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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 13, 1997
Big 5 Corp.
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(Exact name of registrant as specified in its charter)
Delaware (formerly 33-61300 and
California) 33-61096 95-1854273
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2525 East El Segundo Boulevard
El Segundo, California 90245
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(Address of principal executive offices)
Registrant's telephone number, including area code: 310/536-0611
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United Merchandising Corp.
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(Former name, if changed since last report)
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Item 1. Changes in Control of Registrant.
Management acquired control of the registrant on November 13, 1997. All
of the registrant's common stock is owned by its parent corporation, Big 5
Holdings Corp., a Delaware corporation, formerly known as Big 5 Corporation
("Parent"). The change in control of registrant results from a change in control
of Parent and an agreement regarding the election of directors of both Parent
and registrant, as described below.
On November 13, 1997, Green Equity Investors, L.P.'s ownership of the
common stock ($0.01 par value) of Parent ("Parent Common Stock") was reduced
from 67.2% to 36.2%; and beneficial ownership of Parent Common Stock by
management and employees (including members of their families) increased from
14.0% to 55.3%. In addition, pursuant to a Stockholders Agreement dated as of
November 13, 1997 ("Stockholders Agreement"), by and among Green Equity
Investors, L.P. ("GEI"), Robert W. Miller, Chief Executive Officer and Chairman
of the Board of the registrant, Steven G. Miller, President and Chief Operating
Officer of the registrant (Robert W. Miller and Steven G. Miller together are
referred to as the "Millers" in this report), and Parent, the parties thereto
agreed: (1) the Millers shall have the right to designate three of the five
members of the Board of Directors of Parent, two of which shall be the Millers,
or if either is unable for reasons of health to serve as directors, their
designees, (2) GEI shall have the right to designate two of the five members of
the Board of Directors of Parent, (3) to vote their Parent Common Stock in favor
of the election of such designees as members of the Board of Parent, and (4) to
cause Parent to elect the same persons as directors of the registrant.
The following individuals are the current members of the Board of
Directors of Parent and the registrant:
1. Robert W. Miller
2. Steven G. Miller
3. Dr. Michael D. Miller
4. John G. Danhakl
5. Jonathan A. Seiffer
The Stockholders Agreement is filed as Exhibit 99-1 to this report. The
foregoing description is qualified in its entirety by Exhibit 99-1 which is
incorporated herein by reference.
The change of ownership of the Parent Common Stock is more specifically
set forth in the table below.
The following table sets forth the ownership of Parent Common Stock as of
the date of the Recapitalization (as defined in Item 5 of this report) by any
person known to the registrant to be the beneficial owner of more than 5% of
Parent Common Stock, the registrant's directors, and certain executive officers
of the registrant, immediately before the Recapitalization and immediately after
the Recapitalization. The table assumes all options and warrants have been
exercised and all sales of Parent Common Stock by certain selling stockholders
have occurred (all as described further in Item 5 of this report).
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BEFORE RECAPITALIZATION AFTER RECAPITALIZATION
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NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS NUMBER OF SHARES PERCENT OF CLASS
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Robert W. Miller................... 111,400 2.4% 350,509(1) 17.5%
Steven G. Miller................... 81,400 1.8% 200,000 10.0%
Dr. Michael D. Miller.............. 20,000 (2) (3) (3)
Thomas J. Schlauch................. 39,600 (2) 40,000 2.0%
Richard A. Johnson................. 39,600 (2) 48,000 2.4%
Charles P. Kirk.................... 28,100 (2) 48,000 2.4%
John G. Danhakl.................... (4) (4) (4) (4)
Jonathan A. Seiffer................ -0- 0% -0- 0%
Green Equity Investors, L.P........ 3,100,160 67.2% 723,580 36.2%
</TABLE>
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(1) Includes shares of Parent Common Stock owned by Dr. Miller over which
Robert W. Miller has voting control.
(2) Less than one percent.
(3) Effective as of the Recapitalization, Dr. Miller will grant voting control
over his shares to Robert W. Miller, and such shares will be included with
Robert W. Miller's shares.
(4) Mr. Danhakl is a general partner of an affiliate of GEI and may be deemed
to be a beneficial owner of the shares of Parent Common Stock owned by GEI
because of his interest in such affiliate.
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The amounts and sources of consideration for acquisition of the
additional Parent Common Stock by management and employees of the registrant is
as follows:
a. Pursuant to the 1997 Management Equity Plan applicable to
employees of Parent and its subsidiaries, Parent sold 462,009 shares of the
Parent Common Stock to certain members of management and certain employees of
the registrant for $5 per share. The shares are subject to certain transfer
restrictions and a right of first refusal in favor of Parent.
