
to gains and losses resulting from the underlying hedged transaction.
<PAGE>
Reclassifications
The Company has reclassified certain amounts reported in prior
years to conform with the
fiscal 1996 presentation.
3. Property and Equipment
Property and equipment consists of the following:
<TABLE>
February 2, January 28,
Description 1997 1996
<S> <C> <C>
Capitalized lease property -
land and buildings $ 6,321,226 $ 7,710,917
Land 1,341,135 -
Store and warehouse equipment 38,660,735 41,640,120
Buildings and leasehold
improvements 37,367,980 40,376,168
Data processing equipment and
software 10,271,170 7,801,362
Other 5,141,608 5,717,919
99,103,854 103,246,486
Less accumulated depreciation and
amortization:
Capitalized lease property 4,064,397 4,932,389
All other 33,289,592 26,274,427
37,353,989 31,206,816
Property and equipment, net $ 61,749,865 $72,039,670
</TABLE>
Depreciation expense for fiscal years 1996, 1995 and 1994 was
$11,084,968, $8,501,209 and $6,193,710, respectively.
The Company had assets held pending sale or sale and leaseback
of $2,631,333 and $2,882,734, respectively, as of February 2,1997 and
January 28, 1996. These assets consist of land and buildings and
improvements for store locations that the Company intends to sell and,
for certain properties, lease back from unaffiliated third parties.
4. Accrued Expenses
Accrued expenses consist of the following:
<TABLE> February 2, January 28,
Description 1997 1996
<S> <C> <C>
Accrued salaries and wages $3,338,228 $3,297,211
Taxes other than income 8,048,865 6,911,878
Advertising 5,014,511 7,959,466
Reserve for store closings 16,318,746 7,176,567
Other 13,377,649 11,136,942
Accrued expenses $ 46,097,999 $36,482,064
</TABLE>
<PAGE>
5. Financing Arrangements
On September 6, 1996, the Company entered into, and subsequently amended
certain provisions of, a $135.0 million revolving credit agreement with a
syndicate of banks. The new credit facility is due in September, 2001 and
the inventory and personal property of the Company have been pledged as
collateral. Interest is due monthly on outstanding cash borrowings based on
LIBOR (London Interbank Offered Rate) plus a fee ranging up to 2.50% depending
on the maintenance of certain financial ratios or, at the Company's option,
at the prime rate (8.25% at February 2, 1997) plus 1.00%. In addition, the
facility also provides for the issuance of letters of credit, not to exceed
$25.0 million, for a fee equal to 1.50% per annum. The Company also pays a
commitment fee of .375% on the unused portion of the line of credit. This
new revolving line of credit requires the maintenance of minimum net worth
and maximum debt to inventory ratios and prohibits the payment of cash
dividends. The proceeds from this new credit facility were used to repay
all borrowings outstanding under the previous revolving credit facilities
and the Senior Notes (as discussed below). As of February 2, 1997,
approximately $93.2 million in cash borrowings and $4.5 million in letters
of credit (to support imported merchandise and certain real estate
transactions) were outstanding under this line of credit.
In order to comply with Emerging Issues Task Force Issue (EITF) No. 95-22
regarding classification of certain debt instruments, the borrowings under
this new revolving line of credit have been classified as current liabilities
in the February 2, 1997 balance sheet. However, based on the terms of the
agreement and the Company's current business plan, the Company believes the
amounts outstanding under the revolving line of credit will be due and
payable on its stated maturity in September, 2001.
The Company previously had two agreements with a syndicate of banks in
the United States and Canada providing for unsecured revolving lines of
credit up to $125.0 million (U.S. dollars). Interest on these agreements was
based on LIBOR in the U.S. or Bankers Acceptances in Canada, plus a fee
ranging from .50% to 2.60% depending on the maintenance of certain financial
ratios. The Company also had the option to borrow at the prime rate in
the U.S. and, in Canada, at the prime rate plus a fee ranging up
to 2.00% depending on the maintenance of certain financial ratios.
Commitment fees paid to the banks on the unused portion of these lines of
credit ranged from .15% to .70%. As of January 28, 1996 these revolving
lines of credit had outstanding balances of a U.S. dollar equivalent of
$48.2 million. These agreements were terminated upon execution of the
$135.0 million facility discussed above.
The weighted average interest rate on short-term cash borrowings
outstanding was 8.1% and 6.9% as of February 2, 1997 and January 28, 1996,
respectively.
As of January 28, 1996, the Company also had $25.6 million in borrowings
outstanding in the form of unsecured Senior Notes due January 30, 1999 and
May 15, 2000. Interest on the Senior Note due January 30, 1999 was payable
monthly at a rate ranging from 8.9% to 11.15% per annum depending on the
maintenance of certain financial ratios. Principal payments of $1.4
million were required on January 30th of each year. Interest on the Senior
Note due May 15, 2000 was payable at a rate ranging from 6.6% to 8.85% per
annum depending on the maintenance of certain financial ratios. Annual
principal payments of $4.0 million were required commencing on May 15, 1996.
Principal payments totaling $5.4 million on these Senior Notes were made in
fiscal 1996 prior to the termination of these agreements in conjunction
with the execution of the $135.0 million facility discussed above.
<PAGE>
6. Financial Instruments and Risk Management
Derivative financial instruments are utilized by the Company
to reduce interest rate and foreign exchange risks.
The notional amount of foreign currency contracts is the amount of
foreign currency bought or sold at maturity. The notional amount of
interest rate swaps is the underlying principal amount used in determining
the interest payments exchanged over the term of the swap agreement. The
notional amounts are not a measure of the Company's exposure through its
use of derivatives.
Interest Rate Contracts - In March 1995, the Company entered into an
interest rate swap agreement 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 the
effective LIBOR rate was recognized in interest expense for the years ended
February 2, 1997 and January 28, 1996.
Foreign Exchange Contracts - As of February 2, 1997, the Company held
foreign currency contracts with settlement dates prior to March 1997 with
several major financial institutions to exchange Canadian dollars for
approximately $38.0 million U.S. dollars. The total net realized and
unrealized gains and losses on foreign currency contracts was immaterial.
Fair Value of Financial Instruments - The carrying amounts reported in the
balance sheet for cash and cash equivalents, accounts payable and accrued
expenses approximate fair value due to the short maturity of these
instruments. The amounts recorded for the line of credit also approximates
fair market value based on the borrowing rates currently available to the
Company for debt with similar terms and average maturities. The fair value
at February 2, 1997 and January 28, 1996 of the foreign currency
contracts and the interest rate swap agreement as presented below is the
amount at which these contracts could be settled or terminated based on
bank or market quotes.
<TABLE> February 2, January 28,
1997 1996
<S> <C> <C>
Interest rate swap agreement
Notional Principal $ 10,000,000 $10,000,000
Fair Value (227,000) (600,000)
Foreign currency contracts
Notional Principal $ 38,000,000 $ 5,700,000
Fair Value 164,000 40,000
</TABLE>
Credit risk - The Company is exposed to credit risk to the extent of
nonperformance by the counterparties to the foreign currency contracts and
interest rate swap discussed above. However, the Company considers the risk
of default to be remote because the counterparties are major financial
institutions whose credit ratings are regularly monitored.
<PAGE>
7. Income Taxes
The income tax (benefit) provision consists of the following:
<TABLE>
Fiscal Year Ended
February 2, January 28, January 29,
1997 1996 1995
<S> <C> <C> <C>
Historical income tax (benefit) provision:
Current:
Federal $ (9,267,312) $ 749,755 $ 5,513,431
State (450,696) (18,804) 1,434,745
(9,718,008) 730,951 6,948,176
Deferred (benefit):
Federal (6,948,488) (3,110,288) (901,005)
State (1,945,312) (306,678) (211,262)
Foreign 1,947,922 (1,867,249) -
(6,945,878) (5,284,215) (1,112,267)
Total income tax (benefit) provision (16,663,886) (4,553,264) 5,835,909
</TABLE>
Differences between the U.S. federal statutory income tax rate and the
Company's effective rate for the historical income tax provision are as
follows:
<TABLE>
Fiscal Year Ended
February 2, January 28, January 29,
1997 1996 1995
<S> <C> <C> <C>
Statutory rate 34.0% 35.0% 34.3%
State/provincial income taxes, net of federal
income tax benefit 5.5 9.0 5.5
Foreign rate difference (1.0) 1.2 -
Alternative minimum tax and tax credits - (3.2) (1.4)
Other (.4) (0.5) 1.1
Effective tax rate 38.1% 41.5% 39.5%
</TABLE>
<PAGE>
The effective tax rate as presented above represents the Company's total
effective rate including the discontinued operations and extraordinary item.
Significant components of the deferred tax assets and liabilities, and their
related tax effects are as follows:
<TABLE> February 2, January 28,
1997 1996
<S> <C> <C>
Deferred tax assets:
Capitalized inventory cost 2,311,000 2,177,000
Capital leases 969,000 1,016,000
Vacation accrual 546,000 504,000
Deferred rent 649,000 501,000
Reserve for store closings and severance pay 2,751,000 2,422,000
Credit carry forwards 880,000 964,000
NOL carry forward 7,637,000 1,867,000
Other 1,030,000 607,000
16,773,000 10,058,000
Deferred tax liabilities:
LIFO reversal - (616,000)
Depreciation (2,811,000) (2,539,000)
Capital lease termination (349,000) (358,000)
Other (35,000) (20,000)
(3,195,000) (3,533,000)
Net deferred tax asset $13,578,000 $6,525,000
</TABLE>
As of February 2,1997, the Company has available federal and state net
operating loss carry forwards of approximately $19.0 million for offset
against taxable income. The federal NOL carry forwards expire at the end
of the fiscal year ending January 2012. In addition, the Company also has
available tax credit carry forwards for tax purposes of $880,000 primarily
consisting of alternative minimum tax credits which do not have an
expiration date. Based on the Company's business plan and the timing of
the reversals of temporary differences, management believes the Company
will be able to realize the benefit of the net deferred tax asset.
8. Employee Benefit Plans
Profit Sharing Plan
The Company has a noncontributory profit sharing plan for eligible
employees. The plan provides for contributions by the Company in such
amounts as the Board of Directors may annually determine, not to exceed
15% of the compensation paid annually to the participants. There were no
contributions to the plan for fiscal years 1996 and 1995. Contributions
to this plan were $100,000 in fiscal 1994.
Incentive Savings Plan
The Company has an incentive savings plan covering eligible employees
which allows for employee contributions under Section 401(k) of the
Internal Revenue Code. The Company is obligated to match one-third of
the first 3% of each employee's salary which is contributed to the plan.
Company contributions to this plan were approximately $193,000, $175,000
and $153,000 for fiscal 1996, 1995, and 1994, respectively.
<PAGE>
Stock Purchase Plan
Effective September 1992, the Board of Directors and stockholders adopted
a stock purchase plan for its employees under which a maximum of 200,000
shares of common stock have been reserved for issuance. Under this plan,
a Sportmart employee may purchase stock through payroll deductions for 85%
of the lesser of the closing market price of the common stock on the grant
date or the exercise date. The grant date, the exercise date and the
class of stock are designated by the purchase committee. On February 28,
1994, the first exercise date, 16,075 shares were purchased of Voting
Common Stock. On March 10, 1995, the second exercise date, 23,296 shares
of Voting Common Stock were purchased. On March 22, 1996, the third
exercise date, 60,766 shares of Class A Common Stock were purchased.
Restricted Stock Plan
Effective July 1, 1996, the Board of Directors and stockholders adopted
the Sportmart, Inc., 1996 Restricted Stock Plan. 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. Under this Plan, shares
awarded may be granted as Voting Common Stock or Class A Common Stock. A
total of 400,000 shares of common stock were authorized and reserved for
issuance under the plan. A Committee appointed by the Board of Directors
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 Company. During fiscal 1996, 300,000 shares of Class
A Common Stock were granted to participants under the plan. During
the period commencing on the Grant Date, November 19, 1996, and continuing
until August 1, 1999, these shares are restricted and can not be sold or
transferred. After such period, the participants vest immediately.
Stock Option Plans
1992 Plan
The Board of Directors and stockholders adopted the Sportmart, Inc.
Stock Option Plan (the "1992 Plan"), effective as of September 1992. A
total of 625,000 shares of common stock were authorized and reserved for
issuance under the 1992 Plan as of January 30, 1994, and during fiscal 1994,
an additional 500,000 shares of common stock were authorized and reserved
under the 1992 Plan. Options granted under this plan may be granted to
purchase either Voting Common Stock or Class A Common Stock. The
1992 Plan provides for the grant of incentive stock options ("ISOs") as
defined in Section 422A of the Internal Revenue Code of 1986, as amended
(the "Code"), to employees of the Company. The 1992 Plan also provides for
non-qualified stock options ("NQSOs") which may be granted to the Company's
officers, employees or independent contractors or any affiliate thereof.
The exercise price of the ISOs granted under the 1992 Plan may not be less
than 100% of the fair market value of the Company's common stock on the date
of grant or 110% of such fair market value in the case of holders of more
than 10% of the Company's common stock. Shares subject to an option granted
under the 1992 Plan may be purchased (i) for cash; (ii) in exchange for
shares of common stock owned by the optionee; (iii) for a combination
of cash and common stock; or (iv) by reducing the number of shares of
common stock to be issued and delivered to the optionee upon such exercise.
The plan includes vesting requirements from immediately up to five years
and option lives of ten years.
<PAGE>
Directors' Plan
The Board of Directors and stockholders adopted the Sportmart,
Inc. Directors' Stock Option Plan (the "Directors' Plan"), effective as of
September 1992. A total of 75,000 shares of common stock have been
authorized and reserved for issuance under the Directors' Plan. All
options granted under the Directors' Plan are exercisable immediately upon
grant and, for options other than those granted as of the Initial Grant
Date, at a price per share equal to the closing price of the common stock
as reported on the Nasdaq National Market on the date of grant or,
if the market is closed on such date, the next business day. Once granted,
options may not be canceled, but expire on the earlier of seven years after
the grant date or two years after the Outside Director is no longer serving
as a Director.
Option activity for the fiscal years ended February 2, 1997, January 28,
1996 and January 29, 1995 for the 1992 Plan and the Director's Plan was as
follows:
<TABLE>
Weighted Average Options
Shares Exercise Price Exercisable
<S> <C> <C> <C>
Balances at January 30, 1994 101,081 $ 14.67 74,031
Options granted 179,200 13.15
Options exercised - -
Options cancelled 146,200 13.02
Balances at January 28, 1995 134,081 14.45 93,231
Options granted 788,190 5.70
Options exercised - -
Options cancelled 268,649 5.57
Balances at January 28, 1996 653,622 7.55 226,959
Options granted 846,229 3.17
Options exercised 8,430 3.27
Options cancelled 110,148 3.19 -
Balances at February 2, 1997 1,381,273 5.24 525,410
</TABLE>
The following table summarizes the status of outstanding
stock options as of February 2, 1997:
<TABLE>
Options Outstanding Options Exercisable
Weighted-
Average Weighted Weighted
Number Remaining Average Number Average
Range of of Options Contractual Exercise of Options Exercise
Exercise Prices Outstanding Life(in yrs) Price Exercisable Price
<S> <C> <C> <C> <C> <C>
$2.69- 7.25 1,235,192 9.5 $ 4.21 420,179 $ 4.00
8.25-12.75 52,081 6.6 11.48 40,231 11.26
14.00-18.40 94,000 6.9 15.37 65,000 15.43
$2.69-$18.40 1,381,273 9.2 $ 5.24 525,410 $ 5.97
</TABLE>
<PAGE>
Had the Company elected to apply the provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation"
(SFAS 123) regarding recognition of compensation expense to the extent of
the calculated fair value of stock options granted in fiscal 1996 and 1995,
reported loss from continuing operations and loss per share from continuing
operations would have been increased as follows:
<TABLE>
1996 1995
<S> <C> <C>
Loss from continuing operations, as reported $(26,506,547) $ (4,120,791)
Pro forma loss from continuing operations (27,379,325) (5,111,339)
Loss per share from continuing operations, as reported $ (2.06) $ (0.32)
Pro forma loss per share from continuing operations (2.14) (0.40)
</TABLE>
The effects of applying SFAS 123 in the above pro forma disclosure are
not likely to be representative of the effects disclosed in future years
because the proforma calculations exclude stock options granted before
fiscal 1995.
For purposes of the SFAS 123, pro forma net loss and loss per share
calculation, the fair value of each option grant is estimated as of the
date of grant using the Black-Scholes option-pricing model. The weighted-
average assumptions used in determining fair value as disclosed for SFAS
123 are shown in the following table:
<TABLE>
1996 1995
<S> <C> <C>
Risk-free interest rate 6.3% 6.15%
Dividend yield 0.0% 0.0%
Option life (years) 4.0 4.0
Stock price volatility 45.% 45.0%
</TABLE>
During fiscal 1996, 1995 and 1994,the Company did not pay any
post-retirement benefits to retired employees.
9. Leasing Arrangements
The Company is obligated under several noncancellable operating leases
for its stores, distribution centers and certain computer and warehouse
equipment, which expire through the year 2018 exclusive of renewal option
periods. The leases provide for, among other things, minimum annual
rentals and contingent rentals based upon a percentage of sales in excess
of stipulated amounts, payments of real estate taxes and maintenance and
insurance costs. Eight of the leases are with partnerships, the
partners of which are officers of the Company and their family members.
The Company has also entered into agreements for the lease of certain
other properties which are classified as capital leases for financial
reporting purposes. All of these capital leases are with partnerships
substantially owned by certain officers of the Company and their family
members. The lease terms range from 15 to 21 years and provide for minimum
annual rental payments plus contingent rentals based upon a percentage of
sales in excess of stipulated amounts.
<PAGE>
The following table presents the future minimum lease commitments,
including the present value of the net minimum lease payments for capital
leases and the minimum future rental commitments for all operating leases
that have initial or remaining noncancelable terms in excess of one year.
<TABLE>
Capital Operating
Leases Leases Total
<S> <C> <C> <C>
1997 . . . . . . . . . . . . . . . $ 665,152 $ 28,831,537 $ 29,496,689
1998 . . . . . . . . . . . . . . . 665,152 28,268,667 28,933,819
1999 . . . . . . . . . . . . . . . 665,152 27,447,377 28,112,529
2000 . . . . . . . . . . . . . . . 665,152 27,352,716 28,017,868
2001 . . . . . . . . . . . . . . . 673,485 26,071,062 26,744,547
Thereafter . . . . . . . . . . . . 2,175,432 195,270,322 197,445,754
Total minimum lease payments 5,509,525 $333,241,681 $338,751,206
Less imputed interest. . . . . . . 1,793,867
Present value of future minimum
rentals, of which $306,619 is included
in current liabilities,
at February 2, 1997 . . . . . . . $ 3,715,658
</TABLE>
The total future minimum operating lease commitments also include
$4,413,789 of noncancellable sublease payments.
Rent expense was $31,644,197, $27,110,292 and $18,058,102 for fiscal 1996,
1995, and 1994, respectively. Included in these amounts are $118,641,
$209,599 and $333,240, respectively, representing contingent rentals.
As of February 2,1997, the Company has issued letters of credit of
approximately $3.8 million related to the leasing for various locations.
<PAGE>
10. Related Parties
The Company leases certain properties from partnerships that are
substantially owned by certain officers of the Company and their family
members. Expenses recognized for leases with these related partnerships
are as follows:
<TABLE>
Fiscal Year Ended
February 2, January 28, January 29,
1997 1996 1995
<S> <C> <C> <C>
Operating leases:
Base rentals $ 2,969,740 $ 2,766,741 $ 2,170,196
Percentage rentals 80,277 208,268 95,716
3,050,017 2,975,009 2,265,912
Capitalized leases:
Interest 388,378 498,585 766,631
Reduction of lease obligations 276,774 380,297 390,287
Percentage rentals 10,828 21,812 225,865
675,980 900,694 1,382,783
Totals $ 3,725,997 $ 3,875,703 $ 3,648,695
</TABLE>
In both fiscal 1996 and 1995, one of the related party capital leases was
reclassified into an operating lease due to substantial changes in the lease
thus causing the increase in operating leases expenses and the reduction in
capital lease above. The affiliated real estate partnerships pay a
management fee to the Company as reimbursement for administrative services
provided. Total management fees for fiscal 1996, 1995 and 1994
were $123,065, $115,406 and $100,000, respectively. In addition, the
Company has advanced amounts to certain affiliated real estate partnerships
for working capital purposes. These advances are due on demand and bear
interest at 6-9% per year. As of February 2, 1997 and January 28, 1996,
$216,900 and $695,900, respectively, was owed to the Company by affiliated
partnerships. The Company earned interest on affiliated partnership advances
of $36,560, $34,700 and $17,500 in fiscal 1996, 1995 and 1994, respectively.
The Company has not experienced problems in collecting advances to affiliated
real estate partnerships in the past and does not anticipate problems
in collecting amounts currently advanced.
11. Commitments and Contingencies
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the amount of
the ultimate liability with respect to these actions will not materially
affect the financial position or results of operations of the Company.
12. Non-Recurring Items
During the fourth quarter of fiscal 1996, the Company recorded a non-
recurring pre-tax charge of $33.2 million of which approximately $850,000
related to termination benefits. The majority of the charge is related
to costs associated with exiting the Canadian market. Included
in the charge of store closings is severance, lease buy-out costs,
inventory write-down costs, unamortized portions of nonrecoverable capital
improvements, as well as other miscellaneous exit costs. In addition to
termination benefits, cash outflows will be required for lease buy out costs
estimated at $11.9 million. These cash outflows will be funded from normal
operations. As of February 2, 1997, no termination benefits had been paid
<PAGE>
out. The liquidation of the inventory, by an independent company, began in
mid-January 1997 and was completed by mid-April 1997. The closing of the
eleven Canadian locations will result in personnel reductions of
approximately 600 people. Upon completion of the closings, the Company
expects ro realize approximately $3.5 to $4.5 million (net of tax) annual
cost savings.
During the fourth quarter of fiscal 1995, the Company recorded
a non-recurring pre-tax charge of $5,711,000 of which approximately $832,000
related to termination benefits. Approximately 79% of the charge was related
to costs associated with the closing of a store in Chicago, Illinois (River
North) and a clearance store in Wheeling, Illinois. The River North
location was closed as of the end of fiscal 1995 and the Wheeling store was
closed in May, 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 was
primarily due to severance for certain corporate and store personnel. The
Company updated this reserve at year-end resulting in an additional
non-recurring charge of approximately $300,000. As of February 2, 1997, the
reserve is approximately $2.7 million due to the payout of the lease costs
and severance payments.
13. 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 has been accounted for as discontinued operations,
and accordingly, its operations are segregated in the accompanying income
statements. Net sales, operation costs and expenses, other income and
expense, and income taxes for fiscal years 1995 and 1994 have been
reclassified for amounts associated with the discontinued division. A
reserve was also established for the estimated costs of disposal of the
business segment of $2.9 million pre-tax ($1.7 million after tax). The
reserve included estimated lease buy-out costs (approximately one year of
occupancy costs per location), severance payments, inventory write-down
costs, unamortized portions of nonrecoverable capital improvements (any
recoverable capital improvements were transferred to another operating
location) as well as other miscellaneous exit costs. The Company updated
this reserve at year-end resulting in an additional charge of $90,000 (net
of tax). As of February 2, 1997, the reserve is approximately $150,000 due
to the payout of the lease costs.
Sales, gross profit, related losses and income tax benefits associated
with the No Contest division for the fiscal years ended January 28, 1996
and January 29, 1995 were as follows:
<TABLE>
1995 1994
<S> <C> <C>
Sales $ 10,527,340 $ 10,852,419
Gross profit 1,916,786 1,832,711
Loss before income taxes (962,876) (950,427)
Income tax benefit 385,150 375,419
Net loss from discontinued operations (577,726) (575,008)
</TABLE>
14. Extraordinary item
As a result of the termination of the previous revolving credit facility
and the Senior Notes from Allstate Life Insurance Co. in September, 1996,
the Company incurred an extraordinary charge of $462,183, net of income taxes
of $334,684, for the write-off of the unamortized loan origination fees.
15. Geographic Segment Information
In addition to the Company's operations in the U.S., the Company also
operated eleven and nine locations in Canada as of February 2, 1997 and
January 29, 1996, respectively. All eleven of these locations were in the
process of liquidation as of February 2, 1997 due to the Company's decision
to exit the Canadian market. Revenue, operating loss and identifiable
assets pertaining to the Canadian locations are presented below for the
last two fiscal years:
<TABLE>
Year Ended Year Ended
February 2, 1997 January 29, 1996
<S> <C> <C>
Revenue $49,868,820 $29,642,445
Operating loss including exit
charges $(39,026,457) $(3,884,915)
Identifiable assets $24,036,999 $41,640,925
</TABLE>
<PAGE>
16. Quarterly Financial Data (unaudited)
<TABLE>
First Second Third Fourth
Quarter Quarter Quarter Quarter
Fiscal 1996 (in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $ 116,209 $ 146,079 $ 111,659 $ 140,664
Gross profit 25,619 37,093 24,654 26,608
Store pre-opening expenses 117 384 406 792
Net (loss) income from
continuing operations (877) 4,435 (2,080) (27,985)
Loss from discontinued operations - - - (90)
Loss from extraordinary item - - (462) -
Net (loss) income (877) 4,435 (2,542) (28,075)
Net (loss) income per share from
continuing operations (.07) .35 (.16) (2.18)
Loss per share from discontinued
operations - - - (.01)
Loss per share from extraordinary
item - - (.04) -
Net (loss) income per share (.07) .35 (.20) (2.19)
Fiscal 1995
Net sales $ 103,193 $ 133,945 $ 105,020 $ 150,021
Gross profit 22,027 34,651 23,428 30,928
Store pre-opening expenses 84 379 674 2,654
Net (loss) income from
continuing operations (984) 5,343 (1,678) (6,802)
Loss from discontinued operations (159) (153) (12) (2,000)
Net (loss) income (1,143) 5,190 (1,690) (8,802)
Net (loss) income per share
from continuing operations (0.08) 0.42 (0.13) (0.53)
Loss per share from
discontinued operations (0.01) (0.01) (0.00) (0.16)
Net (loss) income per share (0.09) 0.41 (0.13) (0.69)
</TABLE>
Fourth quarter adjustments for fiscal 1996, primarily related to
the following entries (net of tax): $2.7 million related to adjusting
shrink at year-end and $19.7 million non-recurring charge incurred for
the exiting of the Canadian operations. Fourth quarter adjustments
for fiscal 1995, primarily related to the following entries (net of
tax): $3.3 million non-recurring charge incurred for the closing of
two locations and severance pay; $1.7 million for loss on discontinued
operations; and $680,000 for reductions of incentives and other
compensation.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 5th day of May, 1997.
Sportmart, Inc.
(Registrant)
By: /S/ ANDREW S. HOCHBERG
Andrew S. Hochberg
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
/S/ LARRY J. HOCHBERG Chairman and Director May 5, 1997
Larry J. Hochberg
/S/ ANDREW S. HOCHBERG Chief Executive Officer May 5, 1997
Andrew S. Hochberg and Director
/S/ JOHN A. LOWENSTEIN Chief Operating Officer, May 5, 1997
John A. Lowenstein Director and Secretary
/S/ C. MARK SCOTT President and Director May 5, 1997
C. Mark Scott
/S/ JEROME GORE Director May 5, 1997
Jerome Gore
/S/ THOMAS T. HENDRICKSON Executive Vice President and May 5, 1997
Thomas T. Hendrickson Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
Number
3.1 (1) Restated Certificate of Incorporation of the
Registrant (Original Certificate of Incorporation
filed June 15, 1992).
3.2 (1) Bylaws of the Registrant.
4.1 (2) Sportmart, Inc. 1996 Restricted Stock Plan (as
amended and restated).
9.1 (3 Voting Trust Agreement between Larry J. Hochberg and
Sanford Cantor.
10.1 (4) Stock Option Plan.
10.2 (4) Director's Plan.
10.3 (4) Tax Indemnification Agreement.
10.4 (4) Form of Indemnification Agreement between the
Registrant and each of its directors.
10.5 (4) Lease between the Registrant and H-C Developers, as
agentfor the beneficiaries of American National Bank
and Trust Company Trust No. 30426 for the Registrant's
store in Niles, Illinois, as amended.
10.6 (4) Lease between the Registrant and American National
Bank and Trust Company, as Trustee under Trust No.
32490 for the Registrant's store in Calumet City,
Illinois,as amended.
10.7 (4) Lease between the Registrant and American National
Bank and Trust Company, as Trustee under Trust No.
42371 for the Registrant's store in Schaumburg,
Illinois, as amended.
10.8 (4) Lease between the Registrant and American National
Bank and Trust Company, as Trustee under Trust No.
54277 for the Registrant's store in Chicago (Lakeview),
Illinois, as amended.
10.9 (4) Lease between the Registrant and American National
Bank and Trust Company, as Trustee under Trust No.
56691 for the Registrant's store in Wheeling, Illinois,
as amended.
10.10 (4) Lease between the Registrant and Lake County Trust
Company, as Trustee under Trust No. 3737 for the
Registrant's store in Merrillville, Indiana,as amended.
10.11 (4) Lease between the Registrant and North Riverside
Limited Partnership for the Registrant's facility in
North Riverside, Illinois, as amended.
10.12 (4) Lease between the Registrant's No Contest division and
North County Associates, L.P. for the Registrant's No
Contest store in Ferguson, Missouri, as amended.
10.13 (4) Guaranty by the Registrant of loan to H-C Developers.
10.14 (4) Guaranty by the Registrant of loan to B.G. Partners
Limited Partnership.
10.15 (4) Guaranty by the Registrant of loan to Watson Road
Associates.
10.16 (4) Completion and Hazardous Substances Guaranty by the
Registrant to American National Bank and Trust Company
of Chicago.
10.17 (4) Guaranty of Payment by the Registrant to American
National Bank and Trust Company of Chicago.
10.18 (4) Incentive Savings Plan.
10.19 (3) Associate Stock Purchase Plan.
<PAGE>
10.20 (5) Fifth Amendment to Loan Agreement between Registrant and
American National Bank and Trust Company of Chicago.
10.21 (6) Second Amendment to Stock Option Plan.
10.22 (6) First Amendment to Associate Stock Purchase Plan.
10.23 (6) Key Employee Incentive Plan, as amended.
10.24 (6) Loan Agreement between the Registrant and American
NationalBank and Trust Company of Chicago and First
National Bank of Chicago.
10.25 (7) Loan Agreement between the Registrant and The First
National Bank of Chicago and American National Bank
and Trust Company of Chicago.
10.26 (7) Loan Agreement between the Registrant and The Bank of
Nova Scotia.
10.27 (7) Amendment to Loan Agreement between the Registrant and
the First National Bank of Chicago and American
National Bank and Trust Company of Chicago.
10.28 (7) Amendment to Loan Agreement between the Registrant and
The Bank of Nova Scotia.
10.29 (7) Second Amendment to Note Agreement between the
Registrant and Allstate Life Insurance Company.
10.30 (7) Note Purchase Agreement between the Registrant and
Xerox Financial Services Life Insurance Company.
10.31 (7) Amendment to Loan Agreement between the Registrant and
The First National Bank of Chicago and American
National Bank and Trust Company of Chicago.
10.32 (7) Amendment to Loan Agreement between the Registrant and
The Bank of Nova Scotia.
10.33 (7) Third Amendment to Note Agreement between the
Registrant and Allstate Life Insurance Company.
10.34 (7) Fifth Amendment to Note Purchase Agreement between the
Registrant and Allstate Life Insurance Company, as
successor in interest to Xerox Financial Services Life
Insurance Company.
10.35 (7) Third Amendment to Loan Agreement between the
Registrant and The First National Bank of Chicago and
American National Bank and Trust Company of Chicago.
10.36 (7) Third Amendment to Loan Agreement between the
Registrant and The Bank of Nova Scotia.
10.37 (7) Fourth Amendment to Note Agreement between the
Registrant and Allstate Life Insurance Company.
10.38 (7) Sixth Amendment to Note Purchase Agreement between the
Registrant and Allstate Life Insurance Company, as
successor in interest to Xerox Financial Services Life
Insurance Company.
10.39 (8) Credit Agreement between the Registrant and BT
Commercial Corporation.
10.40 (8) Sportmart, Inc. Restricted Stock Plan.
10.41 Agency Agreement between Registrant and Hilco/Great
American Group, Inc.
10.42 First Amendment to Credit Agreement between Registrant
and BT Commercial Corporation.
10.43 Second Amendment to Credit Agreement between Registrant
and BT Commercial Corporation.
10.44 Third Amendment to Credit Agreement between Registrant
and BT Commercial Corporation.
10.45 First Amendment to Lease between Registrant and
Roosevelt Associates Limited Partnership for the
Registrant's store at Lombard, Illinois.
<PAGE>
10.46 Lease between the Registrant and American National Bank
and Trust Company of Chicago as Trustee under Trust No.
42371 for the Registrant's store in Schaumburg, Illinois
10.47 Lease between the Registrant and H-C Developers, as
Agent for American National Bank and Trust Company of
Chicago, as Trustee under Trust No. 30426 for the
Registrant's store in Niles, Illinois.
10.48 First Amendment to Lease between Registrant and
Merrillville Partners Limited Partnership for the
Registrant's store in Merrillville, Indiana.
10.49 Second Amendment to Lease between Registrant and North
Riverside Associates Limited Partnership for the
Registrant's store in North Riverside, Illinois.
10.50 Third Amendment to Lease between Registrant and Torrence
Properties for the Registrant's store in Calumet City,
Illinois.
10.51 Third Amendment to Lease between Registrant and North
Riverside Associates Limited Partnership for the
Registrant's store in North Riverside, Illinois.
10.52 Employment and Change in Control Agreement between
Registrant and Thomas T. Hendrickson.
10.53 Post-Employment Medical Benefits Plan for Larry
Hochberg.
10.54 Sportmart, Inc. Severance Plan.
21 Subsidiaries of Registrant.
23.1 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
(1) Exhibit is incorporated herein by reference to same-numbered
Exhibit to Registrant's Statement No. 33-83886.
(2) Exhibit is incorporated herein by reference to same-numbered
Exhibit to Registrant's Statement No. 333-16389.
(3) Exhibit is incorporated herein by reference to same-numbered
Exhibit to Registrant's Report on Form 10-K filed with the
Securities and Exchange Commission on April 29, 1993.
(4) Exhibit is incorporated herein by reference to same-numbered
Exhibit to Registrant's Statement No. 33-50726.
(5) Exhibit is incorporated herein by reference to same-numbered
Exhibit to Registrant's Report on Form 10-Q filed with the
Securities and Exchange Commission on June 14, 1994.
(6) Exhibit is incorporated herein by reference to same-numbered
Exhibit to Registrant's Report on Form 10-Q filed with the
Securities and Exchange Commission on September 9, 1994.
(7) Exhibit is incorporated herein by reference to same-numbered
Exhibit to Registrant's Report on Form 10-K filed with the
Securities and Exchange Commission on April 25, 1996.
(8) Exhibit is incorporated herein by reference to same-numbered
Exhibit to Registrant's Report on Form 10-Q filed with the
Securities and Exchange Commission on September 11, 1996.
<PAGE>
47<PAGE>
<PAGE>
EXHIBIT 10.41
AGENCY AGREEMENT
This Agency Agreement is made this 15th day of January, 1997 by
and between Hilco/Great American Group, a joint venture comprised of
Hilco Trading Company, Inc., an Illinois corporation with a principal
place of business at One Northbrook Place, 5 Revere Drive, Suite 206,
Northbrook, Illinois 60062 and Garcel, Inc., a California corporation,
with a principal place of business at 6338 Variel Avenue, Woodland
Hills, California 91367, and doing business as Great American Asset
Management(the "Agent"), and Sportdepot Stores Inc. an Ontario
corporation having principal offices at 3090 Bathurst Street, Toronto,
Ontario M6A2A1 (the "Merchant").
WHEREAS, the Merchant operates retail stores under the name
Sportmart and the name Sportdepot in Canada and desires that the Agent
act as the Merchant's exclusive sales agent for the limited purpose of
conducting the Sale (as hereinafter defined);
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Agent and the Merchant hereby agree as follows:
1. Agency Appointment
The Agent shall serve as the Merchant's exclusive agent to
conduct a sale (the "Sale") of all inventory assets (as further
defined in subsection 2(c) hereof, the "Merchandise") from Merchant's
eleven (11) retail Sportmart and Sport Depot stores designated in
Exhibit 1 attached hereto (collectively, the "Stores"). It is
expressly agreed that subject to applicable law, Agent shall be
entitled, in its discretion, to advertise and conduct the Sale at each
Store as a "Store Closing," "Total Liquidation," "Going out of
Business" or similar sale.
2. Merchandise
(a) Inventory Taking Merchant and Agent shall cause to be
taken a "Retail Price" physical inventory of the "Merchandise" (as
such terms are defined in subsections 2(b) and 2(c), respectively),
located in the Stores and Merchant's "Big Ticket Item Warehouse"
beginning at the close of business at the Stores no later than January
24, 1997 (the date of the inventory taking at a Store being the
"Inventory Date" for such Store). During the taking of the inventory
at each Store, such Store shall be closed and no sales transacted.
Merchant and Agent shall jointly employ Western to conduct the
physical inventory, and Merchant and Agent shall each pay 50 percent
of the costs and fees of such inventory taking service. Other than
such costs and fees of Western, each of Merchant and Agent shall bear
their own costs relative to the inventory taking. Merchant and Agent
shall each have representatives present during the inventory taking,
and each shall have the right to review and verify the listing and
tabulation of the inventory count as provided by the inventory taking
service. The procedures to perform the inventory taking shall be as
mutually agreed by the parties. Prior to the inventory taking, Agent
shall have full access to all pricing and cost files of goods,
purchase journals, markdown calendars, POS calendars, advertising
<PAGE>
schedules, inter-store transfer logs, markdown schedules, invoices,
style runs, data processing, computer hardware, software, data files
and all other documents of Merchant relative to its inventories, past,
current and future.
(b) Valuation
For purposes of this Agreement, "Retail Price" shall mean the
lowest ticketed retail price or other non-ticketed point of sale
discount price offered to the public by Merchant at the Stores for
each individual item of Merchandise on or after January 11, 1997 for
each item of Merchandise listed on the flyer dated January 4, 1997
which has been presented to Agent and on or after January 6, 1997 for
all other items of Merchandise (exclusive of sales, excise and gross
receipts taxes), except for "Defective Merchandise" and "Display
Merchandise"( both as defined in subsection 2(c)). The Retail Price
of any Display Merchandise shall be 90% of the lowest ticketed or
other retail price offered to the public by Merchant at the Stores for
such Merchandise on or after January 11, 1997. The Retail Price for
any Defective Merchandise shall be mutually agreed upon by Merchant
and Agent. If Agent raises any concerns as to the lowest ticketed or
other retail price offered to the public of any swim related or
"packaway" Merchandise, Merchant and Agent shall use reasonable
efforts to mutually agree on the Retail Price of any such Merchandise
provided that, if no agreement can be reached after such reasonable
efforts then such Merchandise shall remain at the Retail Price. In
the case of identical items offered at different prices, the lowest
Retail Price on any such item shall control for all such items, unless
it is clear that such lowest Retail Price is mismarked.
(c) Merchandise Subject to this Agreement
For purposes hereof, "Merchandise" shall mean all inventory
that is located in the Stores and the "Big Ticket Item Warehouse" on
the Sale Commencement Date (as defined herein), including, without
limitation "Defective Merchandise" and "Display Merchandise."
As used herein, the following terms have the respective meanings
set forth below:
"Defective Merchandise" means goods identified by Merchant and
Agent as defective, damaged or otherwise not salable in the ordinary
course during the inventory taking process because they are scratched,
worn, broken, faded, torn, stained, discolored, dented or contain
other characteristics making them not first quality, and in each case
as to which Agent and Merchant mutually agree on its value to define
its "Retail Price." Display Merchandise shall not be deemed defective
per se. If Merchant and Agent cannot agree on the value of an item
that is defective, then such item shall be excluded from Merchandise
for purposes of this Agreement and shall be removed by Merchant at its
cost.
"Display Merchandise" shall mean fitness equipment or table
games used solely for display.
<PAGE>
"Merchandise" shall not include: (1) goods held by Merchant on
consignment; (2) on order inventory to be received or received at a
Store after the Inventory Date (unless Agent in its sole discretion
elects to include such inventory in Merchandise); (3) goods retained
by Merchant as bailee, goods which have been sold and are being held
for customers or are waiting to be delivered to customers; (4)
furnishings, store fixtures and equipment; (5) goods in leased or
licensed departments; (6) goods held at the Stores on layaway or for
repair; (7) special order goods for customers; (8) any "Thirty Day
Goods" as defined in the Bankruptcy and Insolvency Act (Canada), or
any other goods in respect of which a lien or encumberance is enforced
such that Agent cannot sell such goods at the Sale or, if sold, cannot
retain the proceeds thereof; and (9) trading cards and magazines.
Merchant shall remain responsible for processing and handling all
goods referred to in the preceding sentence, and contracts relating
thereto, and Agent shall have no cost, expense or responsibility in
connection therewith; provided that Agent shall cooperate with
Merchant in the administration of layaway, repair and special order
goods.
(d) Transfer of Inventory and Supplies
(i) Neither inventory nor supplies (e.g. boxes, bags,
twine, hangers, shoe coils) have been since January 6,
1997, and shall not be prior to the Sale Commencement
Date, redirected or directed by Merchant between or
among the Stores and any other store locations of
Merchant (the "Remaining Stores") so as to alter the
mix or quantities of inventory or supplies at the
Stores from that existing on January 6, 1997, except
for (A) transfers of goods excluded from Merchandise
hereunder, and (B) sales in the ordinary course of
business.
(ii) Merchant does not represent that adequate stocks of
supplies are or will be available at the Stores as of
the Sale Commencement Date. Agent shall have the right
to use all existing supplies at the Stores as of the
Sale Commencement Date, and to obtain additional
supplies reasonably needed for Agent's proper conduct
of the Sale from Merchant at Merchant's actual cost
therefore as an "Expense" (as defined in subsection
3(d)); provided, however, that Merchant shall be
entitled to remove all hangers, security tags and shoe
coils not in use by Agent or to be used by Agent at
Merchant's expense. At a mutually agreeable time
during the Sale, Merchant shall be entitled to
redistribute "Sportdepot" supplies and bags from its
Western stores to its Eastern Stores for use during the
Sale and therefore allow Merchant to redistribute
"Sportmart" bags to the U.S..
<PAGE>
(e) Gross Rings
In the event that the Inventory Date for a Store is after
the Sale Commencement Date (as hereinafter defined), then for the
period from the Sale Commencement Date for such Store until the
Inventory Date for such Store, Agent and Merchant shall jointly keep
(i) a strict count of gross register receipts less applicable sales
tax, excise taxes and gross receipts taxes ("Gross Rings"), and (ii)
cash reports of sales within such Store. The register receipts shall
show for each item sold the Retail Price for such item and the
storewide or other markdown or discount granted by Agent in connection
with such sale. All such records and reports shall be made available
to Agent and Merchant during regular business hours upon reasonable
notice. The Retail Price of the Merchandise from which the Guaranteed
Amount (as hereinafter defined), the Agent Amount (as hereinafter
defined) and the Recovery Amount (as hereinafter defined) will be
calculated shall be the aggregate of (A) the Retail Price of the
respective items of Merchandise in the Stores on the Inventory Date as
determined in accordance with Section 2(a) hereof, plus (B) the
aggregate of the Retail Price of the Merchandise included in Gross
Rings multiplied by 1.009 (the "Gross Rings Amount").
3. Sale
(a) Term
The Sale shall commence on January 17, 1997 (the "Sale
Commencement Date"). The Agent shall complete the Sale no later than
April 30, 1997, and shall have the discretion to terminate the Sale as
to any Store at any time within that time frame, unless the Sale is
extended by mutual written agreement of Agent and Merchant (the "Sale
Termination Date"). If Agent terminates the Sale as to any particular
Store prior to the Sale Termination Date, Agent shall, subject to
applicable law and as an "Expense" (as defined in subsection 3(d)),
consolidate goods remaining therein in the other Stores (subject to
the limitation set forth in subsection 3(b)(i)(F)). Agent shall give
Merchant reasonable notice prior to terminating the Sale at a Store.
The period from the Sale Commencement Date to the Sale Termination
Date as to each Store shall be hereinafter referred to as the "Sale
Term".
(b) Rights of Agent; Final Sales
(i) The Agent shall conduct the Sale during the Sale Term
in the name of and on behalf of Merchant in a commercially reasonable
manner. The Agent, in the exercise of its reasonable discretion and
in accordance with applicable laws, regulations and ordinances shall
be entitled:
(A) to establish and implement advertising and promotion programs
consistent with the "Store Closing," "Total Liquidation" or "Going
Out of Business" theme to the extent permitted by applicable laws,
regulations and ordinances; provided, however, that Agent shall
deliver copies of all advertising materials for the Sale to
Merchant, Attn: Mitchell P. Kahn (facsimile no. 847-520-1343) or
Gregory E. Fix, (facsimile no. 847-520-1380) who shall have the
right, within forty-eight (48) hours of such delivery, to
approve such materials (which approval shall not be unreasonably
withheld or delayed), and provided further that the failure of
Merchant to reasonably respond to any request for approval within
forty-eight (48) hours shall be deemed approval of the subject
materials;
<PAGE>
(B) to establish Sale prices and discounts upon prior notice to
Merchant;
(C) to use without charge, during the Sale Term and for purposes
of selling the Merchandise, all customer lists, furniture, store
fixtures, equipment, advertising materials, supplies, credit
card facilities and processors including access to credit card
terminal processing coding, computer hardware and software,
Merchant's name, logo, and other assets of Merchant (whether owned,
leased, or licensed) located at the Stores, all of which
will be returned to Merchant at the end of the Sale Term, to the
extent the same (1) are remaining at the end of the Sale Term, (2)
have not been used (e.g. supplies), or (3) otherwise have not been
disposed of through no fault of Agent;
(D) to use the Merchant's personnel, to the extent that the Agent,
in the exercise of its sole discretion, shall deem appropriate
provided that Agent shall comply in all material respects with
Merchant's human resource policies and procedures which are disclosed
to Agent in writing prior to the Sale Commencement Date and provided
further that Agent shall use its reasonable efforts to retain
Merchant's employees for at least eight weeks from the Sale
Commencement Date.
(E) beginning on January 16, 1997 at 4:30 P.M., to have access to
the Stores to prepare for the Sale in a manner so as not to disrupt
Merchant's ongoing business operations, and during the Sale
Term to use all Store keys, case keys, security codes, and safe and
lock combinations to gain access to and to operate the Stores;
(F) to transfer Merchandise between and among the Stores subject to
applicable law and upon prior notice to Merchant; provided, however,
that no Merchandise transfers between the Stores or from the "Big
Ticket Item Warehouse" to the Stores shall be made between the Sale
Commencement Date and completion of the inventory at all of the
Stores; and
(G) to use Merchant's central administrative services and personnel
to process payroll, perform MIS and other central office services
necessary for the Sale.
(ii) Agent's rights expressed above are subject to:
(A) Agent's safekeeping and maintaining in confidence
information received about Merchant's business which is not
in the public domain; and
(B) The requirement that Agent return any assets required to
be returned to Merchant in the same condition as provided to
Agent at the Sale Commencement Date, ordinary wear and tear
and damage caused by Merchant or its employees or agents
excepted.
<PAGE>
(iii) All sales of Merchandise will be "final sales" and
"as is" and all advertisements and sales receipts will
reflect the same. Agent shall not warrant the Merchandise in any manner,
but will pass manufacturers' warranties to customers, to the extent
transferable. In the conduct of the Sale, Agent shall not be required
or obligated to honor any discount coupons, circulars or similar items.
Merchant shall indemnify and hold harmless Agent, and its respective
officers, directors, agents and employees (collectively, the "Agent
Indemnified Parties") for all liabilities and costs of whatever kind
(including, but not limited to, reasonable attorneys' fees) related to
or resulting from any consumer warranty or products liability claims
relating to the Merchandise.
(c) Obligations of Agent
(i) During the Sale Term, Agent shall collect from sales at
the Stores Sale-related sales, excise and gross receipts taxes, as
calculated by Merchant's point-of-sale registers, payable to any taxing
authorities having jurisdiction, which taxes shall be added to the
sales price, shall be paid by the customer, and shall be promptly paid
over to Merchant. So long as Agent complies with the provisions of
this subsection, Merchant shall indemnify and hold harmless the Agent
Indemnified Parties from and against any and all costs,assessments,
fines, penalties and liabilities (including, but not limited to,
reasonable attorneys'fees), which any Agent Indemnified Party sustains
or incurs as a result or consequence of the failure by the
Merchant to promptly pay such taxes to the proper taxing authorities
and/or the failure by the Merchant to promptly file with such taxing
authorities any and all reports and other documents required, by
applicable law, to be filed with or delivered to such taxing
authorities. Agent shall indemnify and hold harmless the Merchant and
its officers, directors, agents, employees, and shareholder
(collectively, the "Merchant Indemnified Parties") from and against any
and all costs, assessments, fines, penalties and liabilities
(including, but not limited to, reasonable attorneys'fees), which the
Merchant sustains or incurs as a result or consequence of the failure
by Agent to fulfill its obligations under this subsection 3(c)(i).
(ii) During the Sale Term, the Merchant shall process the
base payroll for all Merchant employees utilized by the Agent. Such
employees will be identified by Agent prior to the Sale Commencement
Date. Merchant covenants and agrees with Agent that all wages
including applicalbe withholding (but excluding severence and termination
pay for which Merchant shall be liable to pay) have been paid or will be
paid when due, by Merchant to the Sale Commencement Date and will
continue to be paid by Merchant (including severence and termination)
pursuant to the provisions of this Agreement. Subject to the provisions
of Section 3(b)(i)(D) hereof, Agent may stop using any such
employee at any time during the Sale, provided that Agent shall not
terminate any employee without prior notice to Merchant. Base payroll
and related payroll taxes and benefits of employees are designated on
Exhibit 3(c)(ii) hereto. Prior to or during the Sale
Term, Merchant shall not dismiss employees of the Stores (except for
"cause") or transfer employees between the Stores and Remaining Stores
without Agent's consent. Agent acknowledges that Merchant has or will
provide notice of termination pursuant to applicable employment
legislation and consents to any terminations resulting therefrom.
Merchant and Agent acknowledge and agree that: (A) nothing herein nor
any of Agent's actions taken in respect hereto shall he deemed to
constitute an assumption by Agent of any of Merchant's obligations
<PAGE>
relating to Merchant's employees, including, without limitation,
vacation, pension withdrawal, severance or other termination pay,
vacation pay, sick leave or pay, maternity leave or pay, Worker
Adjustment Retraining Act or similar law (if any); and (B) nothing herein
shall make Agent liable under any collective bargaining or employment
agreement, nor shall Agent be deemed a joint or successor employer.
(iii) Retention bonuses in the aggregate amount of up to
$66,000 shall be paid (inclusive of payroll taxes but exclusive of
benefits) to Store managers and employees who work during the Sale Term
and do not voluntarily leave employment or are not terminated "for
cause." Such bonuses shall be payable within thirty (30) days
of the end of the Sale Term. The recipients of such retention bonuses
shall be determined by Agent in its reasonable discretion, and such
retention bonuses shall be processed through Merchant's payroll system.
(iv) Except as specifically set forth in this Agreement,
Agent shall not assume, nor shall its actions be construed as an
assumption of, any of Merchant's liabilities or obligations. Merchant
shall indemnify and hold the Agent Indemnified Parties harmless in
respect of all losses, costs, expenses, liabilities and claims, if any,
arising from or relating to those obligations and liabilities not
specifically assumed by Agent hereunder.
(v) On the Sale Termination Date, Agent shall leave each of
the Stores vacant, broom clean and in good order and condition except
for normal wear and tear and remaining furniture, store fixtures and
equipment.
(vi) Agent shall comply in the conduct of the Sale with (A)
all applicable statutes, rules, regulations and orders of, and applicable
restrictions imposed by, governmental authorities, including, without
limitation, all so called "going out of business laws" and all laws and
regulations relating to treatment of employees, (B) all Merchant's
employee rules, regulations, guidelines and policies, which have been
provided to Agent in writing, and (C) all Store leases, reciprocal
easement agreements and other similar agreements relating to the Stores,
provided that such compliance shall not limit Agent's ability to conduct
and advertise the Sales as a "Store Closing," "Total Liquidation,"
"Going Out of Business" or other similar sale.
<PAGE>
(d) Expenses
As used herein, "Expenses" shall mean Store-level operating
expenses of the Sale which arise during the Sale Term at the Stores,
limited to the following: (A) advertising and signage (with Agent
having the benefit of Merchant's contract rates); (B) costs of
security personnel and armored car service (including, without
limitation, the cost of at least one security guard at each Store to
check receipts through and including the completion of the physical
inventory at such Store); (C) base payroll, including any overtime
pay, plus 15% thereof (in lieu of calculating related payroll taxes
and benefits); (D) on-site supervision (up to a maximum of $3,000
(U.S.) per week for the lead supervisor and $2,000 (U.S.) per week for
each additional supervisor); (E) telephone expenses in excess of base
telephone charges; (F) costs of postage and courier service incurred
in the conduct of the Sale; (G) credit card, debit card and bank card
fees, chargebacks and discounts; (H) merchandise transfer costs during
the Sale Term; (I) retention bonuses to Merchant's Store managers and
employees as described in Section 3(c)(iii) above; (J) fifty percent
(50%)of the fees and costs of Western, the inventory taking service,
to take the inventory (the other fifty percent (50%) to be borne by
Merchant as set forth in Section 2(a)); (K) costs of alarm systems;
(L) costs of janitorial services, trash removal, and Store cleaning;
(M) costs of check verification services; (N) the cost of ADP payroll
processing; (O) costs of additional supplies purchased during the Sale
Term; (P) the cost of music systems; (Q) the Agent Amount (as defined
herein), which shall be provisionally paid to Agent at $100,000
(Canadian) per week (but not more than an aggregate of $900,000
(Canadian)), by Wednesday of each week during the Sale Term commencing
on the fourth week of the Sale. Agent shall maintain the Agent Amount
in a segregated account until the Final Reconciliation (as defined
herein) and shall repay any payment of the Agent Amount to the extent
that the Proceeds are not sufficient to pay the Guaranteed Amount and
the Expenses; and (R) such other costs and expenses reasonably
incurred in providing such additional services which the Agent in its
discretion considers appropriate and which are approved by Merchant,
which approval will not be unreasonably withheld. "Expenses"
specifically excludes any other costs and expenses payable by
Merchant; payroll taxes and employee benefits costs in excess of the
15% amount described above (provided, however, that the costs of ADP
payroll processing shall not be included in this limitation and shall
constitute an Expense of the Sale); all licensing fees required to be
paid to governmental agencies to conduct the Sale; rental for
furniture, store fixtures and equipment, except for furniture, store
fixtures and equipment rented by Agent; and "Occupancy Costs".
"Occupancy Costs" means rent, percentage rent, CAM, HVAC, utilities,
merchant's association dues, building insurance, real estate taxes,
structural repair, base telephone charges and other rent and/or
occupancy costs payable either under leases or on account of occupancy
of the Stores, all of which Merchant has paid and will continue to pay
during the Sale Term for the Stores. Merchant represents and
covenants that it has paid, will pay, and continue to pay when due all
employee benefits programs (including health benefits and insurance),
and shall pay when due all proper claims made or to be made
thereunder, in each case for periods prior to and during the Sale Term
relative to Store employees.
<PAGE>
All Expenses shall be paid by Merchant from the Proceeds when
such Expenses are due. To the extent the Proceeds are insufficient to
pay the Expenses, Merchant shall request payment from Agent. If Agent
does not pay Merchant the amount requested within 48 hours after
notice is given, Merchant shall be entitled to draw such amount from
the Letter of Credit.
4. Proceeds
(a) For purposes of this Agreement, "Proceeds" shall mean the
total amount (in Canadian dollars) of: (i) all sales of Merchandise
made under this Agreement (exclusive of sales, excise and gross
receipt taxes, credit card and bank card fees, and returns, allowances
and customer credits).
All sales will be made only for cash, and by credit and debit
cards currently accepted by Merchant. Agent may, at its decretion,
accept checks provided that the bad debt risk associated with such
checks shall be borne by Agent. Agent shall at Merchant's request
accept store credits, due bills and Merchant gift certificates issued
prior to the Sale Commencement Date, but conditioned upon arrangements
satisfactory to Agent that such amounts will be credited to Agent in
the weekly reconcilation. For seven days from the Sale Commencement
Date, Agent shall accept, for exchange only, returns of goods
evidenced by a receipt dated not more than one week prior to the Sale
Commencement Date. Returned goods that in Agent's reasonable
discretion are damaged or defective shall be set aside for Merchant.
Merchant shall credit Agent for the Retail Price of Merchandise given
to a customer in exchange for the damaged or defective goods returned.
Merchant may at its decretion accept returns of goods after the first
week of the Sale, but, unless otherwise agreed by the parties, such
returned goods shall be the sole responsibility of the Agent.
(b) All cash Proceeds shall be promptly paid over to Merchant
"Overs" and "Shorts" will be the responsibility of Agent, not Merchant.
5. Payments
(a) Payment Amounts
At the end of the Sale Term, the Proceeds shall be
distributed as follows:
(a) first, Proceeds equal to fifty and sixty-five one
hundredths of one percent (50.65%) of the aggregate Retail Price of
the Merchandise (the "Guaranteed Amount") shall be retained by Merchant;
(b) second, after payment in full of item (a) above, remaining Proceeds
equal to the total amount of the Expenses shall be retained by Merchant as
a reimbursement of the Expenses; third, after payment in full of items
(a) and (b) above, remaining Proceeds equal to two percent (2%) of the
aggregate Retail Price of the Merchandise (the "Agent Amount") shall be
paid by Merchant to Agent; and, fourth, after payment in full of items
(a), (b) and (c) above, one-half of the remaining Proceeds (the "Recovery
Amount") shall be paid by Merchant to Agent and one-half shall be retained
by Merchant.
<PAGE>
(b) Reconciliations; Guaranty; Letter of Credit
(i) By Wednesday of each week during the Sale Term Merchant
and Agent shall reconcile the Proceeds and Expenses of the Sale for
the Merchandise sold during the prior week (i.e. Sunday through
Saturday). Within thirty (30) days after the Sale Termination Date
at the last Store, Merchant and Agent shall complete a final
reconciliation of all Proceeds and Expenses and Merchant and Agent
shall pay to one another any amounts due.
(ii) Subject to Merchant's compliance with paragraphs 6(c)
and 6(f) Agent hereby unconditionally guarantees to Merchant payment
of the Guaranteed Amount plus all Expenses. Provided, however, that
Agent's obligation to pay the Guaranteed Amount and Expenses shall not
limit or impair Agent's ability to assert damages against Merchant for
Merchant's breach of any of its other obligations or convenants
hereunder. If the Proceeds of the Sale are insufficient to pay the
Guaranteed Amount plus all Expenses, Agent shall pay to Merchant
within ten (10) days after the Sale Termination Date at the last Store,
an amount equal to (A) the sum of (I) the Guaranteed Amount plus (II)
all Expenses minus (B) the amount of the Proceeds.
(iii) To secure the payment by Agent to Merchant of the
Guaranteed Amount and Agent's obligations to pay Expenses as guaranteed
above, promptly upon the execution of this Agreement (but in no event
later than (2) days after the date hereof), Agent shall deliver to
Merchant a standby letter of credit in the original face amount of the
sum of $4,800,000 (U.S. dollars),naming Merchant as beneficiary
(the "Letter of Credit"). The Letter of Credit shall be issued by
LaSalle National Bank or another bank selected by Agent and reasonably
acceptable to Merchant, and shall contain terms, provisions and
conditions mutually acceptable to Agent and Merchant. In the event that
the Proceeds are insufficient to pay to Merchant (A) the Guaranteed
Amount required to be under Section 5 or (B) any Expenses, Merchant
shall be entitled to draw on the Letter of Credit to fund such amount
following five (5) days written notice to Agent of Merchant's
intention to do so. When the Proceeds equal the Guaranteed Amount, the
amount of the Letter of Credit may be reduced by ten percent (10%) for
every percentage point which the Proceeds exceed the Guaranteed Amount,
but in no event shall the amount of the Letter of Credit be less than
$750,000 (U.S.). Unless Merchant and Agent mutually agree that the
Letter of Credit may terminate earlier, the Letter of Credit shall
expire no earlier than forty-five (45) days following the Sale
Termination Date.
<PAGE>
(c) Agent's Compensation
Provided that Agent has performed its obligations under
this Agreement and the Guaranteed Amount, the Expenses and all other
amounts due from Agent to Merchant hereunder are paid in full, all
Merchandise remaining at the conclusion of the Sale shall become the
property of Agent.
6. Conditions and Covenants
The Agent's and Merchant's willingness to enter into the
transactions contemplated hereunder and Agent's and Merchant's
obligations hereunder are directly conditioned upon the satisfaction,
compliance and completion of the following at the time or during the
time periods indicated, unless specifically waived in writing by both
parties:
(a) Agent on behalf of Merchant shall have obtained all
permits, licenses, authorizations and approvals required under
applicable laws, rules, regulations, and court or administrative
orders necessary to conduct the Sale; provided that Merchant shall
cooperate fully with Agent in obtaining such consents.
(b) The inventory taking shall have been completed at each of the
Stores on or before February 1, 1997 and the inventory taking service
shall have issued its final report to Merchant and Agent with regard
to the inventory. As of the Sale Commencement Date, goods
constituting Merchandise located at the Stores shall be no less than
$40 million (Canadian dollars) at Retail Price.
(c) Provided that Agent complies with the terms of Store leases
in the conduct of the Sale other than any restrictions on the ability
to advertise and conduct the Sale as a "Store Closing," "Total
Liquidation," "Going Out Of Business" or similar sale or any
restrictions on a third party conducting the Sale as agent, the
Merchant possessing and the Agent having the right to the undisturbed
and unencumbered use and occupancy of, and the peaceful and quiet
possession of, the Stores and assets currently located thereat and the
services provided thereto throughout the Sale Term, such that Agent
may conduct the Sale in the manner provided herein without
interference of any landlord, governmental agency or other third
party. If Merchant requests that Agent vacate any Store prior to the
completion of the Sale Term, Agent shall comply with such request,
provided that, Merchant shall reimburse Agent for any reduction of the
Agent Amount, any additional expenses or any other amounts due to or
incurred by Agent relating to or incurred as a result of vacating such
Store prior to the completion of the Sale Term.
(d) All representations and warranties of Merchant and Agent
hereunder shall be true and correct in all material respects and no
Event of Default shall have occurred at and as of the date hereof and
as of the Sale Commencement Date.
(e) Merchant shall have provided Agent reasonable access to all
pricing and cost files, inter-Store transfer logs, markdown schedules,
invoices, style runs and all other documents relative to the price,
mix and quantities of inventory located at the Stores.
<PAGE>
(f) If the conduct of business in the ordinary course at any
Store is interrupted for any reason other than a casualty or an act of
God, in Agent's discretion (i) the Merchandise at such Store may be
transferred to another Store or Stores and if appropriate an
adjustment to Proceeds and Guaranteed Amount shall be made to reflect
the inability of Agent to conduct the Sale at such Store or Stores.
7. Representations, Warranties and Covenants
(a) The Merchant hereby makes the following representations and
warranties to the Agent, which shall survive the execution and
delivery of this Agreement:
(i) Merchant is a corporation, duly organized, validly
existing and in good standing under the laws of the province of its
incorporation, and has the corporate power and authority to own, lease
and operate its assets, properties and business and to carry on its
business as now being conducted. Merchant is authorized to conduct
business in all provinces in which Stores are located.
(ii) Merchant has, the right, power and authority required
to execute, deliver and perform fully its obligations hereunder.
This Agreement has been duly executed and delivered by Merchant and
constitutes the legal, valid and binding obligation of Merchant,
enforceable in accordance with its terms. No court order or decree of
any federal, provincial, or local government authority or regulatory
body is in effect that would prevent or impair consummation of the
transactions contemplated by this Agreement, and no consent of any
third party is required therefor. No contract or other agreement to
which Merchant is a party or by which Merchant is otherwise bound will
prevent or materially impair the consummation of the Sale at any
location or the other transactions contemplated hereunder.
(iii) Merchant has operated and will continue to operate
the Stores to the Sale Commencement Date in the ordinary course of
business consistent with historical operations, applying procedures,
operations, practices and policies (including, but not limited to,
receipts of inventory at the Stores at a normal level through
January 1, 1997 and at the reduced level through January 14, 1997 that
has been disclosed to Agent) in substantially the same manner as
theretofore applied by Merchant at the Stores. Merchant has not
conducted at the Stores any promotions or advertised sales except
promotions and sales in the ordinary course of business
as described in Exhibit 7(a)(iii).
(iv) Merchant has, or will have as of the Sale Commencement
Date, good and marketable title to all of the Merchandise free and
clear of all liens, claims and encumbrances except for the liens of
Bankers Trust which have been disclosed to Agent prior to execution
of this Agreement. Merchant shall not create, incur, assume or suffer
to exist any security interest, lien or other encumbrance upon or with
respect to any of the Merchandise or Proceeds, except for presently
existing liens which have been disclosed to Agent.
<PAGE>
(v) Merchant has maintained its prices of inventory in the
ordinary course, and prices charged to the public for inventory
(whether in-store, by advertisement or otherwise) are the same as set
forth in Merchant's records as of and for the periods indicated, except
for the promotions and sales described in Section 7(a)(iii). All
records since January 1, 1997 relating to all inventory in the Stores
have been or will be made available to Agent upon request, and are true
and accurate in all material respects for purchasing such inventory and
as to the selling price to the public therefor as of the dates and for
the periods of such files and records. Without limiting any of
Merchant's representations and covenants contained herein: (A)
Merchant has not since January 11, 1997 for each item of Merchandise
listed on Exhibit 2(b) and since January 6, 1997 for all other items of
Merchandise, and shall not up to the Sale Commencement Date, remove or
alter any tickets or raise the price of any items of Merchandise; and
(B) Merchant has not and shall not purchase or transfer to or from the
Stores any merchandise or goods outside the ordinary course in
anticipation of the Sale or of the taking of the inventory.
(vi) To the best of Merchant's knowledge, all Merchandise is
in compliance with all applicable federal, state or local product
safety laws, rules and standards. Merchant shall provide Agent with its
historic policies and practices regarding product recalls prior to the
taking of the inventory at the Stores.
(vii) Merchant is not a party to any collective bargaining
agreements with its employees and, to the best of Merchant's knowledge,
no labor unions represent Merchant's employees at the Stores.
(viii) No event of default or event which with the giving of
notice or the passage of time or both has occurred on the part of
Merchant under any Store lease or other agreement relating to the
occupance of the Stores. During the Sale Term, Merchant shall timely
pay all Occupancy Costs and other obligations of Merchant under any
Store lease or other agreement relating to the occupance of the Stores.
(b) Agent represents and warrants to Merchant as follows,
which representations and warranties shall survive the execution of
this Agreement:
(i) Each of the corporations comprising Hilco/Great
American Group are duly organized, validly existing and in good standing
under the laws of their respective states of incorporation and have the
power and authority to consummate the transactions contemplated hereby.
(ii) Agent has the right, power and authority to execute and
deliver this Agreement and perform its obligations hereunder and has
taken all necessary action required to authorize the execution,
delivery, and performance of this Agreement and no further
approval is required for Agent to enter into and deliver this Agreement
and to perform its obligations hereunder.
<PAGE>
(iii)This Agreement has been duly executed and delivered by
Agent and constitutes the legal, valid and binding obligation of Agent
enforceable against the Agent in accordance with its terms. No court
order or decree of any federal, province, or local governmental
authority or regulatory body is in effect that would prevent or impair
or is required for Agent's consummation of the transactions contemplated
by this Agreement and no consent of any third party is required therefor.
No contract or other agreement to which Agent is a party or by which
the Agent is otherwise bound will prevent or impair the consummation of
the transactions contemplated by this Agreement.
(iv) To Agent's knowledge, no actions or proceedings
have been instituted by or against the Agent, or have been threatened,
which question the validity of this Agreement or any action taken or to
be taken by Agent in connection with this Agreement or that, if
adversely determined, would have a material adverse effect upon Agent's
ability to perform its obligations under this Agreement.
8. Insurance
(a) Merchant shall continue at its cost and expense until the
end of the Sale Term, in such amounts as it currently has in effect,
all of its liability insurance policies including, but not limited to,
its product liability, comprehensive public liability and auto liability
insurance policies covering injuries to persons and property in or in
connection with Merchant's operation of the Stores.
(b) Merchant will provide throughout the Sale Term, at its
expense and not as an Expense hereunder, fire, flood, theft and extended
coverage casualty insurance on the Merchandise in a total amount equal to
no less than the retail value thereof. In the event of a loss to the
Merchandise on or after the date of this Agreement, such Merchandise shall
be excluded from the Sale and the Retail Price and Guaranteed Amount adjusted
accordingly.
(c) Agent shall maintain at Agent's cost and expense from the
Sale Commencement Date until the Sale Termination Date in such amount
as it currently has in effect, liability insurance policies including,
but not limited to, products liability, comprehensive public liability
and auto liability insurance policies covering injuries to persons and
property in or in connection with Agent's agency at the Stores.
9. Defaults
The following shall be "Events of Default" hereunder:
(a) The Merchant or Agent shall fail to perform any material
obligation hereunder, and such failure shall remain uncured or unwaived
seven days after written notice thereof; or
(b) Any representation or warranty made by Merchant or Agent
proves untrue in any material respect when made.
Any party's damages or entitlement to equitable relief on account
of an Event of Default shall be determined by a court of competent
jurisdiction in Illinois.
<PAGE>
10. Indemnification
(a) Without limiting any other indemnity provisions contained
herein, Merchant shall indemnify and hold the Agent Indemnified
Parties harmless from and against all claims, demands, penalties,
losses, liability or damage, including, without limitation, reasonable
attorneys' fees and expenses, directly or indirectly asserted against,
resulting from, or related to:
(i) Merchant's material breach of or material failure to
comply with any of its agreements, covenants,representations or
warranties contained in this Agreement;
(ii) any failure of Merchant to pay to its employees any
wages, salaries or benefits due to such employees during the Sale Term;
(iii) any consumer warranty or products liability claims
relating to the Merchandise;
(iv) any liability or other claims asserted by customers,
any of Merchant's employees, or any other person or government authority
against any Agent Indemnified Party (including, without limitation,
claims by employees arising under collective bargaining agreements,
worker's compensation or under the Worker Adjustment Retraining Act),
except for any such claims arising directly from the negligence or
willful misconduct of the Agent; and
(v) the negligence or willful misconduct of Merchant or any
of its officers, directors, employees, agents or representatives.
(b) Without limiting any other indemnity provisions contained
herein, Agent shall indemnify and hold the Merchant Indemnified
Parties harmless from and against all claims, demands, penalties,
losses, liability or damage, including, without limitation, reasonable
attorneys' fees and expenses, directly or indirectly asserted against,
resulting from, or related to:
(i) Agent's material breach of or failure to comply with
any of its agreements, covenants, representations or warranties
contained in this Agreement;
(ii) any harassment or any other unlawful, tortious or
otherwise actionable treatment of any employees or agents of Merchant
by Agent or any of its representatives;
(iii) subject to the right of Agent to conduct the Sale
in accordance with the terms and provisions of this Agreement, any
failure of Agent to comply with the policies and procedures described
in Merchant's Human Resources Policies and Procedures (a copy of which
has been delivered to Agent concurrently with the execution
of this Agreement);
(iv) any claims by any party engaged by Agent as an employee
or independent contractor arising out of such employment; and
(v) the negligence or willful misconduct of Agent or any of
its officers, directors, employees, agents or representatives.
<PAGE>
11. Fixtures
If requested by Merchant, Agent shall advertise, in the context
of advertising for the Sale, that furniture and store fixtures (except
leasehold improvements) at the Stores are for sale, and shall contact
and solicit known purchasers and dealers of furniture and store fixtures.
Merchant shall notify Agent if any such furniture and store fixtures are
to be sold and if terms and conditions of sale are to be set or restricted
by Merchant. In consideration of providing such services, Agent shall
retain ten percent (10%) of receipts (net of sales taxes) from sales or
other dispositions of such furniture and store fixtures.
12. Miscellaneous
(a) All communications provided for pursuant to this Agreement
must be in writing, and sent by telecopy or Federal Express or other
overnight delivery service, as follows:
If to the Agent to: Hilco/Great American Group, Inc.
One Northbrook Place
5 Revere Drive, Suite 206
Northbrook, IL 60062
Fax: 847-509-1150
Attn: Harvey M. Yellen Executive Vice President
and Benjamin L. Nortman,
Vice President and General Counsel
If to the Merchant to: Sportdepot Stores Inc.
c/o Sportmart, Inc.
1400 S. Wolf Rd.
Suite 200
Wheeling, IL 60090
Fax: 847-520-1343
Attn: Mitchell Phillip Kahn and Gregory E.Fix
(b) This Agreement shall be construed and enforced in accordance with
the internal laws of the State of Illinois.
(c) This Agreement contains the entire agreement between the parties
hereto, and no variations shall be binding upon any party unless set forth
in a document duly executed by and on behalf of such party.
(d) No consent or waiver, express or implied, by any party, to or of
any breach or default by the other in the performance by the other of its
obligations hereunder shall be deemed or construed to be a consent or a
waiver to or of any other breach or default in the performance by such other
party of the same or any other obligations of such party. Failure on the
part of any party to complain of any act or failure to act by the other
party or to declare the other party in default, irrespective of how long
such failure continues, shall not constitute a waiver by such party of its
rights hereunder.
(e) This Agreement shall inure to the benefit of and be binding
upon the undersigned, and their respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the Agent and Merchant hereby execute this
Agreement by their duly authorized representative as a sealed
instrument as of the day and year first written above.
HILCO/GREAT AMERICAN GROUP
By: /S/ HARVEY M. YELLEN
Harvey M. Yellen
Executive Vice President
SPORTDEPOT STORES INC.
By: /S/ MITCHELL P. KAHN
Mitchell P. Kahn
Senior Vice President
EXHIBIT 10.42
CONSENT AND FIRST AMENDMENT TO CREDIT AGREEMENT
THIS CONSENT AND FIRST AMENDMENT to Credit Agreement (the
"Amendment") is made as of this 21st day of November, 1996, by and
among Sportmart, Inc. ("Borrower"), BT Commercial Corporation, as
agent (in such capacity as agent, "Agent") and BT Commercial
Corporation, as lender (in such capacity as lender, "Lender").
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lender are parties to that certain
Credit Agreement dated as of September 6, 1996 (the "Credit
Agreement"); and
WHEREAS, Borrower has requested that Agent and Lender provide for
certain amendments to the Credit Agreement and consent to the
establishment of a new Subsidiary or Subsidiaries, as more fully set
forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and subject to the terms and conditions
hereof, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, all
capitalized terms shall have the meaning given to them in the Credit
Agreement.