Parent's 1997 Management Equity Plan is filed as Exhibit 99-2 to this
report. The foregoing description is qualified in its entirety by Exhibit 99-2
which is incorporated herein by reference.
b. The Millers received a one-time payment of $750,000 from Parent
in connection with the Recapitalization (as defined in Item 5 of this report) to
facilitate their purchases under Parent's 1997 Management Equity Plan.
c. Parent paid each holder of Parent Common Stock a cash
distribution of $15 per outstanding share. This payment did not apply to shares
issued under Parent's 1997 Management Equity Plan; however, current employees
who owned other shares of Parent Common Stock paid all or a portion of the
purchase price for new shares acquired under Parent's 1997 Management Equity
Plan by having Parent withhold the purchase price from their respective cash
distributions. In addition, Parent loaned some of its employees an aggregate of
approximately $107,918 to faciliate their purchases under Parent's 1997
Management Equity Plan.
The transactions making up the Recapitalization are summarized in Item 5
of this report. The Recapitalization facilitated the change in control described
above.
Item 5. Other Events.
Recapitalization.
The transactions constituting the Recapitalization took effect
simultaneously with the change in control discussed in Item 1.
The Millers, Parent and GEI agreed to a Plan of Recapitalization and
Stock Repurchase Agreement dated as of October 31, 1997. That document is filed
as Exhibit 99-3 to this report. The description of the Recapitalization in this
report is qualified in its entirety by Exhibit 99-3 which is incorporated herein
by reference. The following transactions constitute and are defined as the
"Recapitalization": (i) the registrant issued 10 7/8% Senior Notes due 2007 (and
received $130.4 million in gross proceeds); (ii) the registrant defeased and
called for repayment all of its outstanding 13 5/8% Senior Subordinated Notes
due 2002 (the "Old Notes"); (iii) Parent issued Senior Discount Notes in an
aggregate principal amount at maturity of $48.2 million, together with a warrant
to purchase approximately three percent of Parent Common
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Stock at a nominal exercise price ($24.5 million proceeds); (iv) Parent
accelerated vesting of substantially all outstanding options and restricted
stock held by management and employees of the registrant; (v) Parent redeemed
for cash its existing Series A 9% Cumulative Redeemable Preferred Stock (the
"Parent Old Preferred") for approximately $21.9 million in the aggregate,
including accrued dividends; (vi) Parent paid a cash distribution of $15 per
share on the outstanding shares of Parent Common Stock (approximately $63.2
million in the aggregate); (vii) Parent repurchased from Pacific Enterprises a
warrant respecting 397,644 shares of Parent Common Stock and 16,667 shares of
Parent Old Preferred and approximately 2,737,310 shares of Parent Common Stock
from certain selling stockholders (including GEI) for an aggregate of $17.6
million in cash and $35.0 million of newly issued Series A 13.45% Senior
Exchangeable Preferred Stock of Parent; (viii) Parent sold additional Parent
Common Stock to middle and senior level management of the registrant
(approximately $2.3 million gross proceeds), increasing the beneficial ownership
of management and employees (and members of their families) from 14.0% to 55.3%
(in each instance on a fully diluted basis); and (ix) other transactions,
including a distribution from the registrant to Parent, so that the above
referenced transactions could be effected.
Redomicile and Change of Name of the Registrant and Parent.
The registrant was redomiciled in Delaware. This was accomplished by
merging the predecessor of the registrant with and into New Big 5 Corp., a new
company incorporated in Delaware which was the surviving corporation in that
merger (the "Survivor"). The Survivor was a wholly owned subsidiary of the
registrant, and had no purpose but to merge with the registrant. By operation of
law, as part of the merger, the Survivor assumed all the assets, liabilities,
rights and obligations of the registrant. The Survivor's name was changed to Big
5 Corp. in connection with the merger.
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Item 7. Financial Statements and Exhibits.
3-1 Restated Certificate of Incorporation of registrant (formerly named New
Big 5 Corp.)
3-2 Certificate of Ownership and Merger Merging United Merchandising Corp.
into New Big 5 Corp. (whereby the name of registrant was changed to
Big 5 Corp.)
3-3 By-Laws of registrant, as amended October 27, 1997
99-1 Stockholders Agreement dated as of November 13, 1997 by and among Big 5
Holdings Corp., Robert W. Miller, Steven G. Miller and Green Equity
Investors, L.P.
99-2 1997 Management Equity Plan of Big 5 Holdings Corp.
99-3 Plan of Recapitalization and Stock Repurchase Agreement dated as of
October 31, 1997 by and among Big 5 Holdings Corp., Robert W. Miller,
Steven G. Miller and Green Equity Investors, L.P.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Big 5 Corp.