SECTION 2. WAIVER AND CONSENT. Subject to the conditions herein
stated, the Agent and Lender hereby consent to Borrower's formation of
one or more new subsidiaries (the "New Subsidiaries") for the ultimate
purpose of amalgamating SportDepot with and into a Nova Scotia
unlimited liability company (the "New SportDepot") and hereby waive
any Default that would otherwise occur pursuant to the terms of
Section 8.15 of the Credit Agreement upon the formation thereof. This
consent and waiver shall not be construed as a waiver and consent with
respect to the formation of any other Subsidiary or a consent or
waiver with respect to the breach of Section 8.15 on any other
occasion. This consent and waiver is subject to the conditions that
(i) not less than 5 Business Days prior to the formation of the New
Subsidiaries, Borrower gives Agent advanced written notice thereof,
and (ii) Borrower hereby agrees to cause such New Subsidiaries
(including New SportDepot) to execute and deliver to Agent, for the
benefit of the Lenders, such guarantees, security agreements, pledge
agreements, financing statements and the like as Agent and its counsel
(including Canadian counsel) shall reasonably request. The foregoing
consent constitutes a consent in writing to the foregoing amalgation
by the Agent pursuant to Section 8.10(e) of the Credit Agreement.
SECTION 3. AMENDMENTS TO CREDIT AGREEMENT.
3.1 The Section 1.1 of the Credit Agreement is hereby
amended by deleting the definition of Inter-Company Loan in its
entirety and inserting the following in lieu thereof:
<PAGE>
"Inter-Company Loan means the following loans and
financial accommodations by Borrower to
SportDepot, the aggregate total of the outstanding
principal balance and total face amount of which
shall in no event exceed $50,000,000: (i) the
Support Letter of Credit or other credit support
provided by or on behalf of Borrower to a Canadian
financial institution acceptable to Agent in the
exercise of its Permitted Discretion, which credit
support shall be evidenced by one or more Letters
of Credit or other documents acceptable to Agent
in the exercise of its Permitted Discretion; and
( ii) the revolving credit facility made by
Borrower to SportDepot, which (a) shall be
evidenced by loan documents acceptable to Agent in
the exercise of its Permitted Discretion, (b)
secured by a first priority, perfected security
interest (other than Permitted Liens) in all
personal property of SportDepot whether now owned
or hereafter credited or acquired, and (c)
assigned to Agent as Collateral for the
Obligation."
3.2 Section 1.1 of the Credit Agreement is hereby further
amended by deleting the definition of "Letters of Credit" in its
entirety and inserting the following in lieu thereof:
"Letters of Credit means the Support Letter of
Credit and all other 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 or
replacements thereof."
3.3 Section 1.1 of the Credit Agreement is hereby further
amended by deleting the definition of "SportDepot" in its
entirety and inserting the following in lieu thereof:
"SportDepot means SportDepot Stores, Inc. an
Ontario corporation, a wholly owned Subsidiary of
Borrower and any successor thereto, by merger or
amalgamation, it being understood that SportDepot
Stores Inc. proposes to amalgamate with and into a
Nova Scotia unlimited liability company."
3.4 Section 1.1 is hereby further amended by inserting the
following definition immediately before the definition of
"Termination Event":
"Support Letter of Credit means one or more
Letters of Credit in form and substance acceptable
to Agent in its Permitted Discretion, issued on
behalf of Borrower for the benefit of a Canadian
financial institution acceptable to Agent, in its
Permitted Discretion, which is making or
committing to make loans and other financial
accommodations directly to SportDepot, on terms
and conditions acceptable to Agent, in its
Permitted Discretion."
<PAGE>
3.5 Section 3.1 of the Credit Agreement is hereby amended
by inserting immediately after word "outstanding" in the second
line of subsection 3.1(a) the parenthetical phrase, "(exclusive
of the Support Letter of Credit)".
3.6 Subsection 4.3(a) of the Credit Agreement is hereby
amended by deleting all of the text following immediately after
the definition "Letter of Credit Fee" in the first sentence
thereof, and inserting the following in lieu thereof:
"for the Support Letter of Credit in an amount
equal to two and one-half percent (2-1/2%) per
annum of the daily weighted average undrawn amount
of the Support Letter of Credit outstanding during
the immediately preceding month and for all other
Letters of Credit in an amount equal to one and
one half percent (1.5) per annum of the daily
weighted average undrawn amount of all other
Letters of Credit out-standing during the
immediately preceding month."
3.7 Subsection 4.3(a) of the Credit Agreement is hereby
further amended by inserting immediately after the word
"contract", in the parenthetical phase in the second complete
sentence thereof, the phrase "or the Support Letter of Credit".
3.8 Subsection 8.5 of the Credit Agreement is hereby
amended by deleting the "and" at the end of clause (f), deleting
clause (g), and inserting the following clauses in lieu thereof:
"(g) Unsecured Indebtedness incurred by SportDepot
in lieu of or in addition to the
Inter-Company Loan which Indebtedness shall
be to a Canadian financial institution
acceptable to Agent in its Permitted
Discretion which Indebtedness, when
aggregated with the principal amount
outstanding under the Inter-Company Loan,
shall not exceed $50,000,000; and
(h) Additional unsecured Indebtedness not
otherwise set forth in subsections (a)
through (g) above in an amount not to exceed
$1,000,000 in the aggregate outstanding at
any one time."
SECTION 4. REAFFIRMATION BY BORROWER. Borrower hereby
represents and warrants to Agent and Lender that (i) the
representations and warranties set forth in Section 6 of the Credit
Agreement are true and correct on and as of the date hereof, except to
the extent (a) that any such representations or warranties relate to a
specific date, or (b) of changes thereto as a result of transactions
for which Agent and Lenders have granted their consent; (ii) Borrower
is on the date hereof in compliance with all of the terms and
provisions set forth in the Credit Agreement as hereby amended; and
(iii) upon execution hereof no Default or Event of Default has
occurred and is continuing or has not previously been waived.
<PAGE>
SECTION 5. FULL FORCE AND EFFECT. Except as herein amended, the
Credit Agreement and all other Credit Documents shall remain in full
force and effect.
SECTION 6. COUNTERPARTS. This Amendment may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment on the day and year specified above.
BORROWER:
SPORTMART, INC.
By: /S/THOMAS HENDRICKSON
Name: THOMAS HENDRICKSON
Title: EXECUTIVE VICE PRESIDENT -
CHIEF FINANCIAL OFFICER
AGENT:
BT COMMERCIAL CORPORATION
By: /S/ FRANK FAZIO
Name: FRANK FAZIO
Title: VICE PRESIDENT
LENDERS:
BT COMMERCIAL CORPORATION
By: /S/ FRANK FAZIO
Name: FRANK FAZIO
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 10.43
CONSENT AND SECOND AMENDMENT TO CREDIT AGREEMENT
THIS CONSENT AND SECOND AMENDMENT to Credit Agreement (the
"Amendment") is made as of this 17th day of January, 1997, by and among
Sportmart, Inc. ("Borrower"), BT Commercial Corporation, as agent (in
its capacity as agent, "Agent") and BT Commercial Corporation (in its
capacity as lender, "BTCC"), Sanwa Business Credit Corporation
( " S a n wa"), LaSalle National Bank ("LaSalle"), Fleet Capital
Corporation ("Fleet"), Heller Financial, Inc. ("Heller"), National
Bank of Canada ("NBC"), American National Bank and Trust Company of
Chicago ("American National") and IBJ Schroder Bank and Trust Company
("IBJ"), as Lenders (BTCC, Sanwa, LaSalle, Fleet, Heller, NBC,
American National and IBJ referred to collectively as "Lenders")
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders are parties to that certain
Credit Agreement dated as of September 6, 1996 as amended by that
certain Consent and First Amendment to Credit Agreement dated as of
November 21, 1996 (as so amended, the "Credit Agreement"); and
WHEREAS, Borrower has requested that Agent and Lenders provide
for certain amendments to the Credit Agreement and consent to the
transfer of certain assets and business of the Borrower in Canada all
as more fully set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and subject to the terms and conditions
hereof, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, all
capitalized terms shall have the meaning given to them in the Credit
Agreement.
SECTION 2. WAIVER AND CONSENT. Subject to the conditions herein
stated, the Agent and Lenders hereby consent to Borrower's cessation
of SportDepot's business operations in Canada and the liquidation of
the assets thereof (the "Canadian Liquidation") as described in that
certain proposal to close Canadian operations set forth in that
certain letter delivered by Borrower to Agent on January 16, 1997 (the
"Canadian Liquidation Proposal") and hereby waive any Default or Event
of Default that would otherwise occur under the Credit Agreement upon
the implementation of the Canadian Liquidation, including, without
limitation, any breach under the terms of Section 6.13 of the Credit
Agreement (with respect to SportDepot leases or contracts), Section
7.4 (with respect to the existence or non existence of SportDepot),
Section 8.5(c) (with respect to Borrower's guaranty of SportDepot's
leases), Section 8.8 (with respect to the disposition of SportDepot's
assets), 9.1(e) (with respect to the dissolution of SportDepot) and
Section 9.1(h) (with respect to cross defaults of agreements to which
SportDepot is a party). This consent and waiver shall not be
construed as a consent or waiver with respect to the breach of
Sections 6.13, 7.4, 8.5(c), 8.8, 9.1(e) or 9.1(h) or any other
provision of the Credit Agreement on any other occasion, event or
occurrence other than those related to the Canadian Liquidation and is
<PAGE>
subject to the conditions that (i) the transactions effected pursuant
to the Canadian Liquidation shall be on the terms and conditions as
generally set forth in the Canadian Liquidation Proposal, (ii) after
giving effect to all of the costs, fees and expenses associated with
the Canadian Liquidation, the maximum pre-tax charge to Borrower's
earnings as reflected in Borrower's audited financial statements shall
not in the aggregate exceed $40,000,000, (iii) Borrower shall cause
SportDepot to transfer the net proceeds of the Canadian Liquidation to
Borrower for application to the Obligations pursuant to Section 8.8
(iv)(b)(II), (iv) Borrower shall assign any Letter of Credit received
from any Hilco/Great American Group or from any other agent or broker
assisting Borrower with the Canadian Liquidation as security for
Borrower's Obligations hereunder and under the Credit Agreement and
(v) Borrower shall execute and deliver to Agent on behalf of Lenders
any security agreements, assignments, financing statements and the
like as Agent and its counsel shall reasonably request to effect such
assignment.
SECTION 3. AMENDMENTS TO CREDIT AGREEMENT.
3.1 Section 1.1 of the Credit Agreement is hereby amended
by deleting clause (b) in the definition of "Borrowing Base" in
its entirety and inserting the following in lieu thereof:
" ( 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 the date hereof
through and including May 5, 1997, and during the
period from September 15 through and including
December 15 for each year during the term hereof
thereafter, 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, plus
(c) a $5,000,000 Special Advance during the period
from the date hereof until the earlier of (i) May 31,
1997, or (ii) Borrower's receipt of a federal tax
refund as a result of the Company filing of a Form 1139
(Corporation Application for Tentative Refund) for the
fiscal years ending January 28, 1996, January 29, 1995
and January 30, 1994."
3.2 The Section 1.1 of the Credit Agreement is hereby
amended by inserting the following immediately preceding the
definition "Capital Expenditures":
"Canadian Liquidation" means any sale or transfer
to effect the transactions described in the
Canadian Liquidation Proposal.
"Canadian Liquidation Proposal" means that certain
proposal described in that certain letter dated January
16, 1997 to Agent from Borrower."
<PAGE>
3.3 Section 1.1 is hereby further amended by inserting the
following definition immediately before the definition of
"Permitted Discretion":
"Orland Park Property" means the real estate of
Borrower located at 15700 South LaGrange Road,
Orland Park, Illinois.
3.4 Section 1.1 is hereby further amended by inserting the
following definition immediately before the definition
"Subordinated Indebtedness":
"Special Advance" means that certain $5,000,000
Special Advance described in clause (c) of the
definition of "Borrowing Base."
3.5 Section 8.1 of the Credit Agreement is hereby amended
by deleting the text thereof in its entirety and inserting the
following in lieu thereof:
"8.1 Consolidated Book Net Worth" The Borrower
shall from the date hereof until May 5, 1997
maintain a Consolidated Book Net Worth of not less
than $70,000,000 and thereafter maintain at all
times during the term hereof a Consolidated Book
Net Worth of not less than $75,000,000.
3.6 Section 1.1 of the Credit Agreement is hereby further
amended by deleting the reference to clause "(j)" in the
definition of Permitted Liens and inserting (k) in lieu thereof.
3.7 Subsection 8.5 of the Credit Agreement is hereby
amended by deleting the "and" at the end of clause (g), deleting
clause (h), and inserting the following clauses in lieu thereof:
"(h) Indebtedness in an amount not to exceed $1,500,000
secured by the Orland Park Property and evidenced by
documentation in form and substance satisfactory to Agent
and Agent's counsel; and
(i) Additional unsecured Indebtedness not otherwise set
forth in subsections (a) through (h) above in an amount not
to exceed $1,000,000 in the aggregate outstanding at any one
time."
3.8 Subsection 8.6 of the Credit Agreement is hereby
amended by deleting the word "and" at the end of clause (i),
relettering clause (j) -- clause "(k)" and inserting the
following new clause (j) immediately before such relettered
clause (k):
"(j) a mortgage Lien in form and substance acceptable to
Agent and Agent's counsel on the Orland Park Property to
secure the financing described in Subsection 8.5 (h) above;
and"
3.9 Section 9.1 is hereby amended by inserting the
following at the end of such Section:
<PAGE>
"(j) Misuse of Special Advance. Any portion of the Special
Advance shall be used for a purpose other than for expenditures
and costs associated with effecting the Canadian Liquidation.
(k) Costs in Excess of Canadian Liquidation Proposal. After
giving effect to all of the costs, fees and expenses associated with
the Canadian Liquidation, the maximum pre-tax charge to Borrower's
earnings as reflected in Borrower's audited financial statements shall
in the aggregate exceed $40,000,000."
SECTION 4. CONDITIONS PRECEDENT. The waiver, consent and
amendments herein shall be effective as of the date of this
Agreement upon the satisfactions of the following conditions
precedent:
4.1 Borrower shall have paid Agent for the ratable benefit
of the Lenders an amendment fee in the amount of $200,000.
4.2 Agent shall have received copies of this Amendment duly
executed by Borrower and each of the Lenders.
SECTION 5. REAFFIRMATION BY BORROWER. Borrower hereby
represents and warrants to Agent and Lender that (i) the
representations and warranties set forth in Section 6 of the Credit
Agreement are true and correct on and as of the date hereof, except to
the extent (a) that any such representations or warranties relate to a
specific date, or (b) of changes thereto as a result of transactions
for which Agent and Lenders have granted their consent; (ii) Borrower
is on the date hereof in compliance with all of the terms and
provisions set forth in the Credit Agreement as hereby amended; and
(iii) upon execution hereof no Default or Event of Default has
occurred and is continuing or has not previously been waived.
SECTION 6. FULL FORCE AND EFFECT. Except as herein amended, the
Credit Agreement and all other Credit Documents shall remain in full
force and effect.
SECTION 7. COUNTERPARTS. This Amendment may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment on the day and year specified above.
BORROWER:
SPORTMART, INC.
By: /S/ THOMAS HENDRICKSON
Name: THOMAS HENDRICKSON
Title: EXECUTIVE VICE PRESIDENT -
CHIEF FINANCIAL OFFICER
AGENT:
BT COMMERCIAL CORPORATION
By: /S/ WAYNE D. HILLOCK
Name: WAYNE D. HILLOCK
Title: SENIOR VICE PRESIDENT
<PAGE>
LENDERS:
BT COMMERCIAL CORPORATION
By: /S/ WAYNE D. HILLOCK
Name: WAYNE D. HILLOCK
Title: SENIOR VICE PRESIDENT
SANWA BUSINESS CREDIT
CORPORATION
By: /S/ MICHAEL J. COX
Name: MICHAEL J. COX
Title: VICE PRESIDENT
LASALLE NATIONAL BANK
By: /S/ SAMIR D. DESAI
Name: SAMIR R. DESAI
Title: ASSISTANT VICE PRESIDENT
FLEET CAPITAL CORPORATION
By: /S/ ROBERT J. LUND
Name: ROBERT J. LUND
Title: VICE PRESIDENT
HELLER FINANCIAL, INC.
By: /S/ LINDA A. GRANT
Name: LINDA A. GRANT
Title: ACCOUNT EXECUTIVE
NATIONAL BANK OF CANADA
By: /S/ C.F. MARTIN, JR. - WILLIAM MUCKER
Name: C.F. MARTIN, JR. - WILLIAM MUCKER
Title: V.P. & MANAGER - ASST. V.P.
AMERICAN NATIONAL BANK
AND TRUST COMPANY OF
CHICAGO
By: /S/ PAUL C. CARLISLE
Name: PAUL C. CARLISLE
Title: FIRST VICE PRESIDENT
IBJ SCHRODER BANK AND
TRUST COMPANY
By: /S/ ROBERT R. WALLACE
Name: ROBERT R. WALLACE
Title: VICE PRESIDENT
<PAGE>
<PAGE>
EXHIBIT 10.44
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT to Credit Agreement (the "Amendment") is
made as of this 26th day of March, 1997, by and among Sportmart, Inc.
("Borrower"), BT Commercial Corporation, as agent (in its capacity as
agent, "Agent") and BT Commercial Corporation (in its capacity as
lender, "BTCC"), Sanwa Business Credit Corporation ("Sanwa"), LaSalle
National Bank ("LaSalle"), Fleet Capital Corporation ("Fleet"), Heller
Financial, Inc. ("Heller"), National Bank of Canada ("NBC"), American
National Bank and Trust Company of Chicago ("American National") and
IBJ Schroder Bank and Trust Company ("IBJ"), as Lenders (BTCC, Sanwa,
LaSalle, Fleet, Heller, NBC, American National and IBJ referred to
collectively as "Lenders")
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders are parties to that certain
Credit Agreement dated as of September 6, 1996 as amended by that
certain Consent and First Amendment to Credit Agreement dated as of
November 21, 1996 and that certain Consent and Second Amendment dated
as of January 17, 1997 (as so amended, the "Credit Agreement"); and
WHEREAS, Borrower has requested that Agent and Lenders provide
for certain amendments to the Credit Agreement as more fully set forth
herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and subject to the terms and conditions
hereof, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, all
capitalized terms shall have the meaning given to them in the Credit
Agreement.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT.
2.1 Section 8.1 of the Credit Agreement is hereby amended
by deleting such section in its entirety and inserting the
following in lieu thereof:
"8.1 Consolidated Book Net Worth. The Borrower shall
maintain the Consolidated Book Net Worth of not less
than the amount set forth below for the applicable
period:
Period Amount
From the date hereof $70,000,000
until May 5, 1997
May 5, 1997 through $72,000,000
August 5, 1997
At all times thereafter $75,000,000"
<PAGE>
2.2 Section 8.4 of the Credit Agreement is hereby amended
by deleting the first two sentences thereof in their
entirety and inserting the following in lieu thereof:
"The Borrower shall not make payments for Capital
Expenditures in excess of $10,000,000 for Fiscal Year
1997 and in excess of $16,000,000 for any fiscal year
thereafter."
2.3 All other provisions of the Credit Agreement shall
remain unchanged.
SECTION 3. REAFFIRMATION BY BORROWER. Borrower hereby
represents and warrants to Agent and Lender that (i) the
representations and warranties set forth in Section 6 of the Credit
Agreement are true and correct on and as of the date hereof, except to
the extent (a) that any such representations or warranties relate to a
specific date, or (b) of changes thereto as a result of transactions
for which Agent and Lenders have granted their consent; (ii) Borrower
is on the date hereof in compliance with all of the terms and
provisions set forth in the Credit Agreement as hereby amended; and
(iii) upon execution hereof no Default or Event of Default has
occurred and is continuing or has not previously been waived.
SECTION 4. FULL FORCE AND EFFECT. Except as herein amended, the
Credit Agreement and all other Credit Documents shall remain in full
force and effect.
SECTION 5. COUNTERPARTS. This Amendment may be executed in two
or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment on the day and year specified above.
BORROWER:
SPORTMART, INC.
By: /S/ THOMAS HENDRICKSON
Name: THOMAS HENDRICKSON
Title: EXECUTIVE VICE PRESIDENT -
CHIEF FINANCIAL OFFICER
AGENT:
BT COMMERCIAL CORPORATION
By: /S/ PHILIP J. ISOM
Name: PHILIP J. ISOM
Title: ASSOCIATE
LENDER:
BT COMMERCIAL CORPORATION
By: /S/ PHILIP J. ISOM
Name: PHILIP J. ISOM
Title: ASSOCIATE
<PAGE>
LENDER:
SANWA BUSINESS CREDIT
CORPORATION
By: /S/ MICHAEL J. COX
Name: MICHAEL J. COX
Title: VICE PRESIDENT
LENDER:
LASALLE NATIONAL BANK
By: /S/ TODD J. LANSLIONI
Name: TODD J. LANSLIONI
Title: VICE PRESIDENT
LENDER:
FLEET CAPITAL CORPORATION
By: /S/ ROBERT J. LUND
Name: ROBERT J. LUND
Title: VICE PRESIDENT
LENDER:
HELLER FINANCIAL, INC.
By: /S/ SHYAM AMLADI
Name: SHYAM AMLADI
Title: SENIOR VICE PRESIDENT
LENDER:
NATIONAL BANK OF CANADA
By: /S/ B. WALDERSEN - C.F. MARTIN, JR.
Name: B. WALDERSEN - C.F. MARTIN, JR.
Title: V. P. - V.P. & REGION MGR.
LENDER:
AMERICAN NATIONAL BANK
AND TRUST COMPANY OF CHICAGO
By: /S/ PAUL C. CARLISLE
Name: PAUL C. CARLISLE
Title: FINANCE VICE PRESIDENT
LENDER:
IBJ SCHRODER BANK AND
TRUST COMPANY
By: /S/ ROBERT R. WALLACE
Name: ROBERT R. WALLACE
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 10.45
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (the First Amendment ) is made and
entered into as of this 1st day of May, 1994, by and between ROOSEVELT
ASSOCIATES LIMITED PARTNERSHIP, an Illinois limited partnership,
successor in interest to Minwick Centers, Inc., a Delaware corporation
( Landlord ), and SPORTMART, INC., a Delaware corporation ( Tenant ).
RECITALS:
A. Landlord and Tenant are subject to that certain lease dated
November 16, 1973 (the Lease ) with respect to certain premises
located at 255 Roosevelt Road, Lombard, Illinois (the Premises or
the Demised Premises ).
B. Samuel Zell and Robert Lurie, as Trustee under a certain
Trust Agreement and Declaration of Trust dated January 1, 1984 and
known as Trust No. 7184, contracted to sell Roosevelt Plaza , the
Shopping Center within which the Premises are located, pursuant to the
Agreement of Purchase and Sale dated July 25, 1991 (the Agreement ).
C. Landlord has succeeded to the interest of the purchaser
under said Agreement.
D. Landlord intends to improve the Shopping Center by (i)
making certain improvements to the existing buildings and parking lot;
and (ii) further developing the plaza to enhance sales through an
additional draw of customers.
E. It was critical to Landlord s acquisition of the Shopping
Center that the parties hereto agree to certain changes to the Lease
as hereinafter set forth.
F. Initially capitalized terms not otherwise defined herein
shall have the meanings attributed to them in the Lease.
G. Landlord and Tenant are mutually desirous of amending
certain items in the Lease on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing Recitals, the
mutual covenants hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by each party hereto, Landlord and Tenant hereby
agree as follows:
AGREEMENT
1. Lease Term. Notwithstanding anything to the contrary
contained in Sections 4.1 and 4.2 of the Lease, as of the date hereof
the original term of the Lease, which has currently been extended
through January 31, 1998, shall be extended so as to terminate on
January 31, 2008.
2. Options to Extend. The first two (2) grammatical sentences
of Section 4.2 of the Lease are hereby deleted in their entirety and
replaced with the following new sentences:
<PAGE>
4.2. The Tenant shall have the option to extend the
o r i ginal term of this Lease for two (2) separate,
consecutive additional periods, the first option being for a
period of five (5) years and two (2) months commencing on
February 1, 2008, and the second option being for a period
of five (5) years commencing on April 1, 2013 (each an
"Option Period"). Each Option Period shall be on all of the
same terms and conditions set forth in this Lease other than
Minimum Rent. Each such option must be exercised, if at
all, by notifying the Landlord in writing, not less than six
(6) months prior to the expiration of the original term, or
of the then current Option Period, as the case may be.
Should Tenant neglect to exercise any of its options by the
applicable date specified above, Tenant's right to exercise
shall not expire until thirty (30) days after notice from
Landlord of Tenant's failure to exercise the option. Minimum
Rent payable during each Option Period is specified in
Section 5.1.
3. Minimum Rent. Effective as of the date hereof Section
5.1 of the Lease shall be deleted in its entirety and
replaced with the following new Section 5.1:
5.1. MINIMUM RENT. During the term of this Lease,
Tenant agrees to pay to Landlord a minimum rent (the
Minimum Rent ) according to the schedule set forth below,
payable in equal monthly installments in the amount of one-
twelfth (1/12) of the annual Minimum Rent. Minimum Rent
shall be prorated for any partial calendar months and years.
Each monthly installment of rental shall be payable in
advance on or before the first (1st) day of each calendar
month during the term. All rent and other payments to be
made by Tenant to Landlord shall be sent to the place to
which notices are required to be sent, unless otherwise
directed by the Landlord in writing.
The Minimum Rent is as follows:
Schedule Annual Monthly
April 1, 1993 - May 31, 1997 $225,000.00 $18,750.00
Effective June 1, 1997 and at the end of every sixty (60)
month period thereafter during the term and the Option
Periods, the annual Minimum Rent shall be increased by the
lesser of (i) 12.5% of the annual Minimum Rent paid during
the preceding sixty (60) month period, or (ii) the increase
in the CPI for the immediately preceding sixty (60) month
period, which increase shall be the result of a fraction,
the numerator of which is the CPI for the month of September
immediately preceding the effective date of the applicable
increase, and the denominator of which is the CPI for the
month of September immediately preceding the sixty (60)
month period preceding the effective date of the applicable
increase.
CPI shall mean the Consumer Price Index-United States All
Items for All Urban Consumers (1982-1984=100) published by
the Bureau of Labor Statistics of the Department of Labor.
<PAGE>
If the manner in which such Consumer Price Index as
determined by the Bureau of Labor Statistics shall be
substantially revised, an adjustment shall be made in such
revised index, which would produce results equivalent, as
nearly as possible, to those which would have been obtained
if the Consumer Price Index had not been so revised. If the
Consumer Price Index shall become unavailable to the public,
Landlord will substitute therefor a comparable index based
upon changes in the cost of living or purchasing power of
the consumer dollar published by any other governmental
agency, a major bank or other financial institution, a
university or a recognized financial publication.
4. Common Area Charges. Effective as of the date hereof,
the first grammatical sentence of Section 2.9 of the Lease is hereby
modified to delete therefrom the following words: the lesser of (A)
fifteen cents (15 cents) per square foot of floor area in the Demised
Premises and (B) .
5. Outlot Development. Notwithstanding any provisions in the
Lease to the contrary, Landlord shall have the right, from time to
time, to develop or permit the development of outlots in the Shopping
Center, provided that (i) Marshalls consent, if necessary, is
obtained, and (ii) the amount of available parking spaces in the
aggregate in the Shopping Center shall not be less than 4.5 cars per
1,000 square feet of leasable floor area.
6. Notices. Section 25 of the Lease is hereby deleted in its
entirety and replaced with the following new Section 25:
25. NOTICES. A n y notice to be given or served in
connection with this Lease shall be in writing and shall be
served by certified or registered mail, postage prepaid, or
by reputable overnight (or second business day) air courier
service which provides written evidence of delivery, in
either case addressed as specified below, or to such other
address as requested by either party in writing. Service
shall be deemed effective three (3) days after deposit in
the U.S. mail in accordance herewith or on the next business
day (or second business day, if applicable) following
delivery to such air courier service in accordance herewith.
Either party by written notice to the other may designate
two additional parties to receive copies of notices sent to
it. Such designees may be changed by written notice.
If to Tenant: Sportmart, Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Legal Department
With copies of all notices to Tenant to be
sent to:
Sportmart, Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Senior Vice President,
Corporate Development
<PAGE>
If to Landlord: Roosevelt Associates Limited Partnership
c/o SM Property Management Co., Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Legal Department
With copies of all notices to Landlord to be
sent to:
Roosevelt Associates Limited Partnership
c/o SM Property Management Co., Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Senior Vice President,
Corporate Development
and to Landlord's lender, if any, at its
address currently on file with Landlord and Tenant.
7. Tenant's Right to Go Dark. The following new Section 32 is
hereby incorporated into, added to, and made a part of the Lease:
32. TENANT'S RIGHT TO GO DARK. If, during the term of
this Lease, Tenant discontinues conducting business to the
public in the Demised Premises and vacates the Demised
Premises ("goes dark"), and the Demised Premises remain dark
for a period of four (4) months, Landlord may, at any time
after the expiration of such four (4) month period while the
Demised Premises remain dark, notify Tenant of its intent to
terminate this Lease, which termination will be effective
sixty (60) days after the receipt of such notice; provided,
however, that if Tenant notifies Landlord within thirty (30)
days after receipt of such notice that all or a part of the
Demised Premises will be re-opened for business by Tenant as
of a date certain not more than ninety (90) days after the
date of Tenant's notice, Landlord's notice of termination
will be of no force and effect and this Lease shall continue
so long as Tenant does then timely reopen its Demised
Premises. Tenant is not deemed to have gone dark if it
closes the Demised Premises to the general public (i) in
order to prepare for sales or to take stock of current
inventory, provided that the same does not result in
Tenant's business being closed to the public for more than
ten (10) consecutive business days, or for more than twenty
(20) total business days, in any consecutive twelve (12)
month period; (ii) in connection with the performance of any
construction, alteration, repair or restoration work on the
Demised Premises so long as the same is diligently pursued
by Tenant and does not result in Tenant's business being
closed to the public for more than two hundred forty (240)
days in any consecutive twelve (12) month period; (iii) to
accommodate a change in use of the Demised Premises or
pursuant to an assignment or subletting of the Demised
Premises, provided that the same does not result in the
Demised Premises being closed to the public for more than
one hundred fifty (150) days in any consecutive twelve (12)
month period; or (iv) while a condition of force majeure
prevents operation and for a reasonable time thereafter.
<PAGE>
8. Full Force. Except as hereby expressly or by necessary
implication modified or amended by this First Amendment, the parties
hereto acknowledge and agree that all of the terms and provisions of
the Lease shall be and remain in full force and effect. In the event
of any conflict or inconsistency between the terms of the Lease and
this First Amendment, the terms of this First Amendment shall govern
and control.
9. No Further Amendment. This First Amendment may not be
amended, waived or modified in any respect unless the same shall be in
writing and signed by both parties. This First Amendment constitutes
the entire agreement of the parties and supersedes all prior agreements,
arrangement and contracts, whether oral or written, concerning the subject
matter hereof.
10. Counterparts. This First Amendment may be executed in
multiple counterparts, each of which shall be deemed an original and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Landlord and Tenant have caused this First
Amendment to be executed as of the year and day first above written.
TENANT:
SPORTMART, INC.,
a Delaware Corporation
By: /S/ ANDREW HOCHBERG
Its: PRESIDENT
LANDLORD:
ROOSEVELT ASSOCIATES LIMITED
PARTNERSHIP, an Illinois limited partnership
By: North Riverside Corp., an Illinois corporation,
its General Partner
By: /S/ MITCHELL KAHN
Its: VICE PRESIDENT
<PAGE>
ARTICLE 1 -- BASIC LEASE TERMS EXHIBIT 10.46
THIS LEASE is dated for reference purposes only September 1, 1994.
1.1
(a) Location:
1015 East Golf Road
Schaumburg, Illinois
(Section 2.1(r))
(b) Size: 59,571 square feet
1.2 Parties and Notice Addresses:
Landlord: American National Bank and Trust Company
of Chicago, not personally but solely
as Trustee under Trust Agreement dated
March 13, 1978 and known as Trust No. 42371
c/o Larry J. Hochberg
7233 West Dempster Street
Niles, Illinois 60714
Tenant: SPORTMART, INC., a Delaware corporation
Attn: Legal Department
7233 West Dempster Street
Niles, Illinois 60714
(Sections 3.1 and 31.1)
With copies of all notices to be sent to:
SPORTMART, INC., a Delaware corporation
Attn: Vice President, Real Estate
7233 West Dempster Street
Niles, Illinois 60714
1.3 Size of Store: T h e Store ("Mart") shall have frontage of
approximately 317 feet and maximum depth of
approximately 218 feet (total of 59,571 sq.ft.)
(Sections 2.1(s) and 3.2)
1.4 Intentionally Omitted
1.5 Term: Initial Termination Date: May 31, 2000<PAGE>
1.6 Options: Two (2) additional five (5) year periods.
(Section 6.1)
1.7 Minimum Rent: Commencement Date through November 30, 1994:
$360,000 per year ($30,000 per month)
December 1, 1994 through May 31, 2000: $508,740
per year ($42,395 per month).
First Option Period: $595,710 per year ($49,642.50
per month).
Second Option Period: $670,176 per year
($55,848.00 per month).
(Article 7)
1.8 Intentionally Omitted.
1.9 Brokers: None
(Section 36.10)
<PAGE>
1.10 Contents of Lease:
This lease (the "Lease") consists of:
Pages 1 through
Sections 1.1 through
EXHIBITS
A. Legal Description
B. Site Plan
C. Memorandum of Lease
ARTICLE 2 -- DEFINITIONS
2.1 The terms defined in this Article 2 shall for all purposes
of this Lease and all agreements supplemental hereto have the meanings
herein specified unless expressly stated otherwise.
(a) All Risk Policy: A policy of fire and other property
insurance in the form commonly referred to in the industry as "all
risk" with extended endorsement (false arrest, libel, slander,
assault, battery, invasion of privacy, theft, vandalism and malicious
mischief coverage) and including broad form water damage, or if such
policy is no longer issued, such other policy as would cover the same
risks and perils. Landlord may elect to include coverage for flood
and earthquake but Tenant shall not be required to pay any part of the
premium allocable to such coverages.
(b) Commencement Date: September 1, 1994.
(c) Intentionally Omitted
(d) Common Areas: Those portions of, and facilities
within, the Shopping Center or greater land area of which the Store
forms a part, which are intended for the common non-exclusive use of
the occupants, their customers, agents and employees including,
without limitation, parking areas, driveways, malls, walkways, loading
zones and landscaping.
(e) Intentionally Omitted
(f) Intentionally Omitted
(g) Gross Sales: The selling price of all merchandise sold
in or from the Store by Tenant, its subtenants, licensees and
concessionaires, whether for cash or for credit, excluding, however,
the following: (i) the sales price of all merchandise returned and
accepted for full credit or the amount of the cash refund or allowance
made thereon; (ii) the sums and credits received in settlement of
claims for loss or damage to merchandise; (iii) the consideration
received in connection with a sale of inventory which occurs other
than in the ordinary course of Tenant's business; (iv) sales taxes, so
called luxury taxes, excise taxes, gross receipt taxes, and other
taxes now or hereafter imposed upon the sale or value of merchandise
or services, whether added separately to the selling price of the
merchandise or services and collected from customers or included in
the retail selling price; (v) receipts from public telephones, vending
machines, sales of tickets and passes, sales of money orders, fees for
fishing/hunting licenses and the collection of public utility bills;
(vi) interest, carrying charges, or other finance charges in respect
of sales made on credit; (vii) sales of fixtures, trade fixtures, or
personal property that are not merchandise held for sale at retail;
<PAGE>
(viii) sales to employees at discount, not exceeding three percent
(3%) of total Gross Sales: (ix) labor charges or fees for bowling
ball drilling, racquet restringing, ice skate sharpening, bicycle
assembly, golf club regripping and installation of ski bindings, ski
tuning (including sharpening and waxing) and other similar customer
services; (x) Tenant's accounts receivable, not to exceed two percent
(2%) of Gross Sales, which have been determined to be uncollectible
for federal income tax purposes during the Lease Year provided,
however, that if such accounts are actually collected in a later year,
the amount shall be included in the Gross Sales for such later Lease
Year; (xi) rents, subrents or other consideration received in
connection with an assignment, sublet, license, concession or other
transfer of any portion of the store (however Gross Sales of any such
transferee shall be included); (xii) sales of merchandise ordered by
catalogue regardless of place of order or delivery; (xiii) delivery
charges on merchandise sold; and (xiv) receipts in respect of
instructional programs (but not including merchandise sold in respect
thereto).
(h) Intentionally Omitted
(i) Landlord's Parcel: That certain parcel of land
described in Exhibit "A", together with all appurtenances thereunto
belonging.
(j) Leasable Floor Area: All areas available, or held for
the exclusive use and occupancy of occupants or future occupants of
the Shopping Center, measured from the interior surface of exterior
walls (and from extensions thereof in the case of openings) and from
the center of interior demising partitions. For purposes of computing
Tenant's obligations based upon Leasable Floor Area, the Leasable
Floor Area of the Shopping Center shall be not less than the size
specified in Section 1.1(b). Mezzanines, if any, shall not be
included within the definition of Leasable Floor Area.
(k) Lease Year: The first Lease Year shall extend from the
Commencement Date to the first May 31st following commencement.
Subsequent Lease Years (other than the final Lease Year) shall
commence on June 1st and terminate the following May 31st. The final
Lease Year shall commence on June 1st and terminate on the expiration
or earlier termination of this Lease.
(l) Minimum Rent: The amounts specified in Section 1.7.
(m) Percentage Rent: The term Percentage Rent is defined
in Section 8.1.
(n) Intentionally Omitted
(o) Intentionally Omitted
(p) Redelivery Date: The date, following a casualty, on
which the Landlord's architect, or contractor having charge of the
restoration certifies the same as having been substantially completed
and Tenant receives notice thereof along with written approvals which
may be required from any governmental agency (provided the work has in
fact been completed).
<PAGE>
(q) Shopping Center: Those certain premises with all
appurtenances located as set forth in Section 1.1(a) hereof and
described with particularity in Part I of Exhibit "A".
(r) Store: That portion of the Shopping Center as so
delineated on the site plan attached to this Lease as Exhibit "B"
having the dimensions and containing the Leasable Floor Area specified
in Section 1.3 hereof. Tenant refers to the Store as "Mart" for
internal operation purposes.
(s) Term: References to "Term" of this Lease shall include
the original term and any extension of such Term. The original Term
of this Lease shall start on the Commencement Date and, unless earlier
terminated expire on the Initial Termination Date specified by Section
1.5.
ARTICLE 3 -- PREMISES
3.1 The landlord identified in Section 1.2 ("the Landlord")
hereby leases to the tenant identified in Section 1.2 (the "Tenant")
and the Tenant hires from the Landlord, the Shopping Center,
including, without limitation, the Store and the Common Areas,
together with all appurtenances. Tenant has entered into this Lease
in reliance upon the agreement of the Landlord that the Shopping
Center is and will remain retail in character, and, further, no part
of which shall be used as a nightclub, bar, theater, auditorium,
meeting hall, school, or other place of public assembly, gymnasium
(excluding aerobics studios and weight clinics of less than 3,000
square feet), dance hall, billiard or pool hall, massage parlor, video
game arcade, bowling alley, skating rink, car wash, night club or
adult book or adult video tape store, (which are defined as stores a
substantial portion of the inventory of which is not available for
sale or rental to children under 15 years old because it explicitly
deals with or depicts human sexuality). No restaurant shall be
permitted in the Shopping Center without prior Tenant consent.
3.2 Intentionally Omitted.
3.3 Landlord warrants that the site plan attached hereto as
Exhibit "B" (the "Site Plan") depicts the land described in Exhibit
"A" Part I and the improvements thereon. No change, alteration, or
addition shall be made to the Site Plan, including but not limited to
the configuration of the Common Areas, methods of ingress and egress,
direction of traffic, lighting, curbing and building heights and
stories, without the express written consent of the Tenant.
3.4 No construction initiated by Landlord shall be permitted in
the Shopping Center, except for emergency repairs diligently pursued,
during the period from October 1st to December 31st of any year,
without the prior written consent of the Tenant, which consent may
include conditions designed to eliminate interference with the
operation of the Shopping Center or the effect of such construction
upon the Tenant's business.
3.5 Upon the Commencement Date, that certain Lease dated
September 8, 1978, between Landlord and Tenant, as amended and
extended from time to time, will be cancelled, terminated, discharged
and superseded by this Lease.
<PAGE>
ARTICLE 4 -- INTENTIONALLY OMITTED
ARTICLE 5 -- LEASE TERM
5.1 The Term of this Lease shall commence on the Commencement
Date and, unless earlier terminated, shall expire as specified in
Section 1.5(a), subject to the Tenant options to extend the term as
provided in the following Article 6.
ARTICLE 6 -- OPTION PERIODS
6.1 The Tenant may extend the original term of this Lease for
the number of separate, consecutive additional periods of five (5)
years each, as designated in Section 1.6 hereof, on the terms and
conditions set forth herein, except that the number of option periods
remaining to be exercised under Section 1.6 shall, in each case, be
reduced by one, by notifying the Landlord, in writing, not less than
ninety (90) days prior to the expiration of the original term, or each
extended term, as the case may be. Should Tenant neglect to exercise
any option by the dates specified above, Tenant's right to exercise
shall not expire until thirty (30) days after notice from Landlord of
Tenant's failure to exercise the option.
ARTICLE 7 -- MINIMUM RENT
7.1 During the Term of this Lease, the Minimum Rent shall be as
specified in Section 1.7. Each monthly installment of rental shall be
payable in advance on or before the tenth (10th) day of each calendar
month during the Term. All rent and other payments to be made by
Tenant to Landlord shall be sent to the place to which notices are
required to be sent, unless otherwise directed by the Landlord in
writing.
ARTICLE 8 -- PERCENTAGE RENT
8.1 (a) Percentage Rent for each Lease Year during the Term (as
the same may beextended pursuant to Article 6, above) which contains
twelve (12) full calendar months shall be three percent (3%) of the
amount by which (a) Tenant's Gross Sales made during such Lease Year,
less any and all amounts paid by Tenant to Landlord or any third party
under the provisions of Articles 10, 11 and 12 hereof, exceeds (b)
either (i) $12,000,000.00 during the primary Term of this Lease or
(ii) a dollar amount or amounts to be determined by the parties for
each option period at the time of Tenant's exercise of each of the
Options pursuant to Article 6 hereof..
(b) The Percentage Rent for any Lease Year having less than
twelve (12) full months shall be based upon Gross Sales for the twelve
(12) months immediately succeeding the Commencement Date (as to the
first Lease Year) and for the twelve (12) month period immediately
preceding the expiration or earlier termination of the Lease (as to
the final Lease Year). The Percentage Rent due for such period shall
be established by multiplying the Percentage Rent which would have
been due for such twelve (12) month period by a fraction, the
numerator of which is the number of days in such Lease Year and the
denominator or which is 365.
<PAGE>
8.2 Within seventy-five (75) days after the close of each Lease
Year, Tenant shall submit to Landlord a statement indicating the
amount of its Gross Sales for the previous Lease Year and the amount
expended for the above mentioned expenses which are to be deducted and
which relate to the Lease Year in question. Percentage Rent due, if
any, shall accompany such statement.
8.3 (a) Tenant shall maintain adequate records for a period of
one year after the close of each Lease Year for the purpose of
allowing Landlord to verify the reported Gross Sales for such year.
At any time within said one year, Landlord or its agents may audit
such records during normal business hours at Tenant's records center
after not less than fifteen (15) days' prior written notice to Tenant.
Audit shall be conducted in manner least apt to interfere with
Tenant's business operations and audit or inspection of records other
than pertaining to Premises is prohibited. Landlord shall not conduct
such an audit of Tenant's records more than once in any given Lease
Year. Failure of Landlord to conduct audit within one (1) year
following provision to Landlord of annual Gross Sales statement shall
constitute waiver by Landlord of right to dispute Tenant's Gross Sales
as specified within such annual Gross Sales statement.
(b) In the event an inaccuracy is disclosed after any audit
of Tenant's Gross Sales, an adjustment shall thereupon be made.
(c) Any information obtained by Landlord as a result of any
audit shall be held in strict confidence by Landlord excepting such
may be disclosed by Landlord to proposed lender or purchaser with
respect to a prospective sale, mortgage, lease or sale-leaseback of
the Shopping Center or when Landlord is required to comply with lawful
orders of a court or governmental agency.
8.4 The Minimum Rent provided for in this Lease is acknowledged
by the parties to be sufficient consideration for the leasehold
granted hereby and the Percentage Rent specified herein is in addition
to such adequate consideration.
ARTICLE 9 -- USE
9.1 The Store may be used for any lawful retail use including
but not limited to the following specific uses: the retail sale of
sporting goods, sports apparel and active wear (including without
limitation athletic footwear and athletic uniforms of all kinds) and,
such other merchandise as may be sold from time to time in Tenant's
similarly merchandised stores. Tenant agrees to comply with all
applicable laws and ordinances in its operations at the Premises; not
to create hazardous or noxious conditions that would constitute a
nuisance or would increase the premiums payable for casualty insurance
coverage of the Shopping Center.
9.2 Landlord warrants to Tenant that Tenant, while operating a
store for the above use(s), will not be in violation of (a) any
exclusives or other agreements which Landlord may have with other
occupants, lessees, lenders, governmental authorities or any others,
or (b) restrictions imposed by any governmental authority or body.
Landlord shall hold Tenant harmless from any claims to the contrary
including loss suffered by reason thereof.
<PAGE>
9.3 Landlord agrees that Landlord shall not suffer any Leasable
Floor Area within the Shopping Center (other than the Store) to be
used for the sale of sporting goods, sports apparel and/or athletic
footwear.
ARTICLE 10 -- REAL ESTATE TAXES
10.1 (a) Tenant shall pay, on or before the due date, all taxes
and assessments levied against the Shopping Center.
(b) Should the Tenant be in occupancy during only a portion
of the first or final tax year, Landlord and Tenant shall pro-rate
taxes for such tax year based on the portion of such tax year included
in the Term of this Lease. This Article includes the Tenant's total
responsibility for taxes for the Shopping Center.
10.2 There shall be excluded from the tax bill which Tenant shall
be obligated to pay (a) income, excess profits, estate, single
business, inheritance, succession, transfer, franchise, capital or
other tax or assessment upon Landlord or the rentals payable under
this Lease; (b) any charge, such as a water meter charge and the
sewer rent based thereon, which is measured by the consumption of the
actual user of the item or service for which such charge is made; and
(c) any increase in taxes caused by a "change of ownership," such as
defined in Section 60, California Revenue and Taxation Code. Any and
all such charges and amounts shall be paid by Landlord when and as
they become due.
10.3 Any rebates, refunds, or abatements of real estate taxes
received by the Landlord subsequent to payment of taxes by the Tenant
shall be refunded to Tenant within ten (10) days of receipt thereof by
Landlord. If any such rebate, refund or abatement is realized by the
Landlord prior to payment of the taxes by the Tenant, Landlord shall
promptly so notify Tenant.
10.4 Tenant shall have such rights to contest the validity or
amount of real estate taxes as are permitted by law, either in its own
name or in the name of the Landlord, in either case with the
Landlord's full cooperation. Any resultant refund, rebate or
reduction shall be used first to repay the expenses of obtaining such
relief. Landlord shall provide Tenant with government notices of
assessment (or reassessment) in time sufficient to reasonably permit
Tenant, at Tenant's election, to make contest; and if Landlord fails
to do so, then there shall be excluded from the tax bill to which
Tenant contributes, any increased taxes resulting from such assessment
(or reassessment). The term "contest" as used in this Section 10.4
means contest, appeal, abatement or other proceeding prescribed by
applicable law to obtain tax reduction or tax refund, howsoever
denominated.
ARTICLE 11 -- FIRE INSURANCE
11.1 Landlord shall maintain at all times during the Term an All
Risk Policy insuring against damage to any portion of the Shopping
Center including the store front, and appurtenances thereto. Such
insurance shall be in the full amount of replacement value, without
deduction for physical depreciation and shall provide that the
proceeds of any loss shall be payable in the manner provided for in
this Lease. Landlord shall, upon request of Tenant, provide Tenant
<PAGE>
with a certification of such insurance coverage from an insurer
licensed to do business within the state in which the Shopping Center
is located, and which insurer is rated A and XII or better in Best's
Insurance Guide, which certificate shall indicate, among other things,
that the Tenant is an additional insured along with the Landlord and
that the Shopping Center and all the improvements and Landlord's
fixtures appurtenant thereto, have been insured to their full
replacement value, without deduction for physical depreciation.
11.2 Upon submission by Landlord to Tenant of paid receipts for
the premiums for the insurance described in Section 11.1, above,
Tenant shall reimburse the Landlord for such premium costs.
11.3 Intentionally omitted.
11.4 In lieu of Landlord's assuming the obligation specified in
Section 11.1 above, subject to Tenant's reimbursement all as described
in Sections 11.1 and 11.2 hereof, Tenant may, at its option, elect to
carry such insurance on the Shopping Center including such other
endorsements as the Tenant in its judgment deems prudent under the
circumstances, all at Tenant's sole costs and expense in which event
Tenant shall not be responsible for reimbursement under Section 11.2.
11.5 (a) As used in this Section, the term "Lender" means the
holder of indebtedness secured by a first lien upon the Exhibit "A"
Part I real property, whether the interest creating such lien be
denominated as mortgage, deed of trust, security agreement, vendor's
lien or otherwise, but only if Lender (a) is a financial institution,
such as a bank, savings and loan, insurance company, or other entity
regularly engaged in making loans secured by real property, and (b)
has fifty million dollars ($50,000,000) of such loans outstanding.
(b) Insurance proceeds for damage or destruction to the
Shopping Center ("Proceeds"), if under one dollar ($1.00) per square
foot of Leasable Floor Area in the Shopping Center shall be paid
directly to Tenant. If in excess of such amount, the Proceeds shall
be deposited with Lender provided Lender agrees to apply the Proceeds
in the manner described herein. If Lender does not so agree, or there
is no Lender, then the Proceeds shall be deposited with a bank, trust
company, or title insurance company (collectively with Lender referred
to as "Stakeholder") designated by Tenant and approved by Landlord,
for use as provided in Article 20. Stakeholder shall disburse the
same to the party performing restoration upon certification by the
architect in charge of restoration that the amounts requested have
been paid in connection with such restoration or shall be due to
contractor, subcontractors, materialmen, architects or other persons
who have rendered services or have furnished materials for such
restoration and upon the completion of such restoration the remaining
balance of any of such proceeds shall be paid to Tenant upon demand.
ARTICLE 12 -- LIABILITY INSURANCE
12.1 Tenant shall at all times during the Term keep in force a
policy or policies of public liability insurance, or an endorsement on
a blanket liability insurance policy or policies, against claims for
personal injuries, death or property damage, occurring on, in or about
the Shopping Center, with a combined single limit of not less than ONE
MILLION DOLLARS ($1,000,000). Said policy or policies shall contain
Contractual Liability Insurance recognizing the liability assumed in
<PAGE>
Sections 23.1 and 23.2 hereof, shall name Landlord as an additional
insured, shall include a cross-liability endorsement providing that
Landlord and Tenant, although named/additional insureds, may recover
on account of the negligence of the other, and shall be with an
insurer with a policy holder's rating of at least A and a financial
rating of not less than VII in Best's Insurance Reports.
12.2 The policy of insurance herein maintained by the Tenant
shall provide that: (a) the same is not contributory with the
coverage which Landlord may carry and is primary insurance coverage
and not excess insurance coverage or overage insurance coverage; and
(b) the company writing said policy will give at least twenty (20)
days' notice in writing of any cancellation, lapse, or failure to
renew, to the party designated on the insurance certificate as the
holder thereof.
12.3 Tenant agrees to deliver to Landlord a certificate of
insurance evidencing the existence in force of the policy of insurance
described in this Article. The certificate shall provide that such
insurance shall not be canceled or materially amended unless ten (10)
days' prior written notice of such cancellation or amendment is given
to the Landlord.
ARTICLE 13 -- WAIVER OF SUBROGATION
13.1 Tenant and Landlord hereby waive and release any and all
right of recovery against the other, including employees and agents,
arising during the Term for any and all loss or damage to any property
located within or constituting a part of the Shopping Center which
loss or damage arises from the perils covered by an All Risk Policy or
which right of recovery arises from loss of earnings or rents
resulting from damage caused by such a peril. This mutual waiver is
in addition to any other waiver or release contained in this Lease.
Landlord and Tenant shall give written notice to its insurers of the
provisions of this waiver and release and have its insurance policies
endorsed, if required, to prevent invalidation of insurance coverage
by reason of this waiver and release.
ARTICLE 14 -- MAINTENANCE & REPAIR BY TENANT
14.1 Subject to Article 20, Tenant shall maintain the entire
Shopping Center, including the Store and all Common Areas, in good
repair and good condition, reasonable wear and tear excepted, and will
so deliver the Shopping Center to the Landlord at the termination of
this Lease.
ARTICLE 15 -- INTENTIONALLY OMITTED
ARTICLE 16 -- REPAIRS REQUIRED BY GOVERNMENTAL AUTHORITIES
16.1 Any repairs, alterations or other improvements required by
governmental authority which results from the particular retail use of
the Tenant shall be done by the Tenant at its sole cost and expense.
Any such work, however, which is required of the Shopping Center in
general, or of all similar buildings in the area of the Shopping
Center, shall be done at the sole cost and expense of the Landlord.
<PAGE>
ARTICLE 17 -- ALTERATIONS
17.1 The Tenant may make non-structural alterations and
improvements to the Shopping Center in a good and workmanlike manner,
in conformity with all law, ordinances and regulations of public
a u t horities having jurisdiction. Tenant shall not make any
alterations to the foundation, roof, or any structural portions of the
Store without first obtaining the written approval of the Landlord.
Such approval may not be unreasonably withheld and shall be deemed
granted if Tenant is not notified in writing of a reasonable basis for
withholding such approval within ten (10) days of notifying Landlord
thereof. It is further agreed that upon termination of this Lease,
Tenant may, provided no structural damage to the Store will be caused
thereby, remove its furniture, fixtures and equipment and the Landlord
will accept the Store as altered without any obligation upon the
Tenant to restore the Store to its former condition.
17.2 Tenant may place on and about the Premises, and on the
s h opping center roof, equipage used in its ordinary business
operations, such as without limitation HVAC, dumpster, and devices
used for the reception and transmission of signals through the
atmosphere, such as satellite dish.
17.3 Landlord shall cooperate with Tenant efforts to obtain such
government permits, licenses, variances, authorizations and approvals
as may be required so as conduct retail business within the Store, and
from time to time perform the alterations contemplated by this
Article, as well as to construct the signage authorized by the Article
32 of this Lease. To the extent necessary or convenient for such
p u rpose, Tenant may prosecute such efforts, including signing
applications, in the name of Landlord.
ARTICLE 18 -- COMMON AREAS
18.1 Tenant, as well as its agents, employees and customers
(collectively, "Customers"), shall have and is granted complete,
nonexclusive and undisturbed access to, and use of all Common Areas.
Landlord shall use best efforts to prevent Common Area use by other
than Tenant and its Customers. In no event shall Customer use of
Common Areas be conditioned upon payment of parking or other charge by
Tenant or Tenant's customers. Tenant shall, at its sole cost and
expense, maintain all Common Areas in good condition, repair and
cleanliness, including ice and snow removal, and free of any
impediments to easy and safe movement within the Common Areas.
ARTICLE 19 -- UTILITIES
19.1 Landlord agrees to provide that the Tenant's Store shall at
all times have available to it necessary utilities services including
electric, water, gas, telephone and other necessary utility lines, as
well as refuse collection service and sewerage lines capable of
adequately providing for Tenant's needs. Tenant agrees to pay all use
charges for all utilities serving the Store during the Term.
ARTICLE 20 -- CASUALTY
20.1 Except as hereinafter provided, damage to or destruction of
any portion or all the Shopping Center by fire, the elements or any
other cause whatsoever shall not terminate this Lease or entitle
<PAGE>
Tenant to surrender the leased premises or to any abatement of or
reduction in Minimum Rent payable by Tenant hereunder or otherwise
affect the respective obligations of the parties. In such event, the
Landlord shall proceed with due diligence to collect the proceeds of
any available insurance, and Tenant, at its own expense, shall
promptly restore the buildings to substantially as good condition and
of not less value and utility than immediately prior to the casualty.
All plans for restoration shall first be submitted to the Landlord for
approval, which approval shall not be unreasonably withheld, and the
failure by the Landlord to notify the Tenant of its objections to such
plans within fifteen (15) days of receipt thereof shall be deemed
approval by Landlord.
20.2 Tenant shall be reimbursed by the Landlord for its cost of
restoring the Shopping Center from the proceeds of insurance received
by Landlord, it being understood that Landlord shall not be required
to repair or rebuild any such building or improvements, or to pay any
of the expenses or costs thereof in excess of the insurance proceeds
paid to it. Such reimbursement shall be made as work by Tenant
progresses, but only upon the furnishing to Landlord of assurance
satisfactory to the Landlord against mechanics' liens or similar
claims and provided that the insurance proceeds in the hands of the
Landlord shall at all times be sufficient to pay for the completion of
such restoration. Payments by the Landlord to Tenant shall be made
upon architect's certificates as to payments and expenditures or
amounts then payable for restoration and waivers of lien. Any
insurance proceeds not required for the restoration of the leased
premises shall be retained by Landlord.
20.3 Anything herein to the contrary notwithstanding, in the
event of substantial damage to or destruction of the Store by fire or
other casualty within the last two (2) years of the Term hereof, the
Tenant may terminate this Lease and all its obligations hereunder in
which event, all insurance monies paid under any insurance policies
with respect to such loss of Landlord's property shall be payable to
and remain the property of Landlord, and Minimum Rent shall abate as
of the date of such loss or destruction. The election to terminate
hereunder shall be made by notice in writing given to Landlord within
twenty (20) days of the date of such loss or destruction. For the
purpose of this Article, the phrase "substantial damage to or
destruction of the Store" shall mean if more than 50% of the principal
building above the foundations is destroyed and cannot be used for the
conduct of the principal business conducted by Tenant therein.
20.4 The parties waive such rights of Lease termination as are
granted to them under the laws of the state wherein the Store is
located, it being their agreement that the rights of termination in
the event of casualty, as set forth herein, shall be exclusive.
ARTICLE 21 -- CONDEMNATION
21.1 In the event the Shopping Center or any part hereof shall be
condemned and taken for a public or quasi-public use, any award made
to compensate either Landlord or Tenant for their respective damage or
loss shall be paid to Landlord. In the event only a part of the
Shopping Center is condemned and taken, Tenant, in accordance with
plans and specifications approved by the Landlord, shall promptly
restore the remaining portion of the Shopping Center so that it will
<PAGE>
constitute a complete architectural unit, and upon completion of such
work and upon payment of the award or compensation, the Landlord shall
reimburse Tenant for costs so expended, and there shall be such
abatement in Minimum Rent and such other adjustments as the parties
m a y agree upon as being just and equitable under all the
circumstances. If the parties are unable to agree upon all such
n e cessary adjustments, resort shall be had to arbitration as
hereinafter provided. Upon any total taking, Tenant's obligation to
pay Minimum Rent or to discharge any other obligation hereunder, other
than the payment of money then due and damages arising out of any
breach on the part of Tenant, shall cease.
21.2 In the event of a condemnation of the Shopping Center as
above provided, if the parties are unable to agree upon the adjustment
to be made within thirty (30) days after the taking, the question
shall be determined by three disinterested arbitrators, one of whom
shall be chosen by each of the parties and the third by the two so
chosen. The decision of any two of the arbitrators shall be final and
conclusive upon the parties. The decision shall be in writing, signed
in duplicate by any two arbitrators, and one copy shall be delivered
to each of the parties. The party desiring arbitration shall given
written notice to the other party, naming therein the arbitrator
selected by it. In the event the other party shall fail, within a
fifteen (15) day period after the giving of such notice, to notify the
other in writing of the arbitrator selected by it, or in the event
that the two arbitrators chosen shall fail, within fifteen (15) days
after their selection, to agree upon the third, then any judge of any
court of general equity jurisdiction in the county in which the
Shopping Center situated may, on request of the party not in default,
or upon the request of either party if neither is in default, appoint
an arbitrator or arbitrators to fill any places remaining vacant
within fifteen (15) days after such request.
ARTICLE 22 -- MECHANIC LIENS
22.1 Neither Tenant nor Landlord shall permit any mechanic's,
materialman's or other lien against the Store or the Shopping Center
in connection with any labor, materials or services furnished or
claimed to have been furnished. If any such lien shall be filed
against the Store or Shopping Center, the party charged with causing
the lien will cause the same to be discharged, provided, however, that
either party may contest any such lien, so long as the enforcement
thereof is stayed.
ARTICLE 23 -- INDEMNIFICATION
23.1 With respect to its use and occupancy of the Store, Tenant
agrees to save Landlord harmless from and indemnify and defend
Landlord against any and all injury, loss, damage, liability (or any
c l a ims in respect of the aforementioned), costs or expenses
(including, without limitation, attorney's fees, reasonable
investigative and discovery costs), of whatever nature, to any person
or property caused or claimed to be caused by or resulting from any
act, omission or negligence of Tenant or agent of Tenant, provided
that the Landlord shall, upon becoming aware of such claim or damage,
promptly notify Tenant. Tenant's obligation hereunder shall be
limited to the amount in excess of any insurance proceeds in event of
casualty damage.
<PAGE>
23.2 With respect to its maintenance of the Store, its operation
and maintenance of the Common Areas, the manner of design and
construction of the Shopping Center, and the manner of construction
and design of the Common Areas, Landlord agrees at Tenant's option, to
save Tenant harmless from and indemnify and defend Tenant against any
and all injury, loss, damage, liability (or any claims in respect of
the aforementioned), costs or expenses (including, without limitation,
attorney's fees, reasonable investigation and discovery costs), of
whatever nature, to any person or property caused or claimed to be
caused by or resulting from any act, omission or negligence of the
Landlord or its employees or agents, provided that Tenant, upon
becoming aware of such claim or damage, shall promptly notify Landlord
as soon as reasonably possible.
23.3 The provisions of this Article as to property damage shall
be subject to the provisions of Article 13 regarding Waiver of
Subrogation.
ARTICLE 24 -- QUIET ENJOYMENT & NONDISTURBANCE
24.1 Landlord agrees to promptly place Tenant in possession of
the Store in accordance with the time provisions of this Lease as a
condition to Tenant's obligation to pay rent hereunder. Landlord
further represents and warrants that it has full authority to execute
and perform this Lease and to grant the subject leasehold estate to
Tenant. Additionally, it is agreed that Tenant shall peaceably and
quietly have, hold and enjoy the Store with all appurtenances during
the Term and without any manner of hindrance or interference with its
quiet enjoyment, possession and use.
24.2 Landlord may, at reasonable times and upon notice to Tenant,
conduct reasonable inspections of the Store.
24.3 Nondisturbance - Existing Loans. Landlord covenants to
obtain from each lender, each lessor ("Overlessor") and each Litigant
Claimant whose interest in the Shopping Center is paramount to
Landlord's at the time of execution hereof, or at any time prior to
the recordation of the Memorandum of Lease specified herein, an
executed nondisturbance agreement assuring Tenant that notwithstanding
any default by the Landlord to the lender or Overlessor, or any
foreclosure or deed in lieu thereof (or Overlessor's termination
proceedings), or any exercise of right by Litigant Claimant, Tenant's
rights under this Lease shall continue in full force and effect and
its possession of the Store shall remain undisturbed except in
accordance with the provisions of this Lease so long as Tenant is not
in default hereunder so as to permit Lease termination. Such
agreement(s) must be satisfactory in form and content to counsel for
Tenant. As used in this Article the term "lender" means each holder
of indebtedness secured by a lien upon the Exhibit "A" real property,
whether the interest creating such lien be denominated as mortgage,
deed of trust, security agreement, vendor's lien or otherwise. As
used herein the term "Litigant Claimant" means each entity which has
established or at any time prior to recordation of the Memorandum of
Lease specified herein establishes actual or constructive notice that
it claims an interest in the Shopping Center and/or the Store which is
paramount to Landlord's at the time of execution hereof, or at any
time prior to the recordation of the Memorandum of Lease specified
herein whether notice of such interest be established by Lis Pendens,
Notice of Mechanics Lien or otherwise.
<PAGE>
24.4 Tenant shall upon Landlord's request, subordinate this Lease
in future to any first lien placed by Landlord upon the Store, or the
Shopping Center or building of which the Store forms a part, with an
insurance company, bank or any other institutional lender, provided
that such lender executes a Nondisturbance Agreement providing that if
Tenant is not then in default under this Lease so as to justify Lease
termination, this Lease shall not terminate as a result of the
foreclosure of such lien, or conveyance in lien thereof, and the
Tenant's rights under this Lease shall continue in full force and
effect and its possession be undisturbed except in accordance with the
provisions of this Lease. Tenant will, upon request of the
lienholder, be a party to such an agreement, and will agree that if
such lienholder succeeds to the interest of the Landlord, Tenant will
recognize said lienholder (or successor in interest of the lienholder)
as its Landlord under the terms of this Lease. Such agreement must be
satisfactory in form and content to counsel for Tenant.
24.5 Within ten (10) days of a written request therefor by either
party hereto, the party receiving such request shall provide to the
requesting party a written statement acknowledging the commencement
date of this Lease, that this Lease is in full force and effect (if
the same be true), that this Lease has not been modified (or, if it
has, stating such modifications) and providing such other information
as requesting party reasonably requests.
ARTICLE 25 -- TENANT DEFAULT
25.1 The occurrence of either of the following shall constitute a
default by Tenant pursuant to this Lease: (i) a failure by Tenant to
pay rent within ten (10) business days of Tenant's receipt of written
notice from Landlord specifying such failure; or (ii) a failure by
Tenant to perform obligations pursuant to this Lease other than as
specified in (i) above, within thirty (30) days of Tenant's receipt of
written notice from Landlord specifying such failure or, if it
reasonably would require more than thirty (30) days to cure such
failure, within a time reasonably necessary to cure such failure after
Tenant's receipt of such written notice. Upon Tenant's default,
Landlord may, in addition to any other remedy available at law, upon
written notice, terminate this Lease and retake possession of the
Store and remove all persons and property therefrom. Landlord shall
be entitled to charge and collect from Tenant interest on any payments
of rent and other charges overdue for a period in excess of ten (10)
days at the rate of 10% per annum.
25.2 It is expressly understood and agreed in the event Tenant
makes an assignment for the benefit of creditors, or if any
proceedings are commenced under the provisions of the Bankruptcy Act
whereby Tenant seeks to be, or would be, discharged of its debts, or
the payment of its debts are sought to be delayed, this Lease shall
not become an asset in such proceedings, however, the commencement of
such proceedings shall not affect this Lease or permit its termination
so long as all covenants on the part of the Tenant to be performed
shall be performed by Tenant or a party claiming under Tenant.
25.3 Landlord waives such liens, if any, to which it may have a
right with respect to the merchandise, furniture, trade fixtures and
other personal property of Tenant located on or about the Store and
shall from time to time execute such documents as Tenant may
reasonably request to acknowledge such waiver.
<PAGE>
ARTICLE 26 -- LANDLORD DEFAULT
26.1 If Landlord should be in default in the performance of any
of its obligations under this Lease, which default continues for a
period of more than thirty (30) days after receipt of written notice
from Tenant specifying such default, or if such default is of a nature
to require more than thirty (30) days for remedy and continues beyond
the time reasonably necessary to cure (provided Landlord shall
undertake action to cure such default within such 30 day period and
diligently pursue such efforts to completion within a period not to
exceed a total of ninety (90) days), then Tenant shall have the right
to exercise any of the following rights (which shall be in addition to
any other rights or remedies available by law):
(a) To terminate this Lease and surrender possession of the
Store, whereupon Tenant's obligation for the payment of rent and all
other charges hereunder shall cease upon the date of surrender.
(b) To perform any act or contract for the performance
t h ereof and incur any expense reasonably related thereto and
thereafter deduct the same from the next installment or installments
of rent accruing hereunder.
ARTICLE 27 -- ATTORNEYS FEES
27.1 If either party becomes a party to any litigation concerning
this Lease, the Store or the Shopping Center by reason of any act or
omission of the other party or its authorized representatives, and not
by any act or omission of the party that becomes a party to that
litigation or any act or omission of its authorized representatives,
the party that causes the other party to become involved in the
litigation shall be liable to that party for reasonable attorney's
fees, court costs, investigation expenses, discovery costs and costs
of appeal incurred by it in the litigation.
27.2 If either party commences an action against the other party
arising out of or in connection with this Lease, the prevailing party
shall be entitled to have and recover from the losing party,
reasonable attorney's fees, costs of suit, investigation costs and
discovery costs, including costs of appeal. When this Lease imposes
upon a party an obligation to indemnify the other, the indemnification
obligation shall include the obligation to pay the indemnitees
reasonable attorney's fees, costs and disbursements, whether the
indemnitee be the plaintiff or defendant.
ARTICLE 28 -- ASSIGNMENT
28.1 Tenant may not assign this Lease, or sublet the Shopping
Center, or any portion thereof, without Landlord's prior, written
consent, which Landlord shall not unreasonably withhold. Upon any
assignment or sublease, Tenant shall remain principally obligated
under the terms of this Lease unless Tenant is specifically released
f r o m its obligations hereunder by a written instrument duly
authorized, executed and delivered by Landlord.
ARTICLE 29 -- HOLDING OVER
29.1 If the Tenant shall remain in possession of the Store or any
portion thereof after the expiration of the Term in the absence of an
<PAGE>
agreement in writing between the Landlord and Tenant, the party
remaining in possession shall be deemed a Tenant at sufferance, until
acceptance of rent by Landlord, at which time the person in possession
shall be come a Tenant from month-to-month at the same rental and
under the same terms and conditions as existed immediately prior to
the expiration of the Lease.
ARTICLE 30 -- SUCCESSORS IN INTEREST
30.1 The terms, conditions and covenants herein contained shall
inure to the benefit of and be binding upon the heirs, assigns and
other successors in interest to the parties hereto.
ARTICLE 31 -- NOTICES
31.1 Any notice to be given or served in connection with this
Lease shall be in writing and shall be served by certified mail or by
reputable air courier service which provides written evidence of
delivery, addressed as specified in Section 1.2 hereof, or to such
other address as requested by either party in writing. Service shall
be deemed effective seven (7) days after deposit in the U.S. mail in
accordance herewith or on the business day following deposit air
courier service in accordance herewith. Either party by written
notice to the other may designate two additional parties to receive
copies of notices sent to it. Such designees may be changed by
written notice.
ARTICLE 32 -- SIGNS
32.1 Tenant has erected and may maintain upon the exterior of the
Store and upon each pylon serving the Shopping Center a sign or signs
which are deemed appropriate to the conduct of its business. Landlord
is deemed to have consented to Tenant's standard signage plans and
specifications and Tenant's existing signage upon execution of this
Lease. Additionally, Tenant may display in the windows of the Store,
from time to time, signs of a temporary nature advertising business
trtansacted by Tenant in the Store, so long as those window signs are
professionally prepared. Landlord shall not alter the pylon signage
at the Shopping Center without Tenant's prior written consent.
ARTICLE 33 -- MEMORANDUM OF LEASE
33.1 This Lease shall not be recorded. However, a Memorandum
thereof in the form attached hereto as Exhibit "C" shall be executed,
in recordable form, by both parties concurrently herewith and recorded
by Landlord with the official charged with recordation duties for the
county in which the Shopping Center is located, with directions that
it be returned to Tenant. Upon expiration or earlier termination of
this Lease, Tenant shall cooperate with Landlord in executing a
Memorandum, in recordable form, acknowledging Tenant's release of its
leasehold interest in the Shopping Center.
ARTICLE 34 -- TENANT RIGHT OF FIRST OFFER
34.1 Tenant's Right of First Offer. If during the Term of this
Lease, Landlord intends to offer for sale the Store, the legal parcel
upon which the Store is located or the Shopping Center (collectively
referred to herein as the "subject property"), Landlord shall so
notify Tenant of that intention in writing, which notice shall contain
<PAGE>
the terms and conditions (collectively "terms") that would be
acceptable to Landlord. If within ten (10) business days after
receipt of such notice, Tenant does not notify Landlord that Tenant
will purchase the subject property under the terms, Landlord, within
the ensuing six (6) month period shall be free to sell the subject
property to any third party named in the Third Party Offer on the
terms; provided, however, that a failure or refusal by Tenant to
purchase the subject property on the terms shall not relieve Landlord
(or any successor in interest to Landlord) of its obligations under
this Article in respect of subsequent instances of Landlord's (or its
successor's) desire to sell the subject property or any portion
thereof; and provided further that if Landlord shall, during the
aforsesaid six (6) month period, materially alter the terms to the
benefit of purchaser, or materially alter the description of the
subject property, Landlord shall so notify Tenant and afford Tenant an
additional five (5) business days within which Tenant may, by notice
to Landlord, elect to purchase the subject property on the terms as so
modified. If Tenant elects to purchase the subject property on the
terms, the terms shall constitute a binding agreement of purchase and
s a le between Landlord and Tenant and govern their subsequent
performance, provided however, time of performance shall be suitably
extended to take into account time elapsed between presentation to
Tenant of the terms and Tenant's acceptance.
ARTICLE 35 -- ACCORD AND SATISFACTION
35.1 No payment by Tenant or receipt by Landlord of a lesser
amount of Minimum Rent or Percentage Rent due hereunder shall be
deemed to be other than on account of the earliest rent due, nor shall
any endorsement or statement on any check or letter accompanying such
check or payment be deemed an accord and satisfaction, and Landlord
may accept such check without prejudice to Landlord's rights to
recover the balance of such rent or payment or pursue any other remedy
available in this Lease, at law or in equity.
ARTICLE 36 -- GENERAL CONDITIONS
36.1 Any sum accruing to the Landlord or Tenant under the
provisions of this Lease which shall not be paid within ten (10) days
following written notice that such sum is due ("Notice Period") shall
bear interest from the expiration of the Notice Period, at the rate of
ten percent (10%) per annum until paid.
36.2 If any term, covenant, condition or restriction of this
Lease is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the provisions hereof shall remain
in full force and effect and shall in no way be affected, impaired, or
invalidated thereby.
36.3 Nothing contained in this Lease shall be deemed or construed
by the parties hereto or by any third person to create the
relationship of principal and agent, or of partnership, or of joint
venture, or of any other association between the parties other than
Landlord and Tenant, or to prevent Landlord or Tenant from entering
into ventures in direct competition with the Shopping Center, or the
Store.
<PAGE>
36.4 Time is of the essence of the performance of each provision
of this Lease.
36.5 The waiver of performance of any covenant, term or condition
of this Lease by Landlord or Tenant shall not be construed as a waiver
of any subsequent breach of the same covenant, term or condition. The
various rights, options, elections, powers and remedies of the parties
contained in this Lease shall be construed as cumulative and no one of
them exclusive of any other or of any legal or equitable remedy which
either party might otherwise have in the event of a breach by the
other, and the exercise of one right or remedy by a party shall not in
anyway impair its right to any other right or remedy.
36.6 For purposes of computing dates for expirations, options,
rental adjustments or cancellations (except for those specifically
designated in Article 5 hereof), any partial month at the commencement
of the Term shall be disregarded.
36.7 Wherever in this Lease the Landlord or the Tenant is
required to give its consent or approval to any action on the part of
the other, such consent or approval shall not be unreasonably
withheld.
36.8 Except for corrections to Annual Statements required in
Section 18.4 hereof, all charges due from Tenant to Landlord for which
the Tenant must be billed by the Landlord, must be billed within one
(1) year of the date the charge is incurred by the Landlord or the
Landlord will have waived its right to reimbursement which may have
been established in any paragraph of this Lease.
36.9 Words of gender used in this Lease shall be deemed to
include other genders, and singular and plural words shall be deemed
to include the other, as the context may require.
36.10 Landlord and Tenant shall and do hereby indemnify,
defend, and hold the other harmless from all claims of brokerage
commission or finders fee arising through them. This covenant shall
survive the expiration, or earlier termination of the term of this
Lease.
36.11 Each of the covenants of this Lease shall be deemed
dependent upon each other covenant hereof.
36.12 Paragraph headings in this Lease are for convenience
only, are not a part of the agreement of the parties, and shall not
constitute an aid in interpreting this Lease.
36.13 This Lease shall be construed in accordance with and
governed by the laws of the state wherein the Store is located, except
as otherwise required by mandatory provisions of law.
36.14 In the event Landlord furnishes materials or services,
or contracts with another for materials or services to be furnished,
and Tenant under this lease must reimburse Landlord for all or part of
the cost thereof, Tenant payment obligations shall be no greater than
if the materials or services had been purchased or furnished at a
reasonable and customary price.
<PAGE>
36.15 If Landlord is other than a natural person, each
individual executing this Lease on behalf of the named Landlord
represents and warrants that he is duly authorized to execute this
Lease on behalf of the named Landlord in accordance with a duly
adopted resolution of Landlord's board of directors and Landlord's
bylaws (if Landlord is a corporation) and in accordance with the
agreement of partnership (if Landlord is a partnership) and by
delivery hereof warrant that execution by no other signatory is
required and will hold Tenant harmless from any claim to the contrary
(and loss suffered by reason thereon.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Lease as of this first day of September, 1994.
LANDLORD
American National Bank and Trust Company of
Chicago, not personally but solely as Trustee
as aforesaid.
By: /S/ ANDREW HOCHBERG
TENANT
Sportmart, Inc.
By: /S/ MITCHELL KAHN
<PAGE>
ARTICLE 1 -- BASIC LEASE TERMS EXHIBIT 10.47
THIS LEASE is dated for reference purposes only January 1, 1995.
1.1 General Location and
Shopping Center Size:
(a) Location:
Sportmart Plaza
Southwest corner of Harlem Avenue
and Dempster Street
Niles, Illinois
(Section 2.1(q))
(b) Size: 120,808 square feet.
(Section 2.1(j))
1.2 Parties and Notice Addresses:
Landlord: H-C Developers, as Agent for
American National Bank and Trust
Company of Chicago, as Trustee
under Trust Agreement dated December 1,
1970, and known as Trust No. 30426,
c/o Larry Hochberg
7233 West Dempster Street
Niles, Illinois 60714
Tenant: SPORTMART, INC., a Delaware corporation
Attn: Legal Department
7233 West Dempster Street
Niles, Illinois 60714
(Sections 3.1 and 31.1)
With copies of all notices to be sent to:
SPORTMART, INC., a Delaware corporation
Attn: Vice President, Real Estate
7233 West Dempster Street
Niles, Illinois 60714
1.3 Size of Store: The Store ("Mart") consists of 59,380 square
feet as depicted on the Site Plan attached hereto as Exhibit B.
(Sections 2.1(r) and 3.2)
1.4 Intentionally Omitted
1.5 Term: Initial Termination Date: August 31, 2013.
1.6 Options: One (1) additional five (5) year period.
(Section 6.1)
1.7 Minimum Rent: Minimum Rent shall be as set forth on Exhibit D,
attached hereto and made a part hereof.
(Article 7)
1.8 Intentionally Omitted.
1.9 Intentionally Omitted.
<PAGE>
1.10 Contents of Lease:
This lease (the "Lease") consists of:
Pages 1 through
Sections 1.1 through
EXHIBITS
A. Part I: Legal Description
B. Site Plan
C. Memorandum of Lease
D. Minimum Rent
ARTICLE 2 -- DEFINITIONS
2.1 The terms defined in this Article 2 shall for all purposes
of this Lease and all agreements supplemental hereto have the meanings
herein specified unless expressly stated otherwise.
(a) All Risk Policy: A policy of fire and other property
insurance in the form commonly referred to in the industry as "all
risk" with extended endorsement (false arrest, libel, slander,
assault, battery, invasion of privacy, theft, vandalism and malicious
mischief coverage) and including broad form water damage, or if such
policy is no longer issued, such other policy as would cover the same
risks and perils. Landlord may elect to include coverage for flood
and earthquake but Tenant shall not be required to pay any part of the
premium allocable to such coverages.
(b) Commencement Date: January 1, 1995.
(c) Common Area Charges: Costs incurred by Landlord for
supervision of ongoing maintenance and repair of the Common Areas (but
in no event shall the charge for such supervision exceed fifteen
percent (15%) of the total Common Area Charges exclusive of taxes and
insurance), repairing or resurfacing the parking area provided such
resurfacing is not a capital expenditure as defined below, repainting
and restriping the parking areas, cleaning, sweeping and other
janitorial services, sanitation, maintenance of refuse receptacles,
replanting landscaping directional signs and other markers, upkeep of
lighting and other utilities). In no event shall the term "Common
Area Charges", as defined herein, include any capital expenditures.
"Capital Expenditures" means those expenditures which, in accordance
w i t h generally accepted accounting principles, are not fully
chargeable to current account in the year the expenditure is incurred
as well as any single Landlord expenditure in excess of $5,000.00.
(d) Common Areas: Those portions of, and facilities
within, the Shopping Center or greater land area of which the Store
forms a part, which are intended for the common non-exclusive use of
the occupants, their customers, agents and employees including,
without limitation, parking areas, driveways, malls, walkways, loading
zones and landscaping.
(e) Intentionally Omitted.
(f) Intentionally Omitted.
<PAGE>
(g) Gross Sales: The selling price of all merchandise sold
in or from the Store by Tenant, its subtenants, licensees and
concessionaires, whether for cash or for credit, excluding, however,
the following: (i) the sales price of all merchandise returned and
accepted for full credit or the amount of the cash refund or allowance
made thereon; (ii) the sums and credits received in settlement of
claims for loss or damage to merchandise; (iii) the consideration
received in connection with a sale of inventory which occurs other
than in the ordinary course of Tenant's business; (iv) sales taxes, so
called luxury taxes, excise taxes, gross receipt taxes, and other
taxes now or hereafter imposed upon the sale or value of merchandise
or services, whether added separately to the selling price of the
merchandise or services and collected from customers or included in
the retail selling price; (v) receipts from public telephones, vending
machines, sales of tickets and passes, sales of money orders, fees for
fishing/hunting licenses and the collection of public utility bills;
(vi) interest, carrying charges, or other finance charges in respect
of sales made on credit; (vii) sales of fixtures, trade fixtures, or
personal property that are not merchandise held for sale at retail;
(viii) sales to employees at discount, not exceeding three percent
(3%) of total Gross Sales: (ix) labor charges or fees for bowling
ball drilling, racquet restringing, ice skate sharpening, bicycle
assembly, golf club regripping and installation of ski bindings, ski
tuning (including sharpening and waxing) and other similar customer
services; (x) Tenant's accounts receivable, not to exceed two percent
(2%) of Gross Sales, which have been determined to be uncollectible
for federal income tax purposes during the Lease Year provided,
however, that if such accounts are actually collected in a later year,
the amount shall be included in the Gross Sales for such later Lease
Year; (xi) rents, subrents or other consideration received in
connection with an assignment, sublet, license, concession or other
transfer of any portion of the store (however Gross Sales of any such
transferee shall be included); (xii) sales of merchandise ordered by
catalogue regardless of place of order or delivery; (xiii) exchanges
of merchandise between stores where such exchanges are made solely for
the convenient operation of Tenant's business and not for the purpose
of consummating a sale which has been made at, in or from the
Premises; (xiv) receipts from the sale of fishing and hunting
licenses; and (xv) receipts in respect of instructional programs (but
not including merchandise sold in respect thereto).
(h) Intentionally Omitted.
(i) Landlord's Parcel: That certain parcel of land
described in Exhibit "A", together with all appurtenances thereunto
belonging.
(j) Leasable Floor Area: All areas available, or held for
the exclusive use and occupancy of occupants or future occupants of
the Shopping Center, measured from the interior surface of exterior
walls (and from extensions thereof in the case of openings) and from
the center of interior demising partitions. For purposes of computing
Tenant's obligations based upon Leasable Floor Area, the Leasable
Floor Area of the Shopping Center shall be not less than the size
specified in Section 1.1(b). Mezzanines, if any, shall not be
included within the definition of Leasable Floor Area.
<PAGE>
(k) Lease Year: The first Lease Year shall extend from the
Commencement Date to the first January 31st following commencement.
Subsequent Lease Years (other than the final Lease Year) shall
commence on February 1st and terminate the following January 31st.
The final Lease Year shall commence on February 1st and terminate on
the expiration or earlier termination of this Lease.
(l) Minimum Rent: The amounts specified in Section 1.7.
(m) Percentage Rent: The term "Percentage Rent" is defined
in Section 8.1.
(n) Intentionally Omitted.
(o) Intentionally Omitted.
(p) Intentionally Omitted.
(q) Shopping Center: Those certain premises with all
appurtenances located as set forth in Section 1.1(a) hereof and
described with particularity in Part I of Exhibit "A".
(r) Store: That portion of the Shopping Center as so
delineated on the site plan attached to this Lease as Exhibit "B"
having the dimensions and containing the Leasable Floor Area specified
in Section 1.3 hereof. Tenant refers to the Store as "Mart" for
internal operation purposes.
(s) Term: References to "Term" of this Lease shall include
the original term and any extension of such Term. The original Term
of this Lease shall start on the Commencement Date and, unless earlier
terminated, expire on the Initial Termination Date specified by
Section 1.5.
ARTICLE 3 -- PREMISES
3.1 The landlord identified in Section 1.2 ("the Landlord")
hereby leases to the tenant identified in Section 1.2 (the "Tenant")
and the Tenant hires from the Landlord, the Store, together with all
appurtenances (collectively, the "Premises"). Tenant has entered into
this Lease in reliance upon the agreement of the Landlord that the
Shopping Center is and will remain retail in character, and, further,
no part of which shall be used as a nightclub, bar, theater,
auditorium, meeting hall, school, or other place of public assembly,
gymnasium (excluding aerobics studios and weight clinics of less than
3,000 square feet), dance hall, billiard or pool hall, massage parlor,
video game arcade, bowling alley, skating rink, car wash, night club
or adult book or adult video tape store, (which are defined as stores
a substantial portion of the inventory of which is not available for
sale or rental to children under 15 years old because it explicitly
deals with or depicts human sexuality). No restaurant (except the
Ponderosa Steak House presently located in the Shopping Center) shall
be permitted in the Shopping Center within five hundred (500) feet of
the Store or in any other portion of the Shopping Center without prior
Tenant consent.
<PAGE>
3.2 The Store thus demised and leased unto the Tenant is not a
separate parcel of real property. In the event the Store is less than
the size specified in Section 1.3, Minimum Rent and other charges
shall be proportionately reduced, but this shall not be construed as
permitting a material variance in dimensions or area.
3.3 Landlord warrants that the site plan attached hereto as
Exhibit "B" (the "Site Plan") depicts the land described in Exhibit
"A" Part I and the improvements thereon. The buildings depicted
thereon contain no more than one (1) story (but mezzanines having
Leasable Floor Area not in excess of one third (1/3) of the occupant's
ground floor Leasable Floor Area, when not used for sales floor
p u rposes shall be permitted). The Site Plan is a material
consideration for the Tenant entering into this Lease, and no change,
alteration, or addition shall be made to the Site Plan, including but
not limited to the configuration of the Common Areas, methods of
ingress and egress, direction of traffic, lighting, curbing and
building heights and stories without the express written consent of
the Tenant.
3.4 No construction shall be permitted in the Shopping Center,
except for emergency repairs diligently pursued, during the period
from October 1st to December 31st of any year, without the prior
written consent of the Tenant, which consent may include conditions
designed to eliminate interference with the operation of the Shopping
Center or the effect of such construction upon the Tenant's business.
3.5 Upon execution of this Lease, that certain lease between
Landlord and Tenant dated December 30, 1972, as previously amended
from time to time, shall be cancelled, terminated, discharged and
superseded.
ARTICLE 4 -- INTENTIONALLY OMITTED
ARTICLE 5 -- LEASE TERM
5.1 The Term of this Lease shall commence on the Commencement
Date and, unless earlier terminated, shall expire as specified in
Section 1.5, subject to the Tenant options to extend the term as
provided in the following Article 6. Upon request of the Tenant,
Landlord shall execute a written acknowledgment of the Commencement
Date.
ARTICLE 6 -- OPTION PERIODS
6.1 By notice to Landlord not less than ninety (90) days prior
to the expiration of the Term, the Tenant may extend the original term
of this Lease for one (1) additional period of five (5) years as
designated in Section 1.6 hereof, on the terms and conditions set
forth herein. Should Tenant neglect to exercise the option by the
date specified above, Tenant's right to exercise shall not expire
until thirty (30) days after notice from Landlord of Tenant's failure
to exercise the option.
<PAGE>
ARTICLE 7 -- MINIMUM RENT
7.1 During the Term of this Lease, the Minimum Rent shall be as
specified in Section 1.7. Each monthly installment of rental shall be
payable in advance on or before the tenth (10th) day of each calendar
month during the Term. If the Lease commences other than on the first
day of a calendar month, the first month's Minimum Rent shall be
prorated accordingly and paid within the Minimum Rent for the first
full month. All rent and other payments to be made by Tenant to
Landlord shall be sent to the place to which notices are required to
be sent, unless otherwise directed by the Landlord in writing.
ARTICLE 8 -- PERCENTAGE RENT
8.1 (a) Percentage Rent for each Lease Year during the Term
which contains twelve (12) full calendar months shall be a sum equal
to the amount by which two and one-half percent (2.5%) of Tenant's
Gross Sales made during each Lease Year exceeds the Minimum Rent paid
for such year.
(b) The Percentage Rent for any Lease Year having less than
twelve (12) full months shall be based upon Gross Sales for the twelve
(12) months immediately preceding the Commencement Date (as to the
first Lease Year) and for the twelve (12) month period immediately
preceding the expiration or earlier termination of the Lease (as to
the final Lease Year). The Percentage Rent due for such period shall
be established by multiplying the Percentage Rent which would have
been due for such twelve (12) month period by a fraction, the
numerator of which is the number of days in such Lease Year and the
denominator or which is 365.
8.2 Within seventy-five (75) days after the close of each Lease
Year, Tenant shall submit to Landlord a statement indicating the
amount of its Gross Sales for the previous Lease Year and the amount
expended for the above mentioned expenses which are to be deducted and
which relate to the Lease Year in question. Percentage Rent due, if
any, shall accompany such statement.
8.3 (a) Tenant shall maintain adequate records for a period of
one, year after the close of each Lease Year for the purpose of
allowing Landlord to verify the reported Gross Sales for such year.
At any time within said one year, Landlord or its agents may audit
such records during normal business hours at Tenant's records center
after not less than fifteen (15) days' prior written notice to Tenant.
Audit shall be conducted in manner least apt to interfere with
Tenant's business operations and audit or inspection of records other
than pertaining to Premises is prohibited. Landlord shall not conduct
such an audit of Tenant's records more than once in any given Lease
Year. Failure of Landlord to conduct audit within one (1) year
following provision to Landlord of annual Gross Sales statement shall
constitute waiver by Landlord of right to dispute Tenant's Gross Sales
as specified within such annual Gross Sales statement.
(b) In the event an inaccuracy is disclosed after any audit
of Tenant's Gross Sales, an adjustment shall thereupon be made.
<PAGE>
(c) Any information obtained by Landlord as a result of any
audit shall be held in strict confidence by Landlord excepting such
may be disclosed by Landlord to proposed lender or purchaser with
respect to a prospective sale, mortgage, lease or sale-leaseback of
the Shopping Center or when Landlord is required to comply with lawful
orders of a court or governmental agency.
8.4 The Minimum Rent provided for in this Lease is acknowledged
by the parties to be sufficient consideration for the leasehold
granted hereby and the Percentage Rent specified herein is in addition
to such adequate consideration.
ARTICLE 9 -- USE
9.1 The Store may be used for any lawful retail use including
but not limited to the following specific uses: the retail sale of
sporting goods, sports apparel and active wear (including without
limitation athletic footwear and athletic uniforms of all kinds) and,
such other merchandise as may be sold from time to time in Tenant's
similarly merchandised stores. Tenant agrees to comply with all
applicable laws and ordinances in its operations at the Premises; not
to create hazardous or noxious conditions that would constitute a
nuisance or would increase the premiums payable for casualty insurance
coverage of the Shopping Center; and not to conduct liquidation,
bankruptcy or sidewalk sales at the Premises without Landlord's
consent. Tenant shall operate under the trade name "Sportmart", and
neither Tenant nor any person, firm or entity affiliated with Tenant
shall open, operate or acquire any financial interest in any store
under that name or any other similar store selling similar merchandise
within a three (3) mile radius of the Store. Tenant shall,
continuously and uninterruptedly during the Term, during usual
business hours and on such days as comparable businesses in the
Shopping Center and elsewhere in the area are open for business,
occupy and use the entire Store for the purposes stated herein.
9.2 Landlord warrants to Tenant that Tenant, while operating a
store for the above use(s), will not be in violation of (a) any
exclusives or other agreements which Landlord may have with other
occupants, lessees, lenders, governmental authorities or any others,
or (b) restrictions imposed by any governmental authority or body.
Landlord shall hold Tenant harmless from any claims to the contrary
including loss suffered by reason thereof.
9.3 Landlord agrees that Landlord shall not suffer any Leasable
Floor Area within the Shopping Center to be used for the sale of
sporting goods, sports apparel and/or athletic footwear, provided,
however, that Landlord shall be permitted to lease other premises in
the Shopping Center to retailers whose use of the premises includes
the "Incidental Sale" of such merchandise. "Incidental Sale" of such
merchandise is defined as the sale or display of not more than (a)
1000 square feet of retail display space in another tenant's premises,
or (b) twenty-five percent (25%) of the total square footage of
another tenant's premises, whichever is less, used for the display of
such merchandise. Landlord will fully cooperate with Tenant in any
and all of Tenant's efforts to enforce the exclusive use provisions of
this Lease.
<PAGE>
ARTICLE 10 -- REAL ESTATE TAXES
10.1 (a) Landlord shall pay, on or before the due date, all
taxes and assessments levied against the Store or the real property of
which the Store forms a part, including land and all Common Areas.
(b) In addition to all rental herein reserved, Tenant shall
pay to Landlord its pro-rata share of the difference between (i) real
estate taxes levied upon and assessed against the Shopping Center for
each tax year of the Term, and (ii) real estate taxes levied against
the Shopping Center for the tax year 1973. Such taxes shall be
payable not later than fourteen (14) days prior to delinquency,
provided Landlord has previously provided Tenant with a copy of the
Tax bill and written notice to pay same. Tenant's schedule of
payments (annual or semi-annual) shall be concurrent with and
proportionate to Landlord's schedule of payments to the taxing
authority. Landlord shall furnish Tenant with proof of payment of
Taxes within thirty (30) days after the delinquency date thereof. If
Landlord fails to provide such proof of payment, Tenant may withhold
from sums coming due under this Lease amounts sufficient to recover
Tenant's tax payment to Landlord. In the event of assessments which
may be paid in installments by reason of bonding or otherwise,
Landlord may elect to make payment under the installment plan. In any
event, Tenant's payment obligations under this Article shall be as if
Landlord made payment over the longest period of time permitted by the
assessment and Tenant shall bear no liability as to installments due
following the expiration or earlier termination of this Lease.
(c) For all purposes of this Lease, the Tenant's pro-rata
share is defined as that fraction in which the numerator is the
Leasable Floor Area in the Store and the denominator of which is the
Leasable Floor Area in the Shopping Center. Such computation shall be
made separately for each tax year.
(d) Should the Tenant be in occupancy during only a portion
of the first or final tax year, Tenant shall be responsible to
Landlord for a pro-rata portion of its tax obligation as described
herein, based on the portion of such tax year included in the Term of
this Lease. This Article includes the Tenant's total responsibility
for taxes both for the Store and Common Areas.
10.2 There shall be excluded from the tax bill to which Tenant
contributes for the purposes of computing Tenant's share (a) income,
excess profits, estate, single business, inheritance, succession,
transfer, franchise, capital or other tax or assessment upon Landlord
or the rentals payable under this Lease; (b) assessments (not ad
valorem taxes) relating to the initial construction of the Shopping
Center or capital improvements (but not replacements) subsequently
constructed therein or with respect thereto; (c) any charge, such as a
water meter charge and the sewer rent based thereon, which is measured
by the consumption of the actual user of the item or service for which
such charge is made; and (d) any increase in taxes caused by a "change
of ownership" as defined in Section 60, California Revenue and
Taxation Code.
10.3 Any rebates, refunds, or abatements of real estate taxes
received by the Landlord subsequent to payment of taxes by the Tenant
shall be refunded to Tenant on a pro rata basis within ten (10) days
of receipt thereof by Landlord. Any such rebate, refund or abatement
<PAGE>
realized by the Landlord prior to payment by the Tenant shall result
in an immediate reduction in the Tenant's proportionate share of taxes
then due to the Landlord.
10.4 In the event the real property taxes on the Common Areas and
the improvements thereon are separately assessed from the buildings of
which the Store forms a part, then in that event, Tenant shall be
responsible for its pro-rata share as described in Section 10.1(c), of
the taxes on the Common Areas and the improvements thereon.
10.5 Tenant shall have such rights to contest the validity or
amount of real estate taxes as are permitted by law, either in its own
name or in the name of the Landlord, in either case with the
Landlord's full cooperation. Any resultant refund, rebate or
reduction shall be used first to repay the expenses of obtaining such
relief. Landlord shall provide Tenant with government notices of
assessment (or reassessment) in time sufficient to reasonably permit
Tenant, at Tenant's election, to make contest; and if Landlord fails
to do so, then there shall be excluded from the tax bill to which
Tenant contributes, any increased taxes resulting from such assessment
(or reassessment). The term "contest" as used in this Section 10.6
means contest, appeal, howsoever denominated.
ARTICLE 11 -- FIRE INSURANCE
11.1 Landlord will maintain at all times during the Term an All
Risk Policy insuring against damage to any portion of the Store and
the Shopping Center (including the store fronts), and appurtenances
thereto. Such insurance shall be in (be full amount of replacement
value, without deduction for physical depreciation and shall provide
that the proceeds of any loss shall be payable in the manner provided
for in this Lease. Landlord shall, at least ten (10) days prior to
the Commencement Date, and thereafter upon request of Tenant, provide
Tenant with a certification of such insurance coverage from an insurer
licensed to do business within the state in which the Store is
located, and which insurer is rated A and XII or better in Best's
Insurance Guide, which certificate shall indicate, among other things,
that the Tenant is an additional insured along with the Landlord and
that the Store and all the improvements and Landlord's fixtures
appurtenant thereto, have been insured to their full replacement
value, without deduction for physical depreciation.
11.2 The Tenant shall be responsible to reimburse the Landlord
its pro-rata share of the premium costs of the insurance described in
Section 11.1 above. Tenant's schedule of payments for reimbursement
shall be established in the same manner as described in Section
10.1(b) above for taxes. Tenant's pro-rata share for purposes of this
Article shall be that fraction the numerator of which is the Leasable
Floor Area of the Store and the denominator of which is the Leasable
Floor Area in the entire Shopping Center, or improved structure,
covered by the insurance policy which is the subject of the premium
provided, however, at Tenant's election, Tenant's pro-rata share shall
depend on the size and value of the Store and other improvements
insured by the policy of insurance and the rate basis applicable to
each.
11.3 Intentionally omitted.
<PAGE>
11.4 In lieu of Landlord's assuming the obligation specified in
Section 11.1 above, subject to Tenant's reimbursement all as described
in Sections 11.1 and 11.2 hereof, Tenant may, at its option, elect to
carry such insurance on the Store and the Shopping Center, including
such other endorsements as the Tenant in its judgment deems prudent
under the circumstances, all at Tenant's sole costs and expense in
which event Tenant shall not be responsible for reimbursement under
Section 11.2, and Landlord shall, to the extent Tenant has, at
Tenant's own expense, purchased casualty insurance coverage for the
entire Shopping Center, pay over to Tenant any and all real insurance
premium reimbursements collected by Landlord from any of the other
Shopping Center tenants and shall otherwise reimburse Tenant or cause
Tenant to be reimbursed for any and all costs of the Shopping Center's
casualty insurance in excess of Tenant's pro rata share of such costs.
11.5 (a) As used in this Section, the term "Lender" means the
holder of indebtedness secured by a first lien upon the Exhibit "A"
Part I real property, whether the interest creating such lien be
denominated as mortgage, deed of trust, security agreement, vendor's
lien or otherwise, but only if Lender (a) is a financial institution,
such as a bank, savings and loan, insurance company, or other entity
regularly engaged in making loans secured by real property, and (b)
has fifty million dollars ($50,000,000) of such loans outstanding.
(b) Insurance proceeds for damage or destruction to the
Store ("Proceeds"), if under one dollar ($1.00) per square foot of
Leasable Floor Area in the Store shall be paid directly to Landlord.
If in excess of such amount, the Proceeds shall be deposited with
Lender provided Lender agrees to apply the Proceeds in the manner
described herein. If Lender does not so agree, or there is no Lender,
then the Proceeds shall be deposited with a bank, trust company, or
title insurance company (collectively with Lender referred to as
"Stakeholder") designated by Tenant and approved by Landlord, for use
as provided in Article 20. Stakeholder shall disburse the same to the
party performing restoration upon certification by the architect in
charge of restoration that the amounts requested have been paid in
connection with such restoration or shall be due to contractor,
subcontractors, materialmen, architects or other persons who have
rendered services or have furnished materials for such restoration and
upon the completion of such restoration the remaining balance of any
of such proceeds shall be paid to Landlord upon demand.
ARTICLE 12 -- LIABILITY INSURANCE
12.1 Tenant shall at all times during the Term keep in force a
policy or policies of public liability insurance, or an endorsement on
a blanket liability insurance policy or policies, against claims for
personal injuries, death or property damage, occurring on, in or about
the Shopping Center, with a combined single limit of not less than ONE
MILLION DOLLARS ($1,000,000). Said policy or policies shall contain
Contractual Liability Insurance recognizing the liability assumed in
Section 23.1 hereof.
12.2 Landlord shall pay over to Tenant any and all sums paid to
Landlord by other tenants of the Shopping Center as reimbursemnts for
the costs of liability insurance coverage for the Shopping Center and
shall otherwise reimburse Tenant or cause Tenant to be reimbursed for
any and all costs of the Shopping Center's liability insurance in
excess of Tenant's pro rata share of such costs.
<PAGE>
12.3 Each policy of insurance herein maintained by the Tenant
shall provide that: (a) the same is not contributory with the
coverage which the other party may carry and is primary insurance
coverage and not excess insurance coverage or overage insurance
coverage; and (b) the company writing said policy will give at least
twenty (20) days' notice in writing of any cancellation, lapse, or
failure to renew, to the party designated on the insurance certificate
as the holder thereof.
12.4 Tenant agrees to deliver to the Landlord a certificate of
insurance evidencing the existence in force of the policies of
insurance described in this Article. The certificate shall provide
that such insurance shall not be canceled or materially amended unless
ten (10) days' prior written notice of such cancellation or amendment
is given to the Landlord.
ARTICLE 13 -- WAIVER OF SUBROGATION
13.1 Tenant and Landlord hereby waive and release any and all
right of recovery against the other, including employees and agents,
arising during the Term for any and all loss or damage to any property
located within or constituting a part of the Shopping Center which
loss or damage arises from the perils covered by an All Risk Policy or
which right of recovery arises from loss of earnings or rents
resulting from damage caused by such a peril. This mutual waiver is
in addition to any other waiver or release contained in this Lease.
Landlord and Tenant shall give written notice to its insurers of the
provisions of this waiver and release and have its insurance policies
endorsed, if required, to prevent invalidation of insurance coverage
by reason of this waiver and release.
ARTICLE 14 -- MAINTENANCE & REPAIR BY TENANT
14.1 Subject to Article 20, Tenant shall, at its expense,
maintain the Store and the entire Common Areas of the Shopping Center
in good repair and good condition throughout the Term of this Lease.
Landlord shall pay over to Tenant any and all sums collected by
Landlord from other tenants of the Shopping Center as reimbursements
for the costs of maintaining the Common Areas and shall otherwise
reimburse Tenant or cause Tenant to be reimbursed for any and all
costs of maintaining and repairing the Common Areas in excess of
Tenant's pro rata share of such costs.
ARTICLE 15 -- INTENTIONALLY OMITTED
ARTICLE 16 -- REPAIRS REQUIRED BY GOVERNMENTAL AUTHORITIES
16.1 Any repairs, alterations or other improvements required by
governmental authority which results from the particular retail use of
the Tenant, shall be done by the Tenant at its sole cost and expense.
Any such work, however, which is required of the Shopping Center in
general, or of all similar buildings in the area of the Shopping
Center, shall be done by Tenant at the sole cost and expense of the
Landlord.
<PAGE>
ARTICLE 17 -- ALTERATIONS
17.1 The Tenant may make non-structural alterations and
improvements to the interior of the Store in a good and workmanlike
manner, in conformity with all law, ordinances and regulations of
public authorities having jurisdiction. Tenant shall not make any
alterations to the foundation, roof, or any structural portions of the
Store without first obtaining the written approval of the Landlord.
Such approval may not be unreasonably withheld and shall be deemed
granted if Tenant is not notified in writing of a reasonable basis for
withholding such approval within ten (10) days of notifying Landlord
thereof. It is further agreed that upon termination of this Lease,
Tenant may, provided no structural damage to the Store will be caused
thereby, remove its furniture, fixtures and equipment and the Landlord
will accept the Store as altered without any obligation upon the
Tenant to restore the Store to its former condition.
17.2 Tenant may place on and about the Premises, and on the
s h opping center roof, equipage used in its ordinary business
operations, such as without limitation HVAC, dumpster, and devices
used for the reception and transmission of signals through the
atmosphere, such as satellite dish.
17.3 Landlord shall cooperate with Tenant efforts to obtain such
government permits, licenses, variances, authorizations and approvals
as may be required so as conduct retail business within the Store, and
from time to time perform the alterations contemplated by this
Article, as well as to construct the signage authorized by Article 32
of this Lease. To the extent necessary or convenient for such
p u rpose, Tenant may prosecute such efforts, including signing
applications, in the name of Landlord.
ARTICLE 18 -- COMMON AREAS
18.1 Tenant, as well as its agents, employees and customers
(collectively, "Customers"), shall have and is granted complete,
nonexclusive and undisturbed access to, and use of all Common Areas.
Landlord shall use best efforts to prevent Common Area use by other
than Shopping Center occupants and their Customers. In no event shall
Customer use of Common Areas be conditioned upon payment of parking or
other charge by Tenant or Tenant's customers. As provided in Section
14.1 hereof, the Tenant shall maintain all Common Areas in good
condition, repair and cleanliness, including ice and snow removal, and
free of any impediments to easy and safe movement within the Common
Areas, including having the areas well lighted during Tenant's normal
business hours and until 11:00 P.M. every day (and until midnight
during the month of December).
18.2 In no event shall Tenant be responsible for payment of any
part of the initial cost of improvements made by Landlord to Common
Areas.
ARTICLE 19 -- UTILITIES
19.1 Landlord agrees to provide that the Tenant's Store shall at
all times have available to it necessary utilities services including
electric, water, gas, telephone and other necessary utility lines, as
well as refuse collection service and sewerage lines capable of
adequately providing for Tenant's needs, but in no event of less
capacity than on the first day of the Term of this Lease. Tenant
agrees to pay all use charges for all utilities serving the Store
during the Term.
ARTICLE 20 -- CASUALTY
20.1 Partial. In the event that the Store shall be partially or
totally destroyed, by fire or other casualty insurable under fire and
extended risk insurance, so as to become partially or totally
untenantable the same shall be repaired as speedily as reasonably
<PAGE>
possible at the expense of Landlord, unless Landlord shall elect not
to rebuild as hereinafter provided, and during the period of said
repair or restoration, the rent hereunder shall abate to the extent of
that portion of the Premises that is untenantable.
20.2 Percent of Damage and Option to Terminate. If more than 25%
of the Store shall be destroyed or so damaged, by fire or other
casualty insurable under fire and extended risk coverage, as to become
(as to said 25%) wholly untenantable, or in the event the Store shall
be partially or totally destroyed by a cause or casualty other than
those covered by fire and extended risk insurance, then in any such
event, Landlord may , if it so elects, rebuild the Store or restore
the Store to a condition good and fit for occupancy wiyhin a
reasonable time after such destruction or damage, or may give notice
to Tenant within 90 days after such damage or destruction terminating
this Lease as of the date of such damage or destruction. If Landlord
elects to repair or restore the Store, it shall, within 90 days after
such damage or destruction, give Tenant notice of Landlord's intention
to repair and proceed with reasonable speed to effect such repairs.
Unless Landlord elects to terminate this Lease as aforesaid, this
Lease shall remain in full force and effect and rent shall abate
hereunder during the period of such repair and construction to the
extent of that portion of the Store that is untenantable.
20.3 Landlord's Obligation of Restoration. If Landlord elects or
is obligated to repair the Store under the terms of this Article,
Landlord's obligation to repair shall in no event include the
obligation to rebuild, repair or replace Tenant's stock in trade,
fixtures, furniture, furnishings, floor coverings and equipment. The
parties waive such rights of Lease termination as are granted to them
under the laws of the state wherein the Store is located, it being
their agreement that the rights of termination in the event of
casualty, as set forth herein, shall be exclusive.
ARTICLE 21 -- CONDEMNATION
21.1 Total. In the event that the whole of the Premises, or such
portion of the Premises as will render the balance thereof incapable
of being restored to an economic unit reasonably suitable for the
Tenant's continued occupancy for the purposes and uses for which the
Premises are leased, shall be permanently taken or condemned for a
public or quasi-public use or purpose by any competent authority, then
and in either of those events, the Term of this Lease shall terminate
from the date when possession of the Premises shall be required for
such public use or purpose.
21.2 Partial. In the event only a part of the Premises
shall be taken or condemned for a public or quasi-public use or
purpose by any competent authority and the balance thereof can be
restored to an economic unit reasonably suitable for Tenant's purposes
by the expenditure of a sum not in excess of the award, this Lease
shall not terminate and Landlord, at its cost and expense, shall
within a reasonable time, repair and restore the Premises. Any award
paid as a consequence of such taking or condemnation shall be paid to
Landlord, and shall be applied, as far as necessary, to the cost of
repair and restoration. Any sums remaining unexpended after such
application shall be retained by and belong to Landlord. From the
date such part of the Premises is actually taken, there shall be
equitable reduction of the Minimum Rent, and during the period of such
repair and restoration, Minimum Rent will abate as to that portion of
the Premises which is untenantable.
<PAGE>
21.3 Landlord's Option to Terminate. In the event only a
part of the Premises shall be taken or condemned for or a public or
quasi-public use or purpose by any competent authority, and the
balance thereof can be restored to an economic unit suitable for
Tenant's purposes, but only by the expenditure of a sum in excess of
the award, or in the event any portion of the premises shall be so
taken or condemned at such time as the then remaining Term of this
Lease is less than 25% of the original Lease Term, then in either
event Landlord shall have the option of electing to repair and restore
the Premises or terminate this Lease. If the Landlord elects to
terminate this Lease, it shall do so by notice in writing to Tenant
within 60 days of the rendition of the award and (in the event it is
terminated for the former reason) shall accompany such notice with the
certification of a duly licensed architect specifying the minimum cost
of restoration (which specified cost shall be in excess of the amount
of such award). Failure of the Landlord to serve such notice shall
constitute election to restore and repair the Premises. In the event
of the Lease termination pursuant to this paragraph, the termination
shall be effective as of the date when possession of the portion of
the Premises was required by the taking authority, and current rental
shall in such case be apportioned as of the date of such termination,
and the award shall belong solely to Landlord.
21.4 Distribution of Award. All compensation awarded or paid
upon such a total or partial taking of the Premises shall belong to
and be the sole property of Landlord, whether such compensation be
awarded or paid as compensation for diminution in value of the
leasehold or to the fee; provided, however, that Landlord shall not be
e n titled to any award made to Tenant for loss of business,
depreciation to, and cost of removal of stock and fixtures. Each
party agrees to execute and deliver to the other all instruments that
may be required to effectuate the provisions of this Article 21.
ARTICLE 22 -- MECHANIC LIENS
22.1 Neither Tenant nor Landlord shall permit any mechanic's,
materialman's or other lien against the Store or the Shopping Center
in connection with any labor, materials or services furnished or
claimed to have been furnished. If any such lien shall be filed
against the Store or Shopping Center, the party charged with causing
the lien will cause the same to be discharged, provided, however, that
either party may contest any such lien, so long as the enforcement
thereof is stayed.
ARTICLE 23 -- INDEMNIFICATION
23.1 With respect to its use and occupancy of the Store, Tenant
agrees to save Landlord harmless from and indemnify and defend
Landlord against any and all injury, loss, damage, liability (or any
c l a ims in respect of the aforementioned), costs or expenses
(including, without limitation, attorney's fees, reasonable
investigative and discovery costs), of whatever nature, to any person
or property caused or claimed to be caused by or resulting from any
act, omission or negligence of Tenant or agent of Tenant, provided
that the Landlord shall, upon becoming aware of such claim or damage,
promptly notify Tenant. Tenant's obligation hereunder shall be
limited to the amount in excess of any insurance proceeds in event of
casualty damage.
<PAGE>
23.2 With respect to its maintenance of the Store, its operation
and maintenance of the Common Areas, the manner of design and
construction of the Shopping Center, and the manner of construction
and design of the Common Areas, Landlord agrees at Tenant's option, to
save Tenant harmless from and indemnify and defend Tenant against any
and all injury, loss, damage, liability (or any claims in respect of
the aforementioned), costs or expenses (including, without limitation,
attorney's fees, reasonable investigation and discovery costs), of
whatever nature, to any person or property caused or claimed to be
caused by or resulting from any act, omission or negligence of the
Landlord or its employees or agents, provided that Tenant, upon
becoming aware of such claim or damage, shall promptly notify Landlord
as soon as reasonably possible.
23.3 The provisions of this Article as to property damage shall
be subject to the provisions of Article 13 regarding Waiver of
Subrogation.
ARTICLE 24 -- QUIET ENJOYMENT & NONDISTURBANCE
24.1 Landlord agrees to promptly place Tenant in possession of
the Store in accordance with the time provisions of this Lease as a
condition to Tenant's obligation to pay rent hereunder. Landlord
further represents and warrants that it has full authority to execute
and perform this Lease and to grant the subject leasehold estate to
Tenant. Additionally, it is agreed that Tenant shall peaceably and
quietly have, hold and enjoy the Store with all appurtenances during
the Term and without any manner of hindrance or interference with its
quiet enjoyment, possession and use.
24.2 Landlord may, at reasonable times and upon notice to Tenant,
conduct reasonable inspections of the Store.
24.3 Nondisturbance - Existing Loans. Landlord covenants to
obtain from each lender, each lessor ("Overlessor") and each Litigant
Claimant whose interest in the Shopping Center is paramount to
Landlord's at the time of execution hereof, or at any time prior to
the recordation of the Memorandum of Lease specified herein, an
executed nondisturbance agreement assuring Tenant that notwithstanding
any default by the Landlord to the lender or Overlessor, or any
foreclosure or deed in lieu thereof (or Overlessor's termination
proceedings), or any exercise of right by Litigant Claimant, Tenant's
rights under this Lease shall continue in full force and effect and
its possession of the Store shall remain undisturbed except in
accordance with the provisions of this Lease so long as Tenant is not
in default hereunder so as to permit Lease termination. Such
agreement(s) must be satisfactory in form and content to counsel for
Tenant. As used in this Article the term "lender" means each holder
of indebtedness secured by a lien upon the Exhibit "A" real property,
whether the interest creating such lien be denominated as mortgage,
deed of trust, security agreement, vendor's lien or otherwise. As
used herein the term "Litigant Claimant" means each entity which has
established or at any time prior to recordation of the Memorandum of
Lease specified herein establishes actual or constructive notice that
it claims an interest in the Shopping Center and/or the Store which is
paramount to Landlord's at the time of execution hereof, or at any
time prior to the recordation of the Memorandum of Lease specified
herein whether notice of such interest be established by Lis Pendens,
Notice of Mechanics Lien or otherwise.
<PAGE>
24.4 Tenant shall upon Landlord's request, subordinate this Lease
in future to any first lien placed by Landlord upon the Store, or the
Shopping Center or building of which the Store forms a part, with an
insurance company, bank or any other institutional lender, provided
that such lender executes a Nondisturbance Agreement providing that if
Tenant is not then in default under this Lease so as to justify Lease
termination, this Lease shall not terminate as a result of the
foreclosure of such lien, or conveyance in lien thereof, and the
Tenant's rights under this Lease shall continue in full force and
effect and its possession be undisturbed except in accordance with the
provisions of this Lease. Tenant will, upon request of the
lienholder, be a party to such an agreement, and will agree that if
such lienholder succeeds to the interest of the Landlord, Tenant will
recognize said lienholder (or successor in interest of the lienholder)
as its Landlord under the terms of this Lease. Such agreement must be
satisfactory in form and content to counsel for Tenant.
24.5 Within ten (10) days of a written request therefor by either
party hereto, the party receiving such request shall provide to the
requesting party a written statement acknowledging the commencement
date of this Lease, that this Lease is in full force and effect (if
the same be true), that this Lease has not been modified (or, if it
has, stating such modifications) and providing such other information
as requesting party reasonably requests.
ARTICLE 25 -- TENANT DEFAULT
25.1 The occurrence of either of the following shall constitute a
default by Tenant pursuant to this Lease: (i) a failure by Tenant to
pay rent within ten (10) business days of Tenant's receipt of written
notice from Landlord specifying such failure; or (ii) a failure by
Tenant to perform obligations pursuant to this Lease other than as
specified in (i) above, within thirty (30) days of Tenant's receipt of
written notice from Landlord specifying such failure or, if it
reasonably would require more than thirty (30) days to cure such
failure, within a time reasonably necessary to cure such failure after
Tenant's receipt of such written notice. Upon Tenant's default,
Landlord may, in addition to any other remedy available at law, upon
written notice, terminate this Lease and retake possession of the
Store and remove all persons and property therefrom.
25.2 It is expressly understood and agreed in the event Tenant
makes an assignment for the benefit of creditors, or if any
proceedings are commenced under the provisions of the Bankruptcy Act
whereby Tenant seeks to be, or would be, discharged of its debts, or
the payment of its debts are sought to be delayed, this Lease shall
not become an asset in such proceedings, however, the commencement of
such proceedings shall not affect this Lease or permit its termination
so long as all covenants on the part of the Tenant to be performed
shall be performed by Tenant or a party claiming under Tenant.
25.3 Landlord waives such liens, if any, to which it may have a
right with respect to the merchandise, furniture, trade fixtures and
other personal property of Tenant located on or about the Store and
shall from time to time execute such documents as Tenant may
reasonably request to acknowledge such waiver.
<PAGE>
ARTICLE 26 -- LANDLORD DEFAULT
26.1 If Landlord should be in default in the performance of any
of its obligations under this Lease, which default continues for a
period of more than thirty (30) days after receipt of written notice
from Tenant specifying such default, or if such default is of a nature
to require more than thirty (30) days for remedy and continues beyond
the time reasonably necessary to cure (provided Landlord shall
undertake action to cure such default within such 30 day period and
diligently pursue such efforts to completion within a period not to
exceed a total of ninety (90) days), then Tenant shall have the right
to exercise any of the following rights (which shall be in addition to
any other rights or remedies available by law):
(a) To terminate this Lease and surrender possession of the
Store, whereupon Tenant's obligation for the payment of rent and all
other charges hereunder shall cease upon the date of surrender.
(b) To perform any act or contract for the performance
t h ereof and incur any expense reasonably related thereto and
thereafter deduct the same from the next installment or installments
of rent accruing hereunder.
ARTICLE 27 -- ATTORNEYS FEES
27.1 If either party becomes a party to any litigation concerning
this Lease, the Store or the Shopping Center by reason of any act or
omission of the other party or its authorized representatives, and not
by any act or omission of the party that becomes a party to that
litigation or any act or omission of its authorized representatives,
the party that causes the other party to become involved in the
litigation shall be liable to that party for reasonable attorney's
fees, court costs, investigation expenses, discovery costs and costs
of appeal incurred by it in the litigation.
27.2 If either party commences an action against the other party
arising out of or in connection with this Lease, the prevailing party
shall be entitled to have and recover from the losing party,
reasonable attorney's fees, costs of suit, investigation costs and
discovery costs, including costs of appeal. When this Lease imposes
upon a party an obligation to indemnify the other, the indemnification
obligation shall include the obligation to pay the indemnitees
reasonable attorney's fees, costs and disbursements, whether the
indemnitee be the plaintiff or defendant.
ARTICLE 28 -- ASSIGNMENT
28.1 Tenant may not assign this Lease, or sublet the Store, or
any portion thereof, without Landlord's prior, written consent, which
Landlord shall not unreasonably withhold. Upon any assignment or
sublease, Tenant shall remain principally obligated under the terms of
this Lease unless Tenant is specifically released from its obligations
hereunder by a written instrument duly authorized, executed and
delivered by Landlord. Without limiting any of the foregoing, upon
any assignment or sublet of this Lease or the Store by Tenant during
the Option Period provided for by Article 6 and Section 1.6 hereof,
Tenant shall pay to Landlord one half (1/2) of any and all profit
realized by Tenant as a result of such assignment or sublet.
<PAGE>
ARTICLE 29 -- HOLDING OVER
29.1 If the Tenant shall remain in possession of the Store or any
portion thereof after the expiration of the Term in the absence of an
agreement in writing between the Landlord and Tenant, the party
remaining in possession shall be deemed a Tenant at sufferance, until
acceptance of rent by Landlord, at which time the person in possession
shall be come a Tenant from month-to-month at the same rental and
under the same terms and conditions as existed immediately prior to
the expiration of the Lease.
ARTICLE 30 -- SUCCESSORS IN INTEREST
30.1 The terms, conditions and covenants herein contained shall
inure to the benefit of and be binding upon the heirs, assigns and
other successors in interest to the parties hereto.
ARTICLE 31 -- NOTICES
31.1 Any notice to be given or served in connection with this
Lease shall be in writing and shall be served by certified mail or by
reputable air courier service which provides written evidence of
delivery, addressed as specified in Section 1.2 hereof, or to such
other address as requested by either party in writing. Service shall
be deemed effective seven (7) days after deposit in the U.S. mail in
accordance herewith or on the business day following deposit air
courier service in accordance herewith. Either party by written
notice to the other may designate two additional parties to receive
copies of notices sent to it. Such designees may be changed by
written notice.
ARTICLE 32 -- SIGNS
32.1 Tenant has erected and may maintain upon the exterior of the
Store and upon each pylon serving the Shopping Center a sign or signs
which are deemed appropriate to the conduct of its business. Landlord
is deemed to have consented to Tenant's existing building and pylon
signage upon execution of this Lease. Additionally, Tenant may
display in the windows of the Store, from time to time, signs of a
temporary nature advertising business transacted by Tenant in the
Store, so long as those window signs are professionally prepared. All
pylon signs at the Shopping Center will identify the Shopping Center
as "Sportmart Plaza."
ARTICLE 33 -- MEMORANDUM OF LEASE
33.1 This Lease shall not be recorded. However, a Memorandum
thereof in the form attached hereto as Exhibit "C" shall be executed,
in recordable form, by both parties concurrently herewith and recorded
by Landlord with the official charged with recordation duties for the
county in which the Shopping Center is located, with directions that
it be returned to Tenant. Upon expiration or earlier termination of
this Lease, Tenant shall cooperate with Landlord in executing a
Memorandum, in recordable form, acknowledging Tenant's release of its
leasehold interest in the Shopping Center.
<PAGE>
ARTICLE 34 -- TENANT RIGHT OF FIRST OFFER
34.1 Tenant's Right of First Offer. If during the Term of this
Lease, Landlord intends to offer for sale the Store, the legal parcel
upon which the Store is located or the Shopping Center (collectively
referred to herein as the "subject property"), Landlord shall so
notify Tenant of that intention in writing, which notice shall contain
the terms and conditions (collectively "terms") that would be
acceptable to Landlord. If within ten (10) business days after
receipt of such notice, Tenant does not notify Landlord that Tenant
will purchase the subject property under the terms, Landlord, within
the ensuing six (6) month period shall be free to sell the subject
property to any third party named in the Third Party Offer on the
terms; provided, however, that a failure or refusal by Tenant to
purchase the subject property on the terms shall not relieve Landlord
(or any successor in interest to Landlord) of its obligations under
this Article in respect of subsequent instances of Landlord's (or its
successor's) desire to sell the subject property or any portion
thereof; and provided further that if Landlord shall, during the
aforsesaid six (6) month period, materially alter the terms to the
benefit of purchaser, or materially alter the description of the
subject property, Landlord shall so notify Tenant and afford Tenant an
additional five (5) business days within which Tenant may, by notice
to Landlord, elect to purchase the subject property on the terms as so
modified. If Tenant elects to purchase the subject property on the
terms, the terms shall constitute a binding agreement of purchase and
s a le between Landlord and Tenant and govern their subsequent
performance, provided however, time of performance shall be suitably
extended to take into account time elapsed between presentation to
Tenant of the terms and Tenant's acceptance.
ARTICLE 35 -- ACCORD AND SATISFACTION
35.1 No payment by Tenant or receipt by Landlord of a lesser
amount of Minimum Rent or Percentage Rent due hereunder shall be
deemed to be other than on account of the earliest rent due, nor shall
any endorsement or statement on any check or letter accompanying such
check or payment be deemed an accord and satisfaction, and Landlord
may accept such check without prejudice to Landlord's rights to
recover the balance of such rent or payment or pursue any other remedy
available in this Lease, at law or in equity.
ARTICLE 36 -- GENERAL CONDITIONS
36.1 Any sum accruing to the Landlord or Tenant under the
provisions of this Lease which shall not be paid within ten (10) days
following written notice that such sum is due ("Notice Period") shall
bear interest from the expiration of the Notice Period, at the rate of
ten percent (10%) per annum until paid.
36.2 If any term, covenant, condition or restriction of this
Lease is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the provisions hereof shall remain
in full force and effect and shall in no way be affected, impaired, or
invalidated thereby.
36.3 Nothing contained in this Lease shall be deemed or construed
by the parties hereto or by any third person to create the
relationship of principal and agent, or of partnership, or of joint
<PAGE>
venture, or of any other association between the parties other than
Landlord and Tenant, or to prevent Landlord or Tenant from entering
into ventures in direct competition with the Shopping Center, or the
Store.
36.4 Time is of the essence of the performance of each provision
of this Lease.
36.5 The waiver of performance of any covenant, term or condition
of this Lease by Landlord or Tenant shall not be construed as a waiver
of any subsequent breach of the same covenant, term or condition. The
various rights, options, elections, powers and remedies of the parties
contained in this Lease shall be construed as cumulative and no one of
them exclusive of any other or of any legal or equitable remedy which
either party might otherwise have in the event of a breach by the
other, and the exercise of one right or remedy by a party shall not in
anyway impair its right to any other right or remedy.
36.6 For purposes of computing dates for expirations, options,
rental adjustments or cancellations (except for those specifically
designated in Article 5 hereof), any partial month at the commencement
of the Term shall be disregarded.
36.7 Wherever in this Lease the Landlord or the Tenant is
required to give its consent or approval to any action on the part of
the other, such consent or approval shall not be unreasonably
withheld.
36.8 Except for corrections to Annual Statements required in
Section 18.4 hereof, all charges due from Tenant to Landlord for which
the Tenant must be billed by the Landlord, must be billed within one
(1) year of the date the charge is incurred by the Landlord or the
Landlord will have waived its right to reimbursement which may have
been established in any paragraph of this Lease.
36.9 Words of gender used in this Lease shall be deemed to
include other genders, and singular and plural words shall be deemed
to include the other, as the context may require.
36.10 Landlord and Tenant shall and do hereby indemnify,
defend, and hold the other harmless from all claims of brokerage
commission or finders fee arising through them. This covenant shall
survive the expiration, or earlier termination of the term of this
Lease.
36.11 Each of the covenants of this Lease shall be deemed
dependent upon each other covenant hereof.
36.12 Paragraph headings in this Lease are for convenience
only, are not a part of the agreement of the parties, and shall not
constitute an aid in interpreting this Lease.
36.13 This Lease shall be construed in accordance with and
governed by the laws of the state wherein the Store is located, except
as otherwise required by mandatory provisions of law.
36.14 In the event Landlord furnishes materials or services,
or contracts with another for materials or services to be furnished,
and Tenant under this lease must reimburse Landlord for all or part of
<PAGE>
the cost thereof, Tenant payment obligations shall be no greater than
if the materials or services had been purchased or furnished at a
reasonable and customary price.
36.15 If Landlord is other than a natural person, each
individual executing this Lease on behalf of the named Landlord
represents and warrants that he is duly authorized to execute this
Lease on behalf of the named Landlord in accordance with a duly
adopted resolution of Landlord's board of directors and Landlord's
bylaws (if Landlord is a corporation) and in accordance with the
agreement of partnership (if Landlord is a partnership) and by
delivery hereof warrant that execution by no other signatory is
required and will hold Tenant harmless from any claim to the contrary
(and loss suffered by reason thereon.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this
Lease as of the first day of January, 1995.
LANDLORD
H-C Developers, as agent as aforesaid
By: /S/ ANDREW HOCHBERG
Its:
TENANT
Sportmart, Inc.
By: /S/ MITCHELL KAHN
Its:
<PAGE>
EXHIBIT D
Minimum Rent Schedule
For the period beginning on the Commencement Date through and
including August 31, 2003, Minimum Rent shall be $225,000.00 per
annum.
For the period beginning on September 1, 2003 through and
including August 31, 2008, Minimum Rent shall be the lesser of (a)
$250,000.00 per annum or (b) the Minimum Rent for the prior 60 month
period increased by five (5) times the increase in the CPI for the
immediately preceding 60 month period.
For the period beginning on September 1, 2008 through and
including August 31, 2013, Minimum Rent shall be the lesser of (a)
$275,000.00 per annum or (b) the Minimum Rent for the prior 60 month
period increased by five (5) times the increase in the CPI for the
immediately preceding 60 month period.
For the Option Period, Minimum Rent shall be the greater of (a)
$325,000.00 per annum or (b) the then prevailing fair market rental
for the Premises.
Minimum Rent shall be payable monthly, in the manner set forth in the
Lease.
For purposes of determining Minimum Rent hereunder and under the
Lease, the "increase in the CPI" in each of the foregoing calculations
shall be the result of a fraction, the numerator of which is the CPI
for the month of September preceding the effective date of the
applicable increase and the denominator of which is the CPI for the
month of September preceding the immediately preceding sixty (60)
month period.
"CPI" shall mean the Consumer Price Index-United States All Items for
All Urban Consumers published by the Bureau of Labor Statistics for
the U.S. Department of Labor. If the CPI shall become unavailable or
if it shall be substantially revised, the Landlord shall select and
substitute therefor a comparable index reflecting changes in the cost
of living or the purchasing power of the consumer dollar published by
any government agency, a major bank or financial institution, a
university or a recognized financial publication, which comparable
index shall take into account any changes in the methodology of
determining the CPI from that previously used.
<PAGE>
FIRST AMENDMENT TO LEASE EXHIBIT 10.48
THIS FIRST AMENDMENT TO LEASE (the First Amendment ) is
made, entered into, and effective as of the 1st day of November,
1995, by and between MERRILLVILLE PARTNERS LIMITED PARTNERSHIP,
an Illinois limited partnership ( Landlord ), as sole beneficiary
of Lake County Trust Company, as Trustee under Trust Agreement
dated June 30, 1987 and known as Trust No. 3737, and SPORTMART,
INC., a Delaware corporation ( Tenant ).
RECITALS:
A. By that certain Lease with an effective date of
September 1, 1987 (the Lease ), by and between Landlord and
Tenant, Landlord leased to Tenant certain premises consisting of
approximately 41,000 square feet of retail space (the Store , or
the Leased Premises ) in the shopping center commonly known as
Sportmart Plaza (the Shopping Center ) located at 3201 East
Lincoln Highway, Merrillville, Indiana.
B. Tenant desires to expand the Leased Premises by
approximately 9,000 square feet (the Additional Premises ), and
to perform other building and facade improvements for its own
benefit.
C. Landlord and Tenant are mutually desirous of amending
the Lease in order to, among other things: (i) reflect Landlord's
approval of Tenant's expansion of the Leased Premises, on the
terms and conditions set forth herein; (ii) modify the Original
Term of the Lease and to grant Tenant certain options to extend
the term of the Lease; (iii) modify the Basic Rent and
percentage rental payable under the Lease; and (iv) grant Tenant
a right of first refusal to purchase the Shopping Center, on the
terms and conditions set forth herein.
D. Initially capitalized terms not otherwise defined
herein shall have the meanings attributed to them in the Lease.
NOW, THEREFORE, in consideration of the foregoing Recitals,
the mutual covenants hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by each party hereto, Landlord and Tenant
hereby agree as follows:
AGREEMENT
1. Additional Premises. Landlord hereby leases to Tenant
and Tenant hereby takes from Landlord, on the terms and
conditions set forth herein, the Additional Premises consisting
of approximately 9,000 square feet. The Additional Premises are
in the approximate location shown on the site plan (the Site
Plan ) attached hereto and made a part hereof as Exhibit A. A
list of Tenant's plans and specifications for the construction of
the Additional Premises, and the building and facade work to be
performed by Tenant, is attached hereto and made a part hereof as
Exhibit B. In accordance with Section 4.7 of the Lease, Landlord
hereby approves of Tenant's plans and specifications for the
construction of the Additional Premises, as well as Tenant's
<PAGE>
plans and specifications for the building and facade work to be
performed by Tenant, all at Tenant's sole cost and expense.
2. Definition of Leased Premises. Notwithstanding
anything to the contrary contained in Section 1.1 of the Lease,
and except as is expressly set forth otherwise in this First
Amendment, from and after the Commencement Date (as hereinafter
defined), the term Leased Premises , as used in the Lease,
shall include and mean for all purposes (including, without
limitation, for purposes of determining Tenant's pro-rata share
of the Shopping Center s common area charges, real estate taxes,
and insurance) both the Leased Premises and the Additional
Premises leased herein.
3. Lease Term, Commencement Date and Rent Commencement
Date. Section 2.1 of the Lease is hereby deleted in its entirety
and replaced with the following new Section 2.1:
2.1 Notwithstanding anything in this Lease contained
to the contrary, the term of this Lease shall commence
on November 1, 1995 (the Commencement Date ), and
Tenant's obligation to commence paying Basic Rent (as
hereinafter defined) shall commence on September 1,
1996 (the Rent Commencement Date ). References to
"Term" of this Lease shall include the original term
(the Original Term ) of this Lease and any extension
of such Original Term. The Original Term of this Lease
shall begin on the Commencement Date and, unless
earlier terminated, shall expire on the Initial
Termination Date (as hereinafter defined). The
Initial Termination Date shall be the January 31st
next following the fifteenth (15th) anniversary of the
Commencement Date. For purposes of this Lease, the
term Lease Year shall have the following meaning: (a)
the first Lease Year shall extend from the Commencement
Date to the second (2nd) January 31st following the
Commencement Date (i.e., the first Lease Year shall be
the period from the Commencement Date through January
31, 1997); and (b) subsequent Lease Years shall
commence on February 1st and end on the following
January 31st.
4. Options to Extend. The following new Section 2.3 is
hereby incorporated into and made a part of the Lease:
2.3 The Tenant shall have the option to extend the
Original Term of this Lease for two (2) separate,
consecutive additional periods of five (5) years each
(each an "Option Period"), on all of the same terms and
conditions set forth in this Lease other than Basic
Rent. Each such option must be exercised, if at all,
by notifying the Landlord in writing, not less than six
(6) months prior to the expiration of the Original
Term, or of the then current Option Period, as the case
may be. Should Tenant neglect to exercise any of its
options by the applicable date specified above,
Tenant's right to exercise shall not expire until
thirty (30) days after notice from Landlord of Tenant's
failure to exercise the option. Basic Rent payable
during each Option Period is specified in Section 3.1.
<PAGE>
5. Basic Rent and Percentage Rent. Effective as of the
Rent Commencement Date, the first grammatical paragraph of
Section 3.1(a) of the Lease shall be deleted in its entirety and
replaced with the following new paragraphs:
3.1(a) During the Term of this Lease from and after
the Rent Commencement Date, the annual Basic Rent shall
be as specified according to the schedule set forth
below, payable in monthly installments in the amount of
one-twelfth (1/12) of the annual Basic Rent. Basic
Rent shall be prorated for any partial calendar months
and years. Each monthly installment of rental shall be
payable in advance on or before the first (1st) day of
each calendar month during the Term. If the Rent
Commencement Date is other than the first day of a
calendar month, the first month's Basic Rent shall be
prorated accordingly and paid with the Basic Rent for
the first full month. All rent and other payments to
be made by Tenant to Landlord shall be sent to the
place to which notices are required to be sent, unless
otherwise directed by the Landlord in writing. For
purposes of computing Tenant's obligations based upon
leasable floor area, the term leasable floor area or
Leasable Floor Area shall mean all areas available,
or held for the exclusive use and occupancy of
occupants or future occupants of the Shopping Center,
measured from the interior surface of exterior walls
(and from extensions thereof in the case of openings)
and from the center of interior demising partitions.
Non-retail mezzanines and basements, if any, shall not
be included within the definition of Leasable Floor
Area.
The annual Basic Rent is as follows:
(1) Rent Commencement Date through the end of the
fifth (5th) Lease Year (Lease Years One (1)
through Five (5)): Seven and 25/100 Dollars
($7.25) per square foot of Leasable Floor
Area of the Leased Premises ($362,500.00
based on 50,000 square feet).
(2) Lease Years Six (6) through Ten (10): the
lesser of (i) Seven and 97/100 Dollars
($7.97) per square foot of Leasable Floor
Area of the Leased Premises ($398,500.00
based on 50,000 square feet), or (ii) the
annual Basic Rent payable during the
preceding sixty (60) month period, multiplied
by the CPI Increase (as defined below) for
the immediately preceding sixty (60) month
period.
(3) Lease Years Eleven (11) through Fifteen (15):
the lesser of (i) Eight and 77/100 Dollars
($8.77) per square foot of Leasable Floor
Area of the Leased Premises ($438,500.00
based on 50,000 square feet), or (ii) the
annual Basic Rent payable during the
<PAGE>
preceding sixty (60) month period, multiplied
by the CPI Increase for the immediately
preceding sixty (60) month period.
(4) Lease Years Sixteen (16) through Twenty (20)
(the first Option Period): the lesser of (i)
Nine and 65/100 Dollars ($9.65) per square
foot of Leasable Floor Area of the Leased
Premises ($482,500.00 based on 50,000 square
feet), or (ii) the annual Basic Rent payable
during the preceding sixty (60) month period,
multiplied by the CPI Increase for the
immediately preceding sixty (60) month
period.
(5) Lease Years Twenty-One (21) through Twenty-
Five (25) (the second Option Period): the
lesser of (i) Ten and 61/100 Dollars ($10.61)
per square foot of Leasable Floor Area of the
square feet), or (ii) the annual Basic Rent
payable during the preceding sixty (60) month
period, multiplied by the CPI Increase for
the immediately preceding sixty (60) month
period.
In addition to such Basic Rent, from and after the Rent
Commencement Date Tenant agrees to pay to Landlord as
percentage rental ( Percentage Rent ) during the entire
Term of this Lease a sum of money equal to one and one-
half percent (1.5%) of Tenant s Gross Sales made from
the Leased Premises as shall exceed Ten Million and
No/100 Dollars ($10,000,000.00) per Lease Year. In
addition to the foregoing, with respect to the one year
period from the Rent Commencement Date through August
31, 1997 only, Tenant shall also pay to Landlord a sum
of money equal to two percent (2%) of Tenant s Gross
Sales made from the Leased Premises during said year as
shall exceed Six Million and No/100 Dollars
($6,000,000.00) but be less than Seven Million and
No/100 Dollars ($7,000,000.00).
For purposes of periodic Basic Rent increases under
this Section 3.1, the "CPI Increase" is calculated by
solving the following equation for CPII:
CPII = (((CPI divided by CPI ) - 1) x 5) + 1
end start
where: CPII = CPI Increase
CPI(end) = the CPI (defined below) for the
month of October immediately
preceding the effective date of the
applicable increase
CPI(start) = the CPI for the month of
October immediately preceding
the sixty (60) month period
preceding the effective date
of the applicable increase
<PAGE>
Notwithstanding the foregoing, if the CPI(start) is
greater than the CPI(end) (i.e., the CPI has gone down
over the 60 month period preceding the rent adjustment
date in question), the CPI Increase shall be deemed to
be 1.00.
"CPI" shall mean the Consumer Price Index--United
States All Items for All Urban Consumers
(1982-1984=100) published by the Bureau of Labor
Statistics of the Department of Labor. If the manner
in which such Consumer Price Index as determined by the
Bureau of Labor Statistics shall be substantially
revised, an adjustment shall be made in such revised
index, which would produce results equivalent, as
nearly as possible, to those which would have been
obtained if the Consumer Price Index had not been so
revised. If the Consumer Price Index shall become
unavailable to the public, Landlord will substitute
therefor a comparable index based upon changes in the
cost of living or purchasing power of the consumer
dollar published by any other governmental agency, a
major bank or other financial institution, a university
or a recognized financial publication.
By way of example only of a calculation of the CPI
Increase and a rent adjustment under this Section
3.1(a), if the Commencement Date is November 1, 1995,
the CPI Increase for purposes of calculating the new
Minimum Rent payable beginning February 1, 2001 under
Section 3.1(a)(2) would be calculated by dividing the
October, 2000 CPI by the October, 1995 CPI. Assume
that the October 1995 CPI (CPI(start)) is 200 and the
October 2000 CPI (CPI(end)) is 220. The CPI Increase
would be 1.50 (((220 divided 200) - 1) x 5) + 1).
Since $10.875 per square foot (1.50 x $7.25) is more
than $7.97 per square foot, the annual Basic Rent
beginning February 1, 2001 would be $7.97 per square
foot. If, however, the October 2000 CPI were 201,
the CPI Increase would be 1.025 ((((201 divided 200)
-1) x 5) +1). Since $7.43125 per square foot (1.025 x
$7.25) is less than $7.97 per square foot, the
annual Basic Rent beginning February 1, 2001 would be
$7.43125 per square foot.
6. Notices. Article X of the Lease is hereby deleted in
its entirety and replaced with the following new Article X:
"ARTICLE X
Notices
Any notice to be given or served in connection with
this Lease shall be in writing and shall be served by
certified or registered mail, postage prepaid, or by
reputable overnight (or second business day) air
courier service which provides written evidence of
delivery, in either case addressed as specified below,
or to such other address as requested by either party
in writing. Service shall be deemed effective three
(3) days after deposit in the U.S. mail in accordance
<PAGE>
herewith or on the next business day (or second
business day, if applicable) following delivery to such
air courier service in accordance herewith. Either
party by written notice to the other may designate two
additional parties to receive copies of notices sent to
it. Such designees may be changed by written notice.
If to Tenant: Sportmart, Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Legal Department
With copies of all notices to Tenant to
be sent to:
Sportmart, Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Senior Vice President,
Corporate Development
If to Landlord: Merrillville Partners Limited Partnership
c/o SM Property Management Co., Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Legal Department
With copies of all notices to Landlord to be
sent to:
Merrillville Partners Limited Partnership
c/o SM Property Management Co., Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Senior Vice President, Corporate
Development
and to Landlord's lender at its address
currently on file with Landlord and Tenant.
7. Right of First Refusal to Purchase the Shopping Center.
The following new Article XIII is hereby incorporated into and
made a part of the Lease:
ARTICLE XIII
Tenant Right of First Refusal
13.1 If during the Term of this Lease, Landlord
receives an offer to purchase the Leased Premises, the
legal parcel upon which the Leased Premises are located
or the Shopping Center (collectively referred to herein
as the "subject property") on terms and conditions
(collectively "terms") acceptable to it ("Third Party
Offer"), Landlord shall by written notice to Tenant
(which notice shall be accompanied by a copy of the
Third Party Offer and other relevant data) offer to
<PAGE>
sell the subject property to Tenant on the terms
specified in the Third Party Offer. If within sixty
(60) days thereafter Tenant does not notify Landlord
that Tenant accepts Landlord's offer, Landlord, within
the ensuing six (6) month period shall be free to sell
the subject property to the party named in the Third
Party Offer on the terms specified in the Third Party
Offer; provided, however, that a failure by Tenant to
exercise such right of first refusal shall not relieve
Landlord of its obligations under this Article in
respect of subsequent Third Party Offers. If Tenant
elects to purchase the subject property on the terms
stated in the Third Party Offer, the Third Party Offer
shall constitute a binding agreement of purchase and
sale between Landlord and Tenant and govern their
subsequent performance, provided however, time of
performance shall be suitably extended to take into
account time elapsed between presentation to Tenant of
Landlord's offer and Tenant's acceptance. The term
"other relevant data" as used in this Section means
copies of all (a) information and materials previously
furnished by or on behalf of Landlord to Third Party
Offerer, (b) inspections and surveys made by or on
behalf of Third Party Offerer in respect of the subject
property and (c) other information as reasonably
requested by Tenant so as to ascertain subject property
value.
13.2 If the Third Party Offer provides for Landlord to
receive nonmonetary consideration from the offeror,
Tenant's right of first refusal shall be converted into
an option, to purchase the subject property free and
clear of all liens or encumbrances other than existing
leases (including this Lease) at 90% of its fair market
value (the "Option"), such Option to be exercised if at
within ten (10) business days following
determination of fair market value. If the parties
cannot agree on such fair market value within sixty
(60) days following provision to Tenant of the Third
Party Offer, fair market value shall be determined by
binding arbitration in accordance with the rules of the
American Arbitration Association. If purchase shall be
by exercise of the Option, closing shall occur within
sixty (60) days following its exercise at a time and
place as designated by Tenant; and the time and manner
of closing (including prorations), shall be in
accordance with local custom, provided however at
closing Landlord shall furnish Tenant with an ALTA
owners policy insuring marketable title to the subject
property as aforesaid in amount of the purchase price
(together with lender's policy if required by Tenant)
and further provided that if the parties are unable to
agree upon local custom, dispute shall be resolved by
binding arbitration in accordance with the rules of the
American Arbitration Association, and the time for
closing extended accordingly.
13.3 For purposes hereof a lease for a term of twenty
nine (29) years or more shall be deemed a sale."
<PAGE>
8. Tenant's Right to Go Dark. The following new Article
XIV is hereby incorporated into and made a part of the Lease:
ARTICLE XIV
Tenant's Right to Go Dark
14.1 If , during the term of this Lease, Tenant
discontinues conducting business to the public in the
Leased Premises and vacates the Leased Premises ("goes
dark"), and the Leased Premises remain dark for a
period of four (4) months, Landlord may, at any time
after the expiration of such four (4) month period
while the Leased Premises remain dark, notify Tenant of
its intent to terminate this Lease, which termination
will be effective sixty (60) days after the receipt of
such notice; provided, however, that if Tenant notifies
Landlord within thirty (30) days after receipt of such
notice that all or a part of the Leased Premises will
be re-opened for business by Tenant as of a date
certain not more than ninety (90) days after the date
of Tenant's notice, Landlord's notice of termination
will be of no force and effect and this Lease shall
continue so long as Tenant does then timely reopen its
Leased Premises. Tenant is not deemed to have gone
dark if it closes the Leased Premises to the general
public (i) in order to prepare for sales or to take
stock of current inventory, provided that the same does
not result in Tenant's business being closed to the
public for more than ten (10) consecutive business
days, or for more than twenty (20) total business days,
in any consecutive twelve (12) month period; (ii) in
connection with the performance of any construction,
alteration, repair or restoration work on the Leased
Premises so long as the same is diligently pursued by
Tenant and does not result in Tenant's business being
closed to the public for more than two hundred forty
(240) days in any consecutive twelve (12) month period;
(iii) to accommodate a change in use of the Leased
Premises or pursuant to an assignment or subletting of
the Leased Premises, provided that the same does not
result in the Leased Premises being closed to the
public for more than one hundred fifty (150) days in
any consecutive twelve (12) month period; or (iv) while
a condition of force majeure prevents operation and for
a reasonable time thereafter."
9. Full Force. Except as hereby expressly or by necessary
implication modified or amended by this First Amendment, the
parties hereto acknowledge and agree that all of the terms and
provisions of the Lease shall be and remain in full force and
effect. In the event of any conflict or inconsistency between
the terms of the Lease and this First Amendment, the terms of
this First Amendment shall govern and control.
10. No Further Amendment. This First Amendment may not be
amended, waived or modified in any respect unless the same shall
be in writing and signed by both parties. This First Amendment
constitutes the entire agreement of the parties and supersedes
all prior agreements, arrangement and contracts, whether oral or
written, concerning the subject matter hereof.
<PAGE>
11. Counterparts. This First Amendment may be executed in
multiple counterparts, each of which shall be deemed an original
and all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
First Amendment as of the date first above written.
LANDLORD:
MERRILLVILLE PARTNERS LIMITED
PARTNERSHIP, an Illinois limited partnership
By: Merrillville Corp., an Illinois Corporation,
its General Partner
By: /S/ MITCHELL KAHN
Title: VICE PRESIDENT
TENANT:
SPORTMART, INC.,
a Delaware corporation
By: /S/ ANDREW HOCHBERG
Title: PRESIDENT
<PAGE>
SECOND AMENDMENT TO LEASE EXHIBIT 10.49
THIS SECOND AMENDMENT TO LEASE (the Second Amendment ) is
made, entered into, and effective as of the 31st day of March,
1 9 9 6, by and between NORTH RIVERSIDE ASSOCIATES LIMITED
PARTNERSHIP, an Illinois limited partnership ( Landlord ), and
SPORTMART, INC., a Delaware corporation ( Tenant ).
RECITALS:
A. By that certain Lease with a reference date of October 31,
1988 (the Original Lease ), by and between Landlord and Tenant,
Landlord leased to Tenant certain premises consisting of approximately
39,347 square feet of retail space (the Store or the Mart ) located
in the shopping center commonly known as Sportmart Plaza (the
Shopping Center ) at 1800 South Harlem Avenue, North Riverside,
Illinois.
B. The Original Lease was amended by that certain First Lease
Amendment dated December 2, 1988 (the First Amendment ), by and
between Landlord and Tenant. The Original Lease and the First
Amendment are referred to herein collectively as the Lease .
C. Tenant desires to lease additional space consisting of
approximately 12,690 square feet (the Additional Premises ) within
the Shopping Center for the purpose of operating a clearance center
for the sale of sporting goods, sports apparel and active wear, and
such other merchandise as may be sold from time to time in Tenant's
similarly merchandised clearance center stores.
D. Landlord and Tenant are mutually desirous of amending the
Lease to reflect the terms and conditions under which the Additional
Premises will be leased to Tenant.
E. Initially capitalized terms not otherwise defined herein
shall have the meanings attributed to them in the Lease.
NOW, THEREFORE, in consideration of the foregoing Recitals, the
mutual covenants hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by each party hereto, Landlord and Tenant hereby
agree as follows:
AGREEMENT
1. Additional Premises. Landlord hereby leases to Tenant and
Tenant hereby takes from Landlord, on the terms and conditions set
forth herein, the Additional Premises consisting of approximately
12,690 square feet. The Additional Premises have a street address of
1770 South Harlem Avenue, North Riverside, Illinois, and are in the
approximate location shown on the site plan (the Site Plan ) attached
hereto and made a part hereof as Exhibit A. Except as is expressly
set forth in this Second Amendment, from and after the Commencement
Date (as hereinafter defined) and until the lease term for the
Additional Premises is terminated pursuant to Section 4 below, the
term Store , as used in the Lease, shall include and mean for all
purposes (including, without limitation, for purposes of determining
<PAGE>
Tenant's pro-rata share of Common Area Charges, real estate taxes, and
insurance) both the Store and the Additional Premises leased herein.
Once the lease term for the Additional Premises is terminated
pursuant to Section 4 below, then the term Store shall have the
meaning originally attributed to such term in the Original Lease.
2. Commencement Date. For purposes of the Additional Premises
only, the term Commencement Date shall mean December 7, 1995.
3. As-Is Basis. Effective as of the Commencement Date,
Tenant agrees that is shall accept the Additional Premises on an as
is basis. Tenant shall be entitled to vacant possession of the
Additional Premises on the Commencement Date. Tenant shall be
entitled to inspect the Additional Premise prior to the Commencement
Date to confirm the condition of the premises. In addition, Tenant
and its agents, employees and contractors shall be afforded access to
the Additional Premises prior to the Commencement Date, at reasonable
times and upon reasonable prior notice, to inspect the same, take
measurements and plan its intended modifications and fixturing
thereof.
4. Lease Term for the Additional Premises Only. With respect
to the Additional Premises only, the lease term shall commence on the
Commencement Date and shall continue on a month-to-month basis until
terminated by either Landlord or Tenant pursuant to the immediately
f o llowing sentence. Notwithstanding anything to the contrary
contained in the Lease, with respect to the Additional Premises only,
either Landlord or Tenant may elect to terminate the Lease for any
reason or for no reason by serving thirty (30) days advance written
notice upon the other party. Upon the effective date of such
termination, the Lease shall be null and void and of no effect with
respect to the Additional Premises only (but shall continue in full
force and effect with respect to the Store, as defined in the Lease),
and, with respect to the Additional Premises only, both Landlord and
Tenant shall have no rights under the Lease or this Second Amendment,
nor be subject to liability for any kind or amount thereunder or
hereunder, except for those obligations and liabilities which
expressly survive the termination or expiration of the Lease.
5. Minimum Rent for the Additional Premises Only. With respect
to the Additional Premises only, during the term of this Second
Amendment, the Minimum Rent for the Additional Premises for each
calendar month shall be a sum equal to five percent (5%) of Tenant's
Gross Sales made from the Additional Premises during each calendar
month. Tenant shall make monthly payments on the twentieth (20th) day
of each calendar month, in arrears, in an amount equal to five percent
(5%) of Tenant's Gross Sales made from the Additional Premises during
the prior calendar month. All rent and other payments to be made by
Tenant to Landlord shall be sent to the place to which notices are
required to be sent, unless otherwise directed by the Landlord in
writing. Within twenty (20) days after the close of each calendar
month during the term of this Second Amendment, Tenant shall submit to
Landlord a statement indicating the amount of its Gross Sales made
from the Additional Premises for the previous calendar month. Minimum
Rent due for the Additional Premises shall accompany such statement.
Other than the Minimum Rent set forth herein, and notwithstanding
anything to the contrary contained in the Lease, Tenant shall owe no
Percentage Rent for the Additional Premises.
<PAGE>
6. Tenant's Right to Go Dark. The following new Section 9.4 is
hereby incorporated into, added to, and made a part of the Lease:
9.4 Going Dark. If, during the term of this Lease,
Tenant discontinues conducting business to the public in the
Store and vacates the Store ("goes dark"), and the Store
remains dark for a period of four (4) months, Landlord may,
at any time after the expiration of such four (4) month
period while the Store remains dark, notify Tenant of its
intent to terminate this Lease, which termination will be
effective sixty (60) days after the receipt of such notice;
provided, however, that if Tenant notifies Landlord within
thirty (30) days after receipt of such notice that all or a
part of the Store will be re-opened for business by Tenant
as of a date certain not more than ninety (90) days after
t h e date of Tenant's notice, Landlord's notice of
termination will be of no force and effect and this Lease
shall continue so long as Tenant does then timely reopen the
Store. Tenant is not deemed to have gone dark if it closes
the Store to the general public (i) in order to prepare for
sales or to take stock of current inventory, provided that
the same does not result in Tenant's business being closed
to the public for more than ten (10) consecutive business
days, or for more than twenty (20) total business days, in
any consecutive twelve (12) month period; (ii) in connection
with the performance of any construction, alteration, repair
or restoration work on the Demised Premises so long as the
same is diligently pursued by Tenant and does not result in
Tenant's business being closed to the public for more than
two hundred forty (240) days in any consecutive twelve (12)
month period; (iii) to accommodate a change in use of the
Store or pursuant to an assignment or subletting of the
Store, provided that the same does not result in the Store
being closed to the public for more than one hundred fifty
(150) days in any consecutive twelve (12) month period; or
(iv) while a condition of force majeure prevents operation
and for a reasonable time thereafter.
7. Full Force. Except as hereby expressly or by necessary
implication modified or amended by this Second Amendment, the parties
hereto acknowledge and agree that all of the terms and provisions of
the Lease shall be and remain in full force and effect. In the event
of any conflict or inconsistency between the terms of the Lease and
this Second Amendment, the terms of this Second Amendment shall govern
and control.
8. No Further Amendment. This Second Amendment may not be
amended, waived or modified in any respect unless the same shall be in
writing and signed by both parties. This Second Amendment constitutes
the entire agreement of the parties and supersedes all prior
agreements, arrangement and contracts, whether oral or written,
concerning the subject matter hereof.
9. Counterparts. This Second Amendment may be executed in
multiple counterparts, each of which shall be deemed an original and
all of which shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Second
Amendment as of the date first above written.
LANDLORD:
NORTH RIVERSIDE ASSOCIATES LIMITED
PARTNERSHIP, an Illinois limited partnership
By: North Riverside Corporation, an Illinois Corporation,
Its General Partner
By: /S/ MITCHELL KAHN
Title: VICE PRESIDENT
Date: March 31, 1996
TENANT:
SPORTMART, INC.,
a Delaware corporation
By: /S/ ANDREW HOCHBERG
Title: PRESIDENT
Date: March 31, 1996
<PAGE>
Site Plan Showing Location of Additional Premises<PAGE>
THIRD AMENDMENT TO LEASE EXHIBIT 10.50
THIS THIRD AMENDMENT TO LEASE (the Third Amendment ) is made,
entered into, and effective as of the 23rd day of April, 1996, by and
between NORTH RIVERSIDE ASSOCIATES LIMITED PARTNERSHIP, an Illinois
limited partnership ( Landlord ), and SPORTMART, INC., a Delaware
corporation ( Tenant ).
RECITALS:
A. By that certain Lease with a reference date of October 31,
1988 (the Original Lease ), by and between Landlord and Tenant,
Landlord leased to Tenant certain premises consisting of approximately
39,347 square feet of retail space (the Store or the Mart ) located
in the shopping center commonly known as Sportmart Plaza (the
Shopping Center ) at 1800 South Harlem Avenue, North Riverside,
Illinois.
B. The Original Lease was amended by the following documents
executed by and between Landlord and Tenant (i) that certain First
Lease Amendment dated December 2, 1988 (the First Amendment ), and
(ii) that certain Second Amendment to Lease dated March 31, 1996 (the
Second Amendment ). The Original Lease, the First Amendment and the
Second Amendment are collectively referred to herein as the Lease .
C. Landlord and Tenant are mutually desirous of amending the
Lease in order to, among other things: (i) lengthen the original Term
of the Lease and to grant Tenant certain options to extend the
modified Term of the Lease; (ii) modify the Minimum Rent payable
under the Lease; and (iii) grant Tenant a cash payment as an
inducement for lengthening the original Term of the Lease.
D. Initially capitalized terms not otherwise defined herein
shall have the meanings attributed to them in the Lease.
NOW, THEREFORE, in consideration of the foregoing Recitals, the
mutual covenants hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by each party hereto, Landlord and Tenant hereby
agree as follows:
AGREEMENT
1. Term and Initial Term Expiration Date. Effective as of the
date hereof Section 1.5 of the Lease shall be deleted in its entirety
and replaced with the following new Section 1.5:
1.5 Term: Initial Term Expiration Date:
Two Hundred Forty (240) months following the
Commencement Date (i.e., June 30, 2009).
2. Options. Effective as of the date hereof Section 1.6 of
the Lease shall be deleted in its entirety and replaced with the
following new Section 1.6:
1.6 Options: Two (2) additional five (5) year periods.
<PAGE>
3. Minimum Rent. Effective as of the date hereof Section 1.7
of the Lease shall be deleted in its entirety and replaced with the
following new Section 1.7:
1.7 Minimum Rent:
(1) Commencement Date through June 30, 1996: Nine and
91/100 Dollars ($9.91) per square foot of Leasable
Floor Area of the Store ($389,928.77 based on
39,347 square feet).
(2) July 1, 1996 through June 30, 1999: Nine and
50/100 Dollars ($9.50) per square foot of Leasable
Floor Area of the Store ($373,796.50 based on
39,347 square feet).
(3) July 1, 1999 through June 30, 2004: the lesser of
(i) Nine and 91/100 Dollars ($9.91) per square
f o o t of Leasable Floor Area of the Store
($389,928.77 based on 39,347 square feet), or (ii)
t h e annual Minimum Rent payable during the
preceding thirty-six (36) month period, multiplied
by the CPI Increase for the immediately preceding
thirty-six (36) month period.
(4) July 1, 2004 through the Initial Termination Date
(i.e., June 30, 2009): the lesser of (i) Ten and
5 0 /100 Dollars ($10.50) per square foot of
Leasable Floor Area of the Store ($413,143.50
based on 39,347 square feet), or (ii) the annual
Minimum Rent payable during the preceding sixty
(60) month period, multiplied by the CPI Increase
for the immediately preceding sixty (60) month
period.
(5) July 1, 2009 through June 30, 2014 (the first
Option Period): the lesser of (i) the annual
Minimum Rent payable during the preceding sixty
(60) month period multiplied by one hundred twelve
percent (112%), or (ii) the annual Minimum Rent
payable during the preceding sixty (60) month
period, multiplied by the CPI Increase for the
immediately preceding sixty (60) month period.
(5) July 1, 2014 through June 30, 2019 (the second
Option Period): the lesser of (i) the annual
Minimum Rent payable during the preceding sixty
(60) month period multiplied by one hundred twelve
percent (112%), or (ii) the annual Minimum Rent
payable during the preceding sixty (60) month
period, multiplied by the CPI Increase for the
immediately preceding sixty (60) month period.
For purposes of periodic Minimum Rent increases under this
Section 1.7, the "CPI Increase" is calculated by solving the
following equation for CPII:
CPII = (((CPIend divided CPIstart) - 1) x 5) + 1
where: CPII = CPI Increase
<PAGE>
CPIend = the CPI (defined below) for the month of
October immediately preceding the
effective date of the applicable
increase
CPIstart = t h e CPI for the month of October
immediately preceding the thirty-six
(36) or sixty (60) month period (as the
case may be) preceding the effective
date of the applicable increase
Notwithstanding the foregoing, if the CPIstart is greater
than the CPIend (i.e., the CPI has gone down over the
thirty-six (36) or sixty (60) month period, as the case may
be, preceding the rent adjustment date in question), the CPI
Increase shall be deemed to be 1.00.
"CPI" shall mean the Consumer Price Index--United States All
Items for All Urban Consumers (1982-1984=100) published by
the Bureau of Labor Statistics of the Department of Labor.
If the manner in which such Consumer Price Index as
determined by the Bureau of Labor Statistics shall be
substantially revised, an adjustment shall be made in such
revised index, which would produce results equivalent, as
nearly as possible, to those which would have been obtained
if the Consumer Price Index had not been so revised. If the
Consumer Price Index shall become unavailable to the public,
Landlord will substitute therefor a comparable index based
upon changes in the cost of living or purchasing power of
the consumer dollar published by any other governmental
agency, a major bank or other financial institution, a
university or a recognized financial publication.
4. Notice Addresses. Effective as of the date hereof Section
1.2 of the Lease shall be deleted in its entirety and replaced with
the following new Section 1.2:
1.2 Parties and Notice Addresses:
If to Tenant: Sportmart, Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Legal Department
With copies of all notices to Tenant to be
sent to:
Sportmart, Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Senior Vice President, Corporate
Development
If to Landlord: North Riverside Associates Limited
Partnership
c/o SM Property Management Co., Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Legal Department
<PAGE>
With copies of all notices to Landlord to be
sent to:
North Riverside Associates Limited
Partnership
c/o SM Property Management Co., Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Senior Vice President, Corporate
Development
and to Landlord's lender at its address
currently on file with Landlord and Tenant.
5. Inducement Payment. As an inducement for Tenant entering
into this Third Amendment and agreeing that the Initial Term
Expiration Date shall be extended to June 30, 2009, Landlord shall pay
to Tenant, on or before July 1, 1999, the sum of Ninety Seven Thousand
Five Hundred and No/100 Dollars ($97,500.00) (the Inducement
Payment ). Landlord and Tenant agree that the Inducement Payment shall
not be deemed to be, or characterized as, free rent or a rental
abatement under the Lease, but the method of payment of the Inducement
Payment may be selected by Landlord at its sole and absolute
discretion, which method may include, without limitation, a credit
against Minimum Rent or any other payments due from Tenant to Landlord
under the Lease.
6. Full Force. Except as hereby expressly or by necessary
implication modified or amended by this Third Amendment, the parties
hereto acknowledge and agree that all of the terms and provisions of
the Lease shall be and remain in full force and effect. In the event
of any conflict or inconsistency between the terms of the Lease and
this Third Amendment, the terms of this Third Amendment shall govern
and control.
7. No Further Amendment. This Third Amendment may not be
amended, waived or modified in any respect unless the same shall be in
writing and signed by both parties. This Third Amendment constitutes
the entire agreement of the parties and supersedes all prior
agreements, arrangement and contracts, whether oral or written,
concerning the subject matter hereof.
8. Counterparts. This Third Amendment may be executed in
multiple counterparts, each of which shall be deemed an original and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Third
Amendment as of the date first above written.
<PAGE>
LANDLORD:
NORTH RIVERSIDE ASSOCIATES LIMITED
PARTNERSHIP, an Illinois limited partnership
By: North Riverside Corporation, an Illinois Corporation, its
General Partner
By: /S/MITCHELL KAHN
Title: VICE PRESIDENT
TENANT:
SPORTMART, INC.,
a Delaware corporation
By: /S/ ANDREW HOCHBERG
Title: PRESIDENT
<PAGE>
THIRD AMENDMENT TO LEASE EXHIBIT 10.51
THIS THIRD AMENDMENT TO LEASE (the Third Amendment ) is made,
entered into, and effective as of the 23rd day of April, 1996, by and
between TORRENCE PROPERTIES, an Illinois limited partnership, as sole
beneficiary of American National Bank and Trust Company of Chicago,
not personally but solely as Trustee under Trust Agreement dated
December 5, 1973 and known as Trust No. 32490 ( Landlord ), and
SPORTMART, INC., a Delaware corporation ( Tenant ).
RECITALS:
A. By that certain Lease dated September 24, 1974 (the
Original Lease ), by and between Landlord and Tenant, Landlord leased
to Tenant certain premises consisting of approximately 44,753 square
feet of retail space (the leased premises ) located in the shopping
center commonly known as Sportmart Plaza (the Shopping Center ) at
1500 South Torrence Avenue, Calumet City, Illinois.
B. The Original Lease was amended by the following documents by
and between Landlord and Tenant: (i) that certain Lease Amendment
dated October 16, 1979 (the First Amendment ); (ii) that certain
Lease Extension dated January 6, 1979 (the First Extension ); (iii)
that certain Lease Extension and Amendment dated April 16, 1987 (the
Second Extension ); and (iv) that certain Second Lease Amendment
dated July 19, 1989 (the Second Amendment ). The Original Lease, the
First Amendment, the First Extension, the Second Extension, and the
Second Amendment are referred to herein collectively as the Lease .
C. Landlord and Tenant are mutually desirous of amending
certain items in the Lease on the terms and conditions set forth
herein.
D. Initially capitalized terms not otherwise defined herein
shall have the meanings attributed to them in the Lease.
NOW, THEREFORE, in consideration of the foregoing Recitals, the
mutual covenants hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by each party hereto, Landlord and Tenant hereby
agree as follows:
AGREEMENT
1. Landlord s Recapture Right if Tenant Goes Dark. The
following new paragraph 11 is hereby incorporated into, added to, and
made a part of the Lease at the end of Article IV thereof:
11. If, during the term of this Lease, Tenant discontinues
conducting business to the public from the leased premises
and vacates the leased premises ("goes dark"), and the
leased premises remain dark for a period of four (4)
consecutive months, Landlord may, at any time after the
expiration of such four (4) month period while the leased
premises remain dark, notify Tenant of its intent to
terminate this Lease, which termination will be effective
<PAGE>
sixty (60) days after the receipt of such notice; provided,
however, that if Tenant notifies Landlord within thirty (30)
days after receipt of such notice that all or a substantial
part of the leased premises will be re-opened for business
by Tenant as of a date certain not more than ninety (90)
days after the date of Tenant's notice, Landlord's notice of
termination will be of no force and effect and this Lease
shall continue so long as Tenant does then timely reopen the
leased premises. Tenant is not deemed to have gone dark if
it closes the leased premises to the general public (i) in
order to prepare for sales or to take stock of current
inventory, provided that the same does not result in
Tenant's business being closed to the public for more than
ten (10) consecutive business days, or for more than twenty
(20) total business days, in any consecutive twelve (12)
month period; (ii) in connection with the performance of any
construction, alteration, repair or restoration work on the
leased premises so long as the same is diligently pursued by
Tenant and does not result in Tenant's business being closed
to the public for more than two hundred forty (240) days in
a n y consecutive twelve (12) month period; (iii) to
accommodate a change in use of the leased premises or
pursuant to an assignment or subletting of the leased
premises, provided that the same does not result in the
leased premises being closed to the public for more than one
hundred fifty (150) days in any consecutive twelve (12)
month period; or (iv) while a condition of force majeure
prevents operation and for a reasonable time thereafter.
2. Tenant s Right of Redemption. The following new paragraph 6
is hereby incorporated into, added to, and made a part of the Lease at
the end of Article VIII thereof:
If Landlord obtains a judgment in an eviction, unlawful
d e t ainer or other proceeding whereby this Lease is
terminated, then if Tenant pays the amount of such judgment
within ninety (90) days after the date that the judgment
becomes a final judgment, together with all of Landlord's
reasonable attorneys' fees and costs, the rights of the
parties shall be as if the judgment had never been entered,
and the Lease had never been terminated, and appropriate
papers and stipulations shall be filed so that the judgment
is rescinded, and the action dismissed. For purposes of the
rights of third parties (e.g., lenders and creditors) this
Lease will not be deemed to have been terminated unless the
ninety (90) day period passes without payment as provided
for herein. Tenant's right of redemption hereunder shall
not apply to an action or proceeding arising from Tenant's
failure to pay basic rent or any installment thereof, unless
such failure of payment resulted from Tenant's good faith
exercise of a right of set-off, withholding or deduction
provided for herein or under applicable law.
3. Notices. Article XI of the Lease is hereby deleted in its
entirety and replaced with the following new Article XI:
<PAGE>
ARTICLE XI
Notices
Any notice to be given or served in connection with this
Lease shall be in writing and shall be served by certified
or registered mail, postage prepaid, or by reputable
overnight (or second business day) air courier service which
provides written evidence of delivery, in either case
addressed as specified below, or to such other address as
requested by either party in writing. Service shall be
deemed effective three (3) days after deposit in the U.S.
mail in accordance herewith or on the next business day (or
second business day, if applicable) following delivery to
such air courier service in accordance herewith. Either
party by written notice to the other may designate two
additional parties to receive copies of notices sent to it.
Such designees may be changed by written notice.
If to Tenant: Sportmart, Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Legal Department
With copies of all notices to Tenant to be
sent to:
Sportmart, Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Senior Vice President,
Corporate Development
If to Landlord: Torrence Properties
c/o SM Property Management Co., Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Legal Department
With copies of all notices to Landlord to be
sent to:
Torrence Properties
c/o SM Property Management Co., Inc.
1400 S. Wolf Road, Suite 200
Wheeling, Illinois 60090
Attention: Senior Vice President,
Corporate Development
and to Landlord's lender at its address
currently on file with Landlord and Tenant.
4. Full Force. Except as hereby expressly or by necessary
implication modified or amended by this Third Amendment, the parties
hereto acknowledge and agree that all of the terms and provisions of
the Lease shall be and remain in full force and effect. In the event
of any conflict or inconsistency between the terms of the Lease and
this Third Amendment, the terms of this Third Amendment shall govern
and control.
5. No Further Amendment. This Third Amendment may not be
amended, waived or modified in any respect unless the same shall be in
writing and signed by both parties. This Third Amendment constitutes
the entire agreement of the parties and supersedes all prior
agreements, arrangement and contracts, whether oral or written,
concerning the subject matter hereof.
6. Counterparts. This Third Amendment may be executed in
multiple counterparts, each of which shall be deemed an original and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Third
Amendment as of the date first above written.
LANDLORD:
TORRENCE PROPERTIES,
an Illinois limited partnership
By: /S/ LARRY HOCHBERG
Title: PRESIDENT
TENANT:
SPORTMART, INC.,
a Delaware corporation
By: /S/ ANDREW HOCHBERG
Title: PRESIDENT
<PAGE>
EXHIBIT 10.52
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT
This Employment and Change in Control Agreement (the "Agreement )
is entered into by and between Sportmart, Inc., a Delaware corporation
(the "Company ) and Thomas T. Hendrickson ("Executive ) and shall be
effective as of November 1, 1996 (the "Effective Date ).
WHEREAS, Executive is employed by the Company as its Executive
Vice President and Chief Financial Officer; and
WHEREAS, the parties hereto agree that it is in their mutual best
interest to encourage Executive s full attention and dedication to the
Company by providing for compensation or benefits in the event of a
Change in Control of the Company or Executive s termination, under the
terms and conditions set forth herein.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Employment and Term. The Company hereby agrees to employ
Executive, and Executive hereby accepts employment by the Company in
accordance with the terms and conditions set forth herein. Subject to
the Termination provisions in contained in this Agreement, the term of
this Agreement shall be three (3) years, commencing on the Effective
Date. This Agreement shall terminate on the third anniversary
following the Effective Date unless the parties agree in writing to
extend the term of this Agreement. Following the termination of this
Agreement for any reason, any continued employment of Executive will
be "at will" and terminable at any time and for any reason by either
party.
2. Title and Duties of Executive. The Executive shall have the
title of Executive Vice President and Chief Financial Officer.
Executive s duties shall include national oversight of business
development and management of strategic, merchandising and financial
plans of the Company. Executive will devote his full-time energies
and skills to the performance of his duties for the Company.
3. Compensation and Benefits. The compensation and benefits
of Executive shall be reviewed by Company on an annual basis.
4. Termination of Employment - Death or Disability.
(a) Death of Executive. In the event Executive shall die
during the term of employment hereunder, this Agreement shall
terminate as of the date of Executive's death. Following such
termination of this Agreement, the Company shall have no further
liability with respect to Executive's employment, except to pay to
Executive s estate or beneficiaries, as appropriate, the value of any
accrued salary or other compensation due Executive on the date of his
death and other benefits payable under any employee benefit plan of
the Company in which Executive was a participant; provided, however,
that Executive's estate shall have the right to exercise any
unexercised stock options granted by the Company to Executive pursuant
to the Company's stock option plan and any option agreement then in
effect.
<PAGE>
(b) Disability of Executive. In the event Executive
becomes disabled during the term of employment hereunder, and is
thereby unable to perform the essential functions of his position,
with or without accommodation, this Agreement shall terminate as of 30
days after the date such disability is established. As used in this
subparagraph, the term disabled means suffering from a physical or
mental impairment which renders the Executive substantially unable to
perform the essential functions of his position in a satisfactory
manner, as confirmed by competent medical evidence, for a period of
180 consecutive days or for more than 180 days in a twelve-month
period. The date on which Executive's disability is established shall
be the 181st consecutive day on which the impaired condition continues
or the 181st day in which the impaired conditions exists within a
twelve-month period. The Company shall give Executive written notice
of its intent to terminate this Agreement pursuant to this Section.
Following such termination of this Agreement, the Company shall have
no further liability with respect to Executive's employment, except to
pay to Executive the value of any accrued salary or other compensation
due Executive up to the date of his termination and other benefits
payable under any employee benefit plan of the Company in which
Executive was a participant; provided, however, that Executive shall
have the right to exercise any unexercised stock options granted by
the Company to Executive pursuant to the Company's stock option plan
and any option agreement then in effect.
5. Termination of Employment - Cause; Good Reason.
(a) Cause. The Company has the right to terminate this
Agreement for Cause (i) immediately upon written notice, if
Executive engages in conduct which the Company reasonably believes is
of a criminal nature and detrimental to the interests of the Company;
(ii) immediately upon written notice, if Executive materially breaches
a fiduciary duty owed to the Company; (iii) upon thirty days written
notice, if Executive refuses or materially fails to perform his
obligations under this Agreement, and fails to cure such deficiency
within said notice period; and (iv) immediately upon written notice if
executive commits a significant violation of Company policy.
(b) Good Reason. The Executive has the right to terminate
this Agreement for Good Reason based upon a Change in Control, as
d e fined herein. A termination for "Good Reason" shall mean
termination based on the occurrence of a Change of Control and
following which there occurs, without Executive's prior written
consent, within 18 months after a Change in Control of the Company:
(i) the assignment to the Executive of any material duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities, or any other material action by the Company which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action and which is remedied by the
Company within 30 days after receipt of notice thereof given by the
Executive; or
<PAGE>
(ii) a reduction in the Executive's annual base salary in an
amount exceeding 5 percent or, other than changes occasioned by a
substitution or modification of general welfare plans that are
generally applicable to all employees and do not discriminate against
the Executive, a material reduction in benefits and other
compensation; or
(iii) the Company's requiring the Executive to be based
at any office or location more than 50 miles from the Executive's
prior office or location.
6. Change in Control.
For purposes of this Agreement, a "Change in Control" shall mean
the happening of any of the following events:
(a) 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 plan (or 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
<PAGE>
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
c o n solidation 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
(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.
<PAGE>
7. Severance. In the event the Company terminates Executive
without Cause or Executive terminates this Agreement for Good Reason,
the Company shall pay Executive the following severance:
(a) Executive's base salary through the month during which
termination occurred, plus any other amount due at the time of
termination under any bonus plan of the Company plus any accrued but
unpaid bonus; and
(b) Subject to Executive's compliance with Section 11
(a), (b), (c) and (d) herein, monthly severance payments equal to
Executive's monthly base salary at the time of termination. Such
monthly severance payments shall commence in the month following
termination (to be paid on or about the 30th of the month) and shall
continue for eighteen months. Only in the event of a termination of
Executive without cause and in consideration of the above benefits,
E x ecutive agrees to make reasonable efforts to seek (and to
immediately notify the Company of) other employment, and to the extent
Executive receives compensation from other employment, the severance
payments provided herein shall be correspondingly reduced.
(c) Any grant of options to purchase shares of Company
stock shall be exercisable and grants of restricted stock held by
Executive will be vested to the extent and for such periods, and
otherwise governed, by the plans and programs (and the agreements and
other documents thereunder) pursuant to which such stock options or
restricted stock has been granted.
(d) All vested, nonforfeitable amounts owing or accrued at
the Date of Termination under any other compensation and benefit
plans, programs, and arrangements in which Executive theretofore
participated will be paid under the terms and conditions of the plans,
programs, and arrangements (and agreements and documents thereunder)
pursuant to which such compensation and benefits were granted.
8. Termination; No Further Liability. In the event the Company
terminates the Executive for Cause or Executive terminates the
Agreement without Good Reason, the Company shall have no further
liability with respect to Executive's employment, except to pay the
Executive the value of any accrued salary or other compensation due
Executive up to the date of his termination and other benefits payable
under any employee benefit plan in which Executive was a participant.
The Company and the Executive agree to provide 30 days written
notice of their intent to terminate this Agreement without Cause or
for Good Reason, as applicable, at any time within the term of this
Agreement. If Executive resigns for any other reason he will provide
the Company 30 days written notice and this Agreement will terminate
upon receipt of such notice by the Company.
9. Confidential Information. During his employment and at all
times thereafter, Executive shall keep secret and retain Confidential
Information in the strictest confidence, and shall not, without the
prior written consent of the Company, furnish, make available, or
disclose to any third party, any Confidential Information. As used in
this Agreement, Confidential Information shall mean any information
relating to the business or affairs of the Company or its products,
including, but not limited to, sales inventory analysis reports such
as the 509 report, the 588 report, 595 report, other related reports
and by whatever name change designated hereafter; memoranda, letters,
<PAGE>
reports, notebooks, books of accounts, drawings, prints, models, and
other materials or records of a proprietary nature; records and policy
materials relating to research, finance, accounting, sales, sales
projections, personnel, management, advertising, inventory, data
processing, expansion plans, and operations; materials particularly
relating to operations, such as price lists, vendor lists, customer
lists, customer service requirements, costs of providing services and
goods, payroll and payroll matrix information, technical data, and
equipment maintenance costs, or other proprietary information used by
the Company; provided, however, Confidential Information shall not
include any information which is in the public domain or becomes known
in the industry through no wrongful act on the part of Executive or
breach of this Agreement. Executive acknowledges that the
Confidential Information is vital, sensitive, confidential and
proprietary to the Company.
10. Return of Company Materials Upon Termination. Executive
a g r ees that all records or documents containing Confidential
Information, whether or not prepared by Executive, is and shall remain
the property of the Company, and that upon termination of his
employment, Executive shall immediately return to the Company all such
items in his possession, as well as all copies thereof.
11. Post-Employment Matters. Executive acknowledges that his
employment with the Company has special, unique and extraordinary
value to the Company; that the Company has a lawful interest in
protecting its investment in training Executive and entrusting its
Confidential Information to him; and that the Company would be
irreparably damaged if Executive were to provide services to any
person or entity in violation of this Agreement; and that the
restrictions, prohibitions and other provision of this Section are
reasonable, fair and equitable in scope, terms, and duration, are
necessary to protect the legitimate business interests of the Company,
and are a material inducement to the Company to enter into this
Agreement.
(a) Non-Competition. Without the consent in writing of the
Board, upon the Executive's date of termination for any reason,
Executive will not, for a period of two years thereafter, acting alone
or in conjunction with others, directly or indirectly (i) engage
(either as owner, investor, partner, stockholder, employer, employee,
consultant, advisor or director (other than as below) in a retail
business in the continental United States and Canada that has gross
sales of sporting goods, athletic footwear and/or athletic apparel in
excess of 20% of its total retail sales, provided that, he may hold
stock not in excess of 5% in one or more publicly-held sporting goods
retailers;
(ii) induce any vendors of the Company or any of its subsidiaries
with whom Executive has had contacts or relationships, directly or
indirectly, during and within the scope of his employment with the
Company or any of its subsidiaries, to curtail or cancel their
business with such companies or any of them; or (iii) induce, or
attempt to influence, any employee of the Company or any of its
subsidiaries to terminate employment. The provisions of subparagraphs
(i), (ii), and (iii) above are separate and distinct commitments
independent of each of the other subparagraphs. It is agreed that the
ownership of not more than one percent of the equity securities of any
company having securities listed on an exchange or regularly traded in
<PAGE>
the over-the-counter market shall not, of itself, be deemed
inconsistent with clause (i) of this paragraph (a), nor shall service
as a member of a board of directors on which Executive is serving on
the date of termination (including any successor board thereto) be
deemed, of itself, to be inconsistent with clause (i) of this
paragraph (a). However, this paragraph 11 (a) will not apply in the
event of a Change in Control as defined in paragraph 6 herein.
(b) Non-Disclosure. Executive shall not at any time
(including following Executive's date of termination for any reason),
disclose, use, transfer, or sell, except in the course of employment
with or other service to the Company, any confidential or proprietary
information of the Company or any of its subsidiaries so long as such
information has not otherwise been disclosed or is not otherwise in
the public domain, except as required by law or pursuant to legal
process.
(c) Cooperation With Regard to Litigation. Executive
agrees to cooperate with the Company (including following Executive's
date of termination for any reason), on a reasonable basis when
cooperation would not unreasonably interfere with Executive's
employment by making himself available to testify on behalf of the
Company or any subsidiary or affiliate of the Company, in any action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative, and to assist the Company, or any subsidiary or
affiliate of the Company, in any such action, suit, or proceeding, by
providing information and meeting and consulting with the Board and
its representatives or counsel, or representatives or counsel of or to
the Company, or any subsidiary or affiliate of the Company, as
requested; provided, however, this subsection (c) shall not apply to
any action between the Executive and the Company to enforce this
Agreement. The Company agrees to reimburse Executive, on an after-tax
basis, for all expenses actually incurred in connection with his
provision of testimony or assistance.
(d) Release of Employment Claims. Executive agrees, as a
condition to receipt of the severance payments and benefits provided
hereunder, that he will execute a release agreement, in a form
satisfactory to the Company, releasing any and all claims arising out
of Executive's employment (other than enforcement of this Agreement).
(e) Remedy. Without limiting the right of the Company to
pursue all of its legal and equitable remedies available for violation
by Executive of the covenants contained in this Section, it is
expressly agreed by the Executive and the Company that any such other
remedies cannot fully compensate the Company for any such violation
and that the Company shall be entitled to injunctive relief to prevent
any such violation.
(f) Survival. Notwithstanding any provision of this
Agreement to the contrary, the provisions of this Section 11 shall
survive the termination or expiration of this Agreement, shall be
valid and enforceable, and shall be a condition precedent to the
Executive (or his or her beneficiaries) receiving any amounts payable
hereunder.
<PAGE>
12. Excise Tax Limit . If Executive becomes entitled to one or
more payments (with a "payment" including, without limitation, the
vesting of an option or other non-cash benefit or property), whether
pursuant to the terms of this Termination Agreement or any other plan,
arrangement, or agreement with the Company or any affiliated company
(the "Total Payments"), which are or could become subject to the tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (or any similar tax that may hereafter be
imposed, whether under federal, state, local or foreign law) (the
"Excise Tax"), the Company shall reduce or eliminate the Total
Payments, but only to the extent necessary, such that no amount of the
Total Payments shall be subject to the Excise Tax.
The Company agrees to indemnify and hold Executive harmless from
any tax, penalty or other charge or liability imposed upon Executive
resulting directly or indirectly from a Total Payment s (in whole or
in part) being subject to the Excise Tax after giving effect to any
reduction directed by the Company pursuant to the preceding sentence,
or from any tax, penalty or other charge or liability resulting
directly or indirectly from the Company's obligation to indemnify and
h o ld Executive harmless hereunder, including investigation and
attorneys fees and expenses.
13. Governing Law. This Agreement is governed by and is to be
construed, administered, and enforced in accordance with the laws of
the State of Illinois, without regard to Illinois conflicts of law
principles, except insofar as federal laws and regulations may be
applicable. If under the governing law, any portion of this Agreement
is at any time deemed to be in conflict with any applicable statute,
rule, regulation, ordinance, or other principle of law, such portion
shall be deemed to be modified or altered to the extent necessary to
conform thereto or, if that is not possible, to be omitted from this
Agreement. The invalidity of any such portion shall not affect the
force, effect, and validity of the remaining portion hereof. If any
court determines that any provision of Section 10 is unenforceable
because of the duration or geographic scope of such provision, it is
the parties' intent that such court shall have the power to modify the
duration or geographic scope of such provision, as the case may be, to
the extent necessary to render the provision enforceable and, in its
modified form, such provision shall be enforced.
14. Arbitration. The parties agree that any claim or dispute
arising out of or relating to this Agreement or Executive's employment
with the Company will be submitted to and decided by arbitration
pursuant to the American Arbitration Act and conducted in accordance
with applicable rules and procedures of the American Arbitration
Association. Claims and disputes subject to this arbitration
provision shall include, but not be limited to, any claim arising
under this Agreement, the Civil Rights Act of 1964, as amended, the
Civil Rights Act of 1991, the Americans with Disabilities Act, the Age
Discrimination in Employment Act, the Fair Labor Standards Act, the
National Labor Relations Act, the Employee Retirement Income Security
Act, the Family and Medical Leave Act; the statutory law of any state
or locality regarding trade secrets, employment, discrimination in
employment, termination of employment, or wage payment; and the common
law of any state relating to employment contracts, wrongful discharge,
defamation, or any other matter arising under common law.
Notwithstanding the above, the parties agree that this
arbitration provision does not apply to: (i) claims for workers'
compensation benefits or unemployment compensation benefits; and (ii)
<PAGE>
claims by the Company for injunctive or equitable relief, including
but not limited to claims related to unauthorized disclosure of
confidential information, trade secrets intellectual property, or
unfair competition. It is further agreed that claims relating to
employee benefits under the Company's insurance, disability and
retirement plans must be raised pursuant to the procedures set forth
in those plans, and that the parties may pursue arbitration only if
the matter is not resolved pursuant to those procedures.
The parties understand and agree that any result reached by the
arbitrator shall be binding, that no appeal may be taken and that
either party can seek a judgment upon the arbitration award, which may
be entered by any court having jurisdiction. Executive further
understands and agrees that by signing this Agreement, he is waiving
his right to have a trial by judge or jury of any claim or dispute
c o v ered by this arbitration provision. The parties further
acknowledge and agree that, other than as expressly set forth herein,
this arbitration provision does not alter or add to the substantive
legal rights, remedies and defenses of either party as provided by
federal or applicable state law.
15. General Provisions.
(a) Notices. Any notice required by this Agreement shall
be deemed sufficient if sent by registered or certified mail, postage
prepaid, with return receipt requested. Notices shall be addressed to
the parties as follows:
If to Executive: Thomas T. Hendrickson
1400 South Wolf Road, Suite 200
Wheeling, IL 60090
If to the Company: Sportmart, Inc.
1400 South Wolf Road, Suite 200
Wheeling, Illinois 60090
Attn: General Counsel
Each party may change his or its address by written notice in
accordance with this Section. Notices shall be deemed effective at the
time of their actual receipt or refusal of receipt.
(b) Severability. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall continue in full force
and without being impaired or invalidated in any way.
(c) Entire Agreement. This Agreement supersedes and cancels
any and all previous and contemporaneous oral or written agreements
between the parties hereto with respect to the employment of Executive
by the Company and contains all of the covenants and agreements
between the parties with respect to such employment. Each party to
this Agreement acknowledges that no representations, inducements or
agreements, oral or otherwise, that have not been embodied herein, and
no other agreement, statement or promise not contained in this
Agreement, shall be valid or binding.
(d) Modification and Waiver. No amendment, modification,
or discharge of this Agreement shall be valid or binding unless set
forth in writing and duly executed by each of the parties hereto. Any
waiver or consent by any party to any breach of or any variation from
<PAGE>
any provision of this Agreement shall be valid only if in writing and
only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any subsequent breach of
any other provision or as a consent with respect to any similar
instance or circumstance.
(e) Headings. The section, paragraph, and subparagraph
headings are for reference only and shall not define or limit the
provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
SPORTMART, INC.
By: /S/ JOHN A. LOWENSTEIN
Title: Chief Operating Officer
EXECUTIVE:
/S/ THOMAS T. HENDRICKSON
<PAGE>
SPORTMART, INC. EXHIBIT 10.53
1400 S. Wolf Road, Suite 200
Wheeling, IL 60090-6524
March 8, 1996
Larry Hochberg, Chairman and CEO
Sportmart, Inc.
1400 S. Wolf Road, Suite 200
Wheeling, IL 60090-6524
Re: Post-Employment Medical Benefits
Dear Larry:
The Company is grateful to you for your many long years of
excellent and distinguished leadership. In consideration of and
recognition for these past services and your continuing contribution
to the Company, the Company has agreed to provide to you and Barbara
Hochberg post employment medical benefits, as set forth below, in
satisfaction of your concerns in this regard.
1. You and Barbara will continue to be covered under the Company's
existing group medical benefit plan for active employees until
the date you cease to be eligible for such coverage under the
terms of the plan. When you cease to be eligible under the Plan,
you will then be eligible for health benefit continuation
coverage under the plan pursuant to Federal law ("COBRA") under
the same terms and conditions that apply to other COBRA-eligible
individuals. This generally would provide you with 18 months of
coverage under the plan; you would, however, be responsible for
paying any required premium for coverage.
2. Upon the date your (and Barbara's) COBRA coverage has expired,
you and Barbara will be eligible for Company-provided retiree
medical benefits, subject to the following terms and conditions:
(i) Y o u will receive reimbursement from the Company for
physician, hospitalization and prescription drug expenses
("Expenses") incurred by you and Barbara which are not
o t h erwise reimbursable or payable by another payor,
including but not limited to, another employer's group
health plan, Medicare, or first or third party insurance
(such as an automobile insurance policy).
(ii) Reimbursement by the Company of Expenses will be subject to
a $25,000 annual calendar year deductible which will apply
to Expenses incurred by you and/or Barbara in the aggregate.
(iii)You and Barbara will take all necessary steps to obtain
coverage under Medicare Parts A and B when you are first
eligible for such coverages and you will seek reimbursement
on a primary basis under such programs. You will give the
Company subrogation rights to the extent of Expenses
reimbursed by the Company in connection with an injury or
accident.
(iv) The Company has no obligation to set aside assets or
purchase insurance to satisfy its obligations hereunder.
<PAGE>
(v) This Agreement contained in this letter supersedes any other
obligation of the Company with respect to post-employment
medical benefits for you and Barbara.
(vi) All reimbursements made will be treated by the Company as
taxable payments to you and your wife and will issue you an
IRS Form 1099 with respect to such payments.
3. During any period that you are accepting benefits under this
Agreement, you will not, without the prior express written
consent of the Company's Compensation Committee, not to be
unreasonably withheld, engage in (either as an owner, investor,
partner, stockholder, employer, employee, consultant, advisor or
director) any "Business" which competes with the Company;
provided, however, this shall not limit your ability to own any
publicly traded securities in a Business for which you provide no
services. "Business" means a large format sporting goods
retailer in the Continental United States.
4. Once you have signed the duplicate copy of this letter, this
letter constitutes an Agreement binding on the Company and any
successor to the Company. This Agreement is governed in
accordance with the laws of the State of Illinois.
5. In the event you desire to pursue a claim relating to this
Agreement, it shall be settled exclusively by arbitration in
Chicago, Illinois by at least two but not more than three
arbitrators in accordance with the rules of the American
Arbitration Association in effect at the time of submission of
the arbitration. Judgment may be entered on the arbitrator's
award in any court having jurisdiction. If you prevail in such
arbitration you will be entitled to reimbursement of your
reasonable legal costs and expenses incurred in pursuing and
enforcing your claim plus interest on all past due claims at the
prime rate of interest plus 2% as published from time to time in
the Midwest edition of the Wall Street Journal.
6. In the event the Company is entering into a transaction which
involves a "change-in-control" of the Company, such transaction
will also provide for undertakings reasonably acceptable to you
and the Company that will assure the continuous performance of
the Company's obligation under this Agreement.
If you agree to the aforementioned terms and conditions, please
signify your consent by executing the extra copy of this letter and
returning it to me.
Sincerely,
SPORTMART, INC.
By: /S/ANDREW HOCHBERG
/S/ LARRY HOCHBERG
<PAGE>
Exhibit 10.54
SPORTMART, INC.
SEVERANCE PLAN
TABLE OF CONTENTS
Page
ARTICLE I Establishment and Purpose . . . . . . . . . . . . . -1-
ARTICLE II Definitions
2.1 "Act" . . . . . . . . . . . . . . . . . . . -1-
2.2 "Administrator" . . . . . . . . . . . . . . -1-
2.3 "Affiliate" . . . . . . . . . . . . . . . . -2-
2.4 "Beneficiary" . . . . . . . . . . . . . . . -2-
2.5 "Benefits" . . . . . . . . . . . . . . . . . -2-
2.6 "Benefits Period" . . . . . . . . . . . . . -2-
2.7 "Board of Directors" or "Board" . . . . . . -2-
2.8 "Cause" . . . . . . . . . . . . . . . . . . -2-
2.9 "Change of Control" . . . . . . . . . . . . -2-
2.10 "Code" . . . . . . . . . . . . . . . . . . . -4-
2.11 "Company" . . . . . . . . . . . . . . . . . -4-
2.12 "Compensation" . . . . . . . . . . . . . . . -4-
2.13 "Effective Date" . . . . . . . . . . . . . . -5-
2.14 "Eligible Employee" . . . . . . . . . . . . -5-
2.15 "Employee" . . . . . . . . . . . . . . . . . -5-
2.16 "Employer" . . . . . . . . . . . . . . . . . -5-
2.17 "Extension Date" . . . . . . . . . . . . . . -5-
2.18 "Good Reason" . . . . . . . . . . . . . . . -5-
2.19 "Named Fiduciary" . . . . . . . . . . . . . -6-
2.20 "Participant" . . . . . . . . . . . . . . . -6-
2.21 "Plan" . . . . . . . . . . . . . . . . . . . -6-
2.22 "Rate of Compensation" . . . . . . . . . . . -6-
2.23 "Termination of Employment" . . . . . . . . -6-
ARTICLE III Eligibility For Benefits
3.1 Classes of Eligible Employees . . . . . . . -6-
3.2 Entitlement to Benefits . . . . . . . . . . -7-
3.3 Voluntary Resignation or Discharge for Cause -7-
3.4 Voluntary Termination After Six Months . . . -7-
3.5 Duration of Participation . . . . . . . . . -7-
ARTICLE IV Benefits
4.1 Class A Severance Benefits . . . . . . . . . -7-
4.2 Class B Severance Benefits . . . . . . . . . -8-
4.3 Class C Severance Benefits . . . . . . . . . -8-
4.4 Class D Severance Benefits. . . . . . . . . -8-
4.5 Additional Severance Benefits . . . . . . . -8-
4.6 Death . . . . . . . . . . . . . . . . . . . -8-
4.7 Deduction of Taxes from Amounts Payable . . -8-
4.8 Manner and Timing of Distribution . . . . . -9-
4.9 Limit on Benefits . . . . . . . . . . . . . -9-
4.10 Continued Health Benefits . . . . . . .-9-
ARTICLE V Administration
5.1 Authority and Responsibility of the
Administrator . . . . . . . . . . . . . . . .-10-
5.2 Administrator Duties . . . . . . . . . . . . -10-
5.3 Records . . . . . . . . . . . . . . . . . . -11-
5.4 Administrator Decisions Final . . . . . . . -11-
5.5 Misrepresentations . . . . . . . . . . . . . -11-
<PAGE>
ARTICLE VI Claims Procedure
6.1 Initial Claim for Payment . . . . . . . . . -11-
6.2 Review of Claim Denial . . . . . . . . . . . -11-
ARTICLE VII Arbitration
7.1 Arbitration . . . . . . . . . . . . . . . . -12-
ARTICLE VIII Amendment and Termination
8.1 Amendments . . . . . . . . . . . . . . . . . -12-
8.2 Termination of the Plan . . . . . . . . . . -13-
8.3 Limit on Amendment and Termination . . . . . -13-
ARTICLE IX Miscellaneous Provisions
9.1 Merger . . . . . . . . . . . . . . . . . . . -13-
9.2 No Term of Employment . . . . . . . . . . . -13-
9.3 Source of Payment . . . . . . . . . . . . . -13-
9.4 Actions by Company . . . . . . . . . . . . . -13-
9.5 Headings . . . . . . . . . . . . . . . . . . -13-
9.6 Invalidity of Certain Provisions . . . . . . -13-
9.7 Law Governing . . . . . . . . . . . . . . . -14-
9.8 Limitation on Liability . . . . . . . . . . -14-
9.9 Prior Benefits . . . . . . . . . . . . . . . -14-
9.10 Notices . . . . . . . . . . . . . . . . . . -14-
9.11 Gender and Number . . . . . . . . . . . . . -14-
<PAGE>
SPORTMART, INC.
AMENDED AND RESTATED SEVERANCE PLAN
ARTICLE I
Establishment and Purpose
WHEREAS, SPORTMART, INC. ("Company") established, effective
February 26, 1996, the Sportmart, Inc. Severance Plan for the purpose
of providing severance benefits to eligible employees on certain
voluntary and involuntary terminations of employment resulting from a
change in corporate control;
WHEREAS, the Company amended the Plan as of May 1, 1997 to clarify
the intent of certain provisions adopted in February 1996; and
WHEREAS, the Company desires to create this amended and restated
Plan instrument to contain the substantive and administrative provisions
of the Company's severance benefit plan.
NOW, THEREFORE, the Company hereby creates this separate Plan
document for the purpose of providing Eligible Employees with severance
benefits. Any prior oral or written declarations of this Plan or
predecessor plans or portions thereof are hereby expressly amended,
restated or revoked, as appropriate, in order to effectuate the
Company's intent that this written instrument (as may be amended from
time to time) shall be the sole embodiment of the Plan. No covered
individual shall have any right or claim with respect to the severance
benefits provided under this Plan other than in accordance with this
Plan document.
ARTICLE II
Definitions
When used herein in a capitalized form, the following words shall
be deemed to have the following meanings unless the context clearly
indicates otherwise:
2.1 "Act" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
thereunder.
2.2 "Administrator" of the Plan within the meaning of the Act
shall be the Compensation Committee of the Board, or such other
committee as the Board shall designate, and in the event that no such
committee sits, the Board provided that, in each case, following a
Change of Control, the Administrator immediately prior to the Change of
Control shall continue to serve as the Administrator thereafter.
2.3 "Affiliate" means the Company, its subsidiaries, any other
trades or businesses of the Company in which it holds a proprietary or
controlling interest, and any successor entity.
2.4 "Beneficiary" means the Participant's spouse on his date of
death or, if none, the Participant's estate.
2.5 "Benefits" means the severance benefits described in Article
IV herein. The Benefits described in Article IV which represent a
severance benefit are unfunded commitments of the Employer.
2.6 "Benefits Period" means the period commencing on the Extension
Date and ending 18 months thereafter.
2.7 "Board of Directors" or "Board" means the Board of Directors
of the Company.
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2.8 "Cause" means an Employee's: (A) felony conviction in a court
of law under applicable federal or state laws which results in material
damage to the Employer or materially impairs the value of an Employee's
services to the Employer, or (B) willfully engaging in one or more acts,
or willfully omitting to act, in a manner so as to violate a material
Employer policy or fiduciary duty owed by Employee to Employer which is
demonstrably and materially damaging to the Employer and which continues
for a period of thirty days after Employer provides such Employee notice
specifying the nature and extent of the reason for such notice;
provided, however, if the reason specified for the notice is not cured
within sixty (60) days, but is capable of being cured within a
reasonable period of time in excess of sixty (60) days, then termination
for cause shall not occur if Employee commences to cure within the first
sixty (60) day period and thereafter diligently and in good faith
continues to cure to completion. An act or failure to act on an
Employee's part shall not be considered "willful" if it was done or
omitted to be done by him in good faith (e.g., without limitation, a
good faith exercise of his business judgment) and he reasonably believes
his action or failure to act was in the Employer's interest, and shall
not include any act or failure to act resulting from any incapacity of
Employee.
2.9 "Change of Control" means:
(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 promul-
gated under the Exchange Act) of a majority of 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
for purposes of this subsection (i), the following
a c quisitions shall not constitute a Change of
Control: (1) any acquisition directly from the
Company, (2) any acquisition by the Company, (3) any
acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (4) any
a c q uisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and
(C) of subsection (iii) of this Section 2.9;
(ii) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the
B o a rd; 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 shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result
of an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board;
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(iii) Consummation of:
A) a reorganization, merger or consolidation
of the Company, or
(B) sale, lease, exchange, mortgage, pledge,
transfer or other disposition of all or
substantially all of the assets of the Company; (a
"Business Combination");
provided that, in each case, a transaction will not
constitute a "Business Combination" if, following
such transaction, (X) all or substantially all of
the individuals and entities who were the beneficial
owners, respectively, of the outstanding shares of
common stock of the Company ("Outstanding Company
Common Stock") and Outstanding Company Voting
Securities immediately prior to such Business
Combination beneficially own, directly or
indirectly, more than fifty percent (50%) of,
respectively, the then-outstanding shares of common
stock and the combined voting power of the then -
outstanding voting securities entitled to vote
generally in the election of directors, as the case
may be, of the corporation resulting from such
Business Combination (including, without limitation,
a corporation which as a result of such transaction
owns the Company or all or substantially all of the
Company's assets either directly or through one or
m o r e subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities, as the case may be, (Y) no person
(excluding any corporation resulting from such
Business Combination or any employee benefit plan
( o r related trust) of the Company or such
corporation resulting from such Business
Combination) beneficially owns, directly or
i n directly, twenty percent (20%) or more of,
respectively, the then outstanding shares of common
s t ock of the corporation resulting from such
Business Combination, or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership
existed prior to the Business Combination and (Z) at
least a majority of the members of the board of
directors of the corporation resulting from such
Business Combination were members of the Incumbent
Board at the time of the execution of the initial
agreement, or of the action of the Board, providing
for such Business Combination; or
(iv) Approval by the shareholders of the
Company of a complete liquidation or dissolution of
the Company.
2.10 "Code" means the Internal Revenue Code of 1986, as amended
from time to time and the regulations promulgated thereunder.
2.11 "Company" means Sportmart, Inc. and any successor company by
merger, consolidation, or purchase of stock or assets.
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2.12 "Compensation" means except with respect to Section 4.9, the
base compensation paid by the Employer to an Eligible Employee on a cash
basis for personal services, but excluding any amounts paid under this
Plan, bonuses, commissions, incentive pay, living allowances, expense
allowances, reimbursement for relocation, education or business
expenses, imputed income under any employee benefit plan, non-cash
awards and any distributions paid under any tax-qualified plan (other
than amounts deferred under a cash or deferred arrangement), payments
made pursuant to any accident or health insurance plan, stock options,
any value received pursuant to a stock option or stock appreciation
rights plan, any other distributions which receive special tax treatment
and all other extraordinary compensation. For purposes of Section 4.9
(regarding the cap on benefits), "Compensation" shall have the meaning
under Section 280G of the Code.
2.13 "Effective Date" means February 26, 1996.
2.14 "Eligible Employee" means an Employee who is not a party to a
written employment agreement or severance agreement with the Company
addressing the same benefits, and who is included in an Eligible Class
of Employees in accordance with Section 3.1 of this Plan; provided,
however, if an Employee is a party to a written agreement addressing the
same benefits as this Plan, and this Plan provides more favorable
benefits than such agreement, then such Employee shall be an Eligible
Employee and shall be entitled to receive the Benefits under this Plan
in lieu of the benefits provided under such other agreement.
2.15 "Employee" means any person who is a common-law employee of an
Employer on or after the Effective Date.
2.16 "Employer" means the Company.
2.17 "Extension Date" means the date on which a Change of Control
occurs. Anything in this Plan to the contrary notwithstanding, if a
Change of Control occurs and if any otherwise Eligible Employee's
employment with the Employer is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by
the Employee that such Termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with or anticipation of a
Change of Control, then for purposes of this Plan, and with respect to
such Employee, the "Extension Date" shall mean the date immediately
prior to such date of Termination.
2.18 "Good Reason" means the occurrence of a Change of Control and
following which there occurs, without an Employee's prior written
consent:
(i) the assignment to the Employee of any duties inconsistent in
any respect with the Employee's position (including status,
offices, titles and reporting requirements), authority,
duties or responsibilities, or any other action by the
Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Employee;
(ii) a reduction in the Employee's Compensation in an amount
exceeding 5 percent or, other than changes occasioned by a
substitution or modification of general welfare plans that
are generally applicable to all Employees and do not
discriminate against the Employee, a reduction in benefits
and other compensation including amounts excluded from
Compensation; or
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(iii) the Company's requiring the Employee to be based at any
office or location more than 50 miles from the Employee's
prior office or location or the Company's requiring the
Employee to travel on Company business to a substantially
greater extent than required immediately prior to the
Extension Date.
2.19 "Named Fiduciary" of the Plan within the meaning of Section
402(a) of the Act shall be the Administrator.
2.20 "Participant" means an Eligible Employee who is entitled to
participate in the Plan as provided in Article III.
2.21 "Plan" means the Sportmart, Inc. Severance Plan, as stated
herein, and as hereafter may be amended from time to time.
2.22 "Rate of Compensation" means an Eligible Employee's monthly
r a t e of Compensation immediately preceding his Termination of
Employment.
2.23 "Termination of Employment" means the earliest of (a) a
resignation by an Employee for reason of disability; (b) a resignation
by an Employee; (c) a dismissal of an Employee for Cause, (d) a
dismissal of an Employee without Cause, (e) death, or (f) retirement.
Except where an Employee terminates for Good Reason, the transfer of an
Employee to an Affiliate shall not be regarded as a Termination of
Employment.
ARTICLE III
Eligibility For Benefits
3.1 Classes of Eligible Employees. An Employee will be considered
an Eligible Employee if he fits within one of the following Classes as
of the Extension Date:
(i) Class A: Chairman, President, Chief Operating Officer or
Chief Executive Officer.
(ii) Class B: Executive Vice President, Senior Vice President
or annual Compensation of $150,000 or greater who is not in
Class A.
(iii) Class C: Vice President with annual Compensation of
$90,000 or greater who is not in Class A or B.
(iv) Class D: Other Employees or categories of Employees as
the Administrator may determine, if any, prior to the
Extension Date.
3.2 Entitlement to Benefits. Subject to any other applicable
requirements of this Plan, an Eligible Employee whose employment with
the Employer is terminated during the Benefits Period because of (i) his
involuntary Termination of Employment other than for Cause, or (ii) his
voluntary Termination of Employment for Good Reason, or (iii) his
voluntary Termination of Employment other than for Good Reason pursuant
to Section 3.4 shall, subject to Section 4.9, be entitled to receive the
benefits applicable to his Class as described in Sections 4.1, 4.2, 4.3
or 4.4.
3.3 Voluntary Resignation or Discharge for Cause. An Eligible
Employee whose employment with the Employer is terminated for Cause
shall not be eligible to receive any benefits provided under Article IV.
An Eligible Employee whose employment with the Employer is terminated
voluntarily other than for Good Reason shall not be eligible to receive
any benefits provided under Article IV except to the extent provided in
Section 3.4.
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3.4 Voluntary Termination After Six Months. An Eligible Class A
or Class B Employee who incurs a voluntary Termination of Employment
other than for Good Reason shall be entitled to a Benefit pursuant to
Sections 4.1(b) or 4.2(b) if such Eligible Class A or Class B Employee
voluntarily terminates employment other than for Good Reason during the
ninety day period beginning on the 180th day after the Extension Date.
3.5 Duration of Participation. A Participant shall cease to be a
Participant on the date the Participant receives the total distribution
of his Benefits under the Plan.
ARTICLE IV
Benefits
4.1 Class A Severance Benefits.
(a) In General. In the event a Class A Eligible Employee
incurs a Termination of Employment and is entitled to Benefits
pursuant to Section 3.2, the Employee shall receive a Benefit based
o n h is Rate of Compensation equivalent to 18 months of
Compensation.
(b) On Voluntary Termination of Employment Other Than for
Good Reason. In the event a Class A Eligible Employee incurs a
voluntary Termination of Employment other than for Good Reason in
accordance with Section 3.4, he shall be entitled to receive a
Benefit based on his rate of Compensation equivalent to 6 months of
Compensation.
4.2 Class B Severance Benefits.
(a) In General. In the event a Class B Eligible Employee
incurs a Termination of Employment and is entitled to Benefits
pursuant to Section 3.2, the Employee shall receive a Benefit based
on such Employee's Rate of Compensation equivalent to 18 months of
Compensation.
(b) On Voluntary Termination of Employment Other Than for
Good Reason. In the event a Class B Eligible Employee incurs a
voluntary Termination of Employment other than for Good Reason in
accordance with Section 3.4, he shall be entitled to receive a
Benefit based on his rate of Compensation equivalent to 6 months of
Compensation.
4.3 Class C Severance Benefits. In the event a Class C Eligible
Employee incurs a Termination of Employment and is entitled to Benefits
pursuant to Section 3.2, the Employee shall receive a benefit based on
his rate of Compensation equivalent to 12 months of Compensation.
4.4 Class D Severance Benefits. In the event a Class D Eligible
Employee incurs a Termination of Employment and is entitled to Benefits
pursuant to Section 3.2, the Employee shall receive a Benefit based on
his Rate of Compensation as determined by the Administrator at the time
Class D Employees are identified in writing by the Administrator.
4.5 Additional Severance Benefits. Notwithstanding the foregoing,
the Administrator shall have the authority to make discretionary grants
of additional Benefits from time to time prior to a change in
control to Class B and Class C Employees as it deems appropriate.
4.6 Death. On the death of a Participant who is entitled to
Benefits under the Plan and who has not received payment of his entire
Benefit, the Participant's remaining Benefit shall be paid in a lump sum
to the Participant's Beneficiary.
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4.7 Deduction of Taxes from Amounts Payable. The Employer may
deduct from the amounts to be distributed such amount as the Employer,
in its sole discretion, deems proper to protect itself against liability
for the payment of death, succession, inheritance, income, employment or
other taxes or withholdings, garnishments and advances, and out of the
money so deducted the Employer may discharge any such liability and pay
t h e amount remaining to the Participant or the Participant's
Beneficiary, as the case may be.
4.8 Manner and Timing of Distribution.
(a) In General. Subject to Section 4.8(b), benefits under the
Plan will be paid in a lump sum as soon as reasonably practical,
but no later than 15 days after termination. If Benefits are not
timely paid, the Participant will be paid a reasonable rate of
interest on the unpaid Benefits until paid.
(b) Limitation. Notwithstanding Section 4.8(a), if the
payment of any Benefit will result in any portion of the Benefit
(or any other amount paid to a Participant or Beneficiary during
the same calendar year) not being deductible by the Company by
reason of Code Section 162(m), the Administrator may defer payment
of all or a portion of such Benefits until such time that payment
will be deductible.
4.9 Limit on Benefits. Notwithstanding anything in the Plan to
the contrary, an Eligible Employee's Benefits shall be reduced or
eliminated to the extent that such otherwise payable Benefits, when
considered with other payments of compensation payable to the Eligible
Employee on termination of employment in connection with a Change of
Control, including, without limitation, the vesting of an option or
other non-cash benefit or property, whether pursuant to the terms of
this Plan or any other plan, arrangement, or agreement with the Company
or any affiliated company (the "Total Payments") would trigger a tax
imposed under Section 4999 of the Code.
4.10 Continued Health Benefits. In the event an Eligible Employee
who is eligible for benefits under Section 3.2 of this Agreement elects
continued coverage under the Company's group health insurance plan, as
permitted by COBRA, the Company shall continue to pay the Company's
share of premiums for such continued coverage for a period of time
following the date of the Employee's Termination of Employment as set
forth below:
Class No. of Months Covered
Class A Eligible Employee 18 months
Class B Eligible Employee 18 months
Class C Eligible Employee 12 months
Class D Eligible Employee 6 months
ARTICLE V
Administration
5.1 Authority and Responsibility of the Administrator. The
Administrator shall have overall responsibility for the establishment,
amendment, termination, administration and operation of the Plan. The
Administrator may discharge its duty by appointment and removal (with or
without cause) of individuals or of a committee or committees to whom
shall be delegated those responsibilities determined by the
Administrator.
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5.2 Administrator Duties. The Administrator on behalf of the
Participants and all Beneficiaries will enforce the Plan in accordance
with its terms and will have all powers necessary to accomplish that
purpose, including, but not limited to, the following:
(a) To adopt and issue rules and regulations necessary for
the proper conduct and administration of the Plan and to change,
alter, or amend such rules and regulations;
(b) To construe and enforce the Plan in accordance with its
terms and any policy and regulations it establishes;
(c) To determine all questions arising in its administration,
including those relating to the eligibility of persons to become
P a r t i c ipants, and the rights of Participants and their
Beneficiaries, and its decision thereon shall be final and binding
upon all persons hereunder;
(d) To authorize all disbursements of Benefits in accordance
with the provisions of the Plan;
(e) To keep records relating to Participants and other
matters applicable to this Plan;
(f) To make available to Participants upon request, for
e x amination during business hours, such records as pertain
exclusively to the examining Participant;
(g) To prescribe procedures to be followed by Participants
and Beneficiaries in claiming benefits;
(h) To make available for inspection and to provide upon
request at such charge as may be permitted and determined by the
Administrator, documents and instruments required to be disclosed
by the Act;
(i) To designate Participants; and
(j) To appoint such agents and other specialists to aid it in
the administration of the Plan as it deems necessary.
5.3 Records. The regularly kept records of the Administrator and
any Employer shall be conclusive evidence of a Participant as to all
matters contained therein applicable to this Plan. An Employee or other
interested individual may request a correction in the record of any fact
relevant for purposes of the Plan and such correction shall be made if
h e furnishes in support thereof documentary proof of the fact
satisfactory to the Administrator.
5.4 A d m i nistrator Decisions Final. The decision of the
Administrator in matters within its jurisdiction shall be final,
binding, and conclusive upon the Employer, Employees, Participants,
Beneficiaries and any other person or party interested or concerned.
5.5 Misrepresentations. The Administrator may (but shall not be
r e q u i r ed to) rely upon any certificate, statement or other
representation made to it by an Employee or Beneficiary with respect to
any fact regarding any of the provisions of the Plan. Any such
certificate, statement or other representation shall be conclusively
binding upon such Employee, Beneficiary or his personal representative,
heir, or assignee (but not upon the Administrator), and any such person
shall thereafter be estopped from disputing the truth of any such
certificate, statement or other representation.
<PAGE>
ARTICLE VI
Claims Procedure
6.1 Initial Claim for Payment. Each Participant or Beneficiary
shall submit a claim for payment to the Administrator (or to such other
person as may be designated by the Administrator) in such manner as is
prescribed by the Administrator, provided that the claim must be
accepted or denied by the Administrator in writing no later than 15 days
after it is submitted. A Participant shall have no right to seek review
of a denial of payment or to bring any action in arbitration pursuant to
Section 7.1 or in any court to enforce a claim for payment prior to
filing a claim for payment and exhausting the rights to review
delineated under Section 6.2.
6.2 Review of Claim Denial. If a claim is denied, in whole or in
p a r t, the claimant shall have the right to request that the
Administrator review the denial, provided that the claimant files a
written request for review with the Administrator within thirty (30)
days after the date on which the claimant received written notification
o f the denial. A claimant (or a claimant's duly authorized
representative) may review pertinent documents and submit issues and
comments in writing to the Administrator. Within thirty (30) days after
a request for review is received, the review shall be made and the
claimant shall be advised in writing of the decision on review. The
decision on review shall be forwarded to the claimant in writing and
shall include specific reasons for the decision and references to Plan
provisions upon which the decision is based.
ARTICLE VII
Arbitration
7.1 Arbitration. In the event that an individual desires to
pursue a claim arising under or in connection with this Plan, following
the exhaustion of the Plan's claims and appeals procedures contained in
Article VI, such claim shall be decided exclusively by arbitration
pursuant to the Federal Arbitration Act (the "FAA") and conducted in
accordance with the National Rules for the Resolution of Employment
Disputes established by the American Arbitration Association then in
effect (the "Rules"). Any such claim must be submitted to arbitration
within 30 days after the party's receipt of the decision on review. The
arbitration shall be held in Chicago, Illinois, before a panel of three
arbitrators selected in accordance with the Rules.
In applying the Rules to any discovery conducted in connection with
the arbitration, the panel shall be guided by the parties' desire for an
expedited proceeding. The fees and expenses of the arbitrators shall,
in all cases, be paid solely by the Company. A Participant prevailing
in arbitration shall be entitled to reimbursement of all costs and
expenses, including reasonable attorneys' fees, incurred in pursuing and
enforcing such claim, together with interest on all benefits payable,
from the date of the Employee's Termination of Employment, at the prime
rate of interest plus 2% during the applicable period as published in
the Midwest Edition of the Wall Street Journal from time to time. In
all other cases, each party shall pay its own costs, expenses and legal
fees unless otherwise required by law or directed by the panel in its
award.
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The parties understand and agree that any result reached by the
arbitrators shall be binding and that no appeal may be taken. Any party
to any award rendered in such arbitration proceeding may seek a judgment
upon the award, and that judgment shall be entered thereon by any court
having jurisdiction. The FAA shall govern any action to compel,
enforce, vacate, or confirm proceedings, awards, orders of the panel or
settlements under this provision.
ARTICLE VIII
Amendment and Termination
8.1 Amendments. Subject to Section 8.3, the Administrator may
amend, modify, change, revise or discontinue this Plan by amendment at
any time.
8.2 Termination of the Plan. Subject to Section 8.3, this Plan
may be terminated and shall terminate at such time as (a) the
Administrator, in its discretion, may determine; or (b) the Company is
dissolved. Subject to Section 8.3, the termination of the Plan shall
not reduce any Benefit payable to a Participant who was entitled to such
Benefit prior to the date the Plan is terminated, and the Employer shall
pay such Benefit as soon as administratively possible in a single sum to
each Participant or Beneficiary.
8.3 Limit on Amendment and Termination. Notwithstanding Sections
8.1 and 8.2, this Plan shall not be amended or terminated on or after
the occurrence of the Extension Date.
ARTICLE IX
Miscellaneous Provisions
9.1 Merger. Any successor company to the Company, by merger,
consolidation, or purchase of stock, shall be substituted hereunder for
the Company. This Plan shall be binding on all successors to and
assigns of the Company.
9.2 No Term of Employment. Nothing contained herein shall be
construed to require the Company to employ any Employee or Participant
for any specific period of time.
9.3 Source of Payment. All payments under this Plan shall be from
the general funds of the Employer, and no special or separate fund shall
be established and no other segregation of assets shall be made to
assure payment. No Participant shall have any right, title, or interest
whatever in or to any investments which the Employer may make to aid the
Employer in meeting its obligations hereunder. Nothing contained in
this Plan, and no action taken pursuant to its provisions, shall create
or be construed to create a trust of any kind, or a fiduciary
relationship, between an Employer and any Participant. To the extent
that any person acquires a right to receive payments from the Employer
hereunder, such right shall be no greater than the right of an unsecured
creditor of the Employer.
9.4 Actions by Company. All actions by the Company under this
Plan shall be by the Board or by a duly authorized Committee of the
Board.
9.5 Headings. The headings of Articles and Sections are included
solely for convenience of reference, and if there is any conflict
between such headings and the text of this Plan, the text shall control.
9.6 Invalidity of Certain Provisions. If any provision of this
Plan shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof and the
Plan shall be construed and enforced as if such provisions, to the
extent invalid or unenforceable, had not been included.
<PAGE>
9.7 Law Governing. The Plan shall be construed and enforced
according to the laws of the State of Illinois (other than its laws
respecting choice of law) to the extent not preempted by the Employee
Retirement Income Security Act of 1974, as amended.
9.8 Limitation on Liability. No employee, officer, or director of
an Employer in any manner guarantees the payments to be made under this
Plan, and to the extent not prohibited by federal law, none of them
shall be liable (except for his own gross negligence or willful
misconduct), for any act or failure to act, done or omitted in good
faith, with respect to the Plan.
9.9 Prior Benefits. This Plan amends, restates and supersedes any
plan, arrangement, agreement or obligation of the Employer to a
Participant respecting the provision of each and any severance benefit
or payment.
9.10 Notices. Whenever any notice may be or is required to be
given by the Administrator to any person, such notice may be given by
United States mail, mailed to such person at his last address appearing
in the records of the Administrator or Employer.
9.11 Gender and Number. Except where the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include
the feminine, singular the plural, and plural the singular.
Executed this _____ day of May, 1997.
SPORTMART, INC.
ATTEST:
By:________________________
___________________________
Secretary
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<TABLE> Exhibit 11
SPORTMART, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
For The Fiscal Years Ended February 2, 1997, January 28, 1996 and January 29, 1995
(Amounts in thousands except per share data)
(Unaudited)
February 2, January 28, January 29,
1997(1) 1996(1) 1995(1)
(53 Weeks) (52 Weeks) (52 Weeks)
<S> <C> <C> <C>
Financial statement computations:
(Loss) income from continuing operations before income taxes $(42,776) $ (7,125) $ 15,721
Income tax (benefit) provision (16,269) (3,004) 6,211
(Loss) income from continuing operations (26,507) (4,121) 9,510
Loss from discontinued operations (90) (2,324) (575)
(Loss) income before extraordinary item (26,597) (6,445) (8,935)
Loss from extraordinary item (462) - -
Net (loss) income $(27,059) $ (6,445) $ 8,935
Net (loss) income per share:
Shares used in primary (loss) earnings per share computation:
Weighted average shares outstanding 12,826 12,772 10,911
Net additional shares assuming options exercised and
proceeds used to purchase treasury shares - - -
Common and common equivalent shares 12,826 12,772 10,911
Primary (loss) earnings per share from continuing operations $ (2.06) $ (.32) $ .87
Primary loss per share from discontinued operations (.01) (.18) (.05)
Primary (loss) earnings per share before extraordinary item (2.07) (.50) (.82)
Primary loss per share from extraordinary item (.04) - -
Primary (loss) earnings per share $ (2.11) $ (.50) $ .82
Shares used in fully diluted (loss) earnings per share computation:
Weighted average shares outstanding 12,826 12,772 10,911
Net additional shares assuming options exercised and
proceeds used to purchase treasury shares - - 216
Common and common equivalent shares 12,826 12,772 11,127
Fully diluted (loss) earnings per share from continuing operations $ (2.06) $ (.32) $ .85
Fully diluted loss per share from discontinued operations (.01) (.18) (.05)
Fully diluted (loss) earnings per share before extraordinary item (2.07) (.50) (.80)
Fully diluted loss per share from extraordinary item (.04) - -
Fully diluted (loss) earnings per share $ (2.11) $ (.50) $ .80
(1) Common stock equivalents were antidilutive in fiscal 1996, fiscal
1995 and fiscal 1994.
</TABLE>
EXHIBIT 21
1. Sportdepot Stores, Inc., a corporation formed under the laws
of the province of Ontario, Canada.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement of Sportmart, Inc. on Form S-8 (reference # 333-16389) of
our report dated March 28, 1997, on our audits of the consolidated
financial statements of Sportmart, Inc. And Subsidiary as of February
2, 1997 and January 28, 1996, and for each of the three fiscal years
in the period ended February 2, 1997, as included in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
May 2, 1997
<PAGE>
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<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-02-1997
<PERIOD-END> FEB-02-1997
<CASH> 2,816,087
<SECURITIES> 0
<RECEIVABLES> 624,399
<ALLOWANCES> 0
<INVENTORY> 162,913,179
<CURRENT-ASSETS> 193,701,598
<PP&E> 99,103,854
<DEPRECIATION> (37,353,989)
<TOTAL-ASSETS> 266,597,306
<CURRENT-LIABILITIES> 184,501,114
<BONDS> 0
0
0
<COMMON> 128,437
<OTHER-SE> 73,790,269
<TOTAL-LIABILITY-AND-EQUITY> 266,597,306
<SALES> 514,611,087
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<INTEREST-EXPENSE> (8,909,876)
<INCOME-PRETAX> (42,775,749)
<INCOME-TAX> 16,269,202
<INCOME-CONTINUING> (26,506,547)
<DISCONTINUED> (90,000)
<EXTRAORDINARY> (462,183)
<CHANGES> 0
<NET-INCOME> (27,058,730)
<EPS-PRIMARY> (2.11)
<EPS-DILUTED> (2.11)
</TABLE>