By: /s/ CHARLES P. KIRK
--------------------------------
Charles P. Kirk
Senior Vice President and
Chief Financial Officer
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EXHIBIT 3-1
Restated Certificate of Incorporation
of
NEW BIG 5 CORP
a Delaware corporation
(originally incorporated on October 27, 1997)
FIRST: The name of the corporation is New Big 5 Corp.
SECOND: The address of the corporation's registered office in the
State of Delaware is 30 Old Rudnick Lane, in the City of Dover, County of Kent.
The name of the corporation's registered agent at such address is CorpAmerica,
Inc.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the Delaware
General Corporation Law ("Delaware Law").
FOURTH: The total number of shares of stock which the corporation
is authorized to issue is three thousand (3,000) shares of common stock, having
a par value of one cent ($0.01) per share.
FIFTH: The business and affairs of the corporation shall be
managed by or under the direction of the board of directors, and the directors
need not be elected by ballot unless required by the bylaws of the corporation.
SIXTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the board of directors is
expressly authorized to make, amend and repeal the bylaws.
SEVENTH: A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. Any repeal or modification of this
provision shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or modification.
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EIGHTH: (A) Right to Indemnification. Each person who was or is
made a party to or is threatened to be made a party to or is involuntarily
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "PROCEEDING"), by
reason of the fact that he or she is or was a director or officer of the
corporation, or is or was serving (during his or her tenure as director and/or
officer) at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, whether the basis of such Proceeding is an alleged action or
inaction in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, shall be indemnified and held
harmless by the corporation to the fullest extent authorized by Delaware Law (or
other applicable law), as the same exists or may hereafter be amended, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection with such
Proceeding. Such director or officer shall have the right to be paid by the
corporation for expenses incurred in defending any such Proceeding in advance of
its final disposition; provided, however, that, if Delaware Law (or other
applicable law) requires, the payment of such expenses in advance of the final
disposition of any such Proceeding shall be made only upon receipt by the
corporation of an undertaking by or on behalf of such director or officer to
repay all amounts so advanced if it should be determined ultimately that he or
she is not entitled to be indemnified under this Article EIGHTH or otherwise.
(B) Right of Claimant to Bring Suit. If a claim under paragraph
(A) of this Article EIGHTH is not paid in full by the corporation within ninety
(90) days after a written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim, together with interest thereon, and, if
successful in whole or in part, the claimant shall also be entitled to be paid
the expense of prosecuting such claim, including reasonable attorneys' fees
incurred in connection therewith. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any Proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the corporation) that the
claimant has not met the standards of conduct which make it permissible under
Delaware Law (or other applicable law) for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the corporation. Neither the failure of the corporation (or of its full Board
of Directors, its directors who are not parties to the Proceeding with respect
to which indemnification is claimed, its stockholders, or independent legal
counsel) to have made a determination prior to the commencement of such action
that indemnification of the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the Delaware Law
(or other applicable law), nor an actual determination by any such person or
persons that such claimant has not met such applicable standard of conduct,
shall be a defense to such action or create a presumption that the claimant has
not met the applicable standard of conduct.
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(C) Non-Exclusivity of Rights. The rights conferred by this
Article EIGHTH shall not be exclusive of any other right which any director,
officer, representative, employee or other agent may have or hereafter acquire
under the Delaware Law or any other statute, or any provision contained in the
corporation's Certificate of Incorporation or bylaws, or any agreement, or
pursuant to a vote of stockholders or disinterested directors, or otherwise.
(D) Insurance and Trust Fund. In furtherance and not in
limitation of the powers conferred by statute:
1. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her status
as such, whether or not the corporation would have the power to indemnify him or
her against such liability under the provisions of law; and
2. The corporation may create a trust fund, grant a
security interest and/or use other means (including, without limitation, letters
of credit, surety bonds and/or other similar arrangements), as well as enter
into contracts providing indemnification to the fullest extent permitted by law
and including as part thereof provisions with respect to any or all of the
foregoing, to ensure the payment of such amount as may become necessary to
effect indemnification as provided therein, or elsewhere.
(E) Indemnification of Employees and Agents of the Corporation.
The corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, including the right to be paid by
the corporation the expenses incurred in defending any Proceeding in advance of
its final disposition, to any employee or agent of the corporation to the
fullest extent of the provisions of this Article EIGHTH or otherwise with
respect to the indemnification and advancement of expenses of directors and
officers of the corporation.
(F) Amendment. This Article EIGHTH is also contained in Article
VIII, Sections 2 through 7, of the corporation's Bylaws. Any repeal or
modification of this Article EIGHTH shall not change the rights of any officer
or director to indemnification with respect to any action or omission occurring
prior to such repeal or modification.
NINTH: The number of directors of the corporation shall be five
(5).
TENTH: (A) The approval of the following actions shall require a
vote of at least eighty percent (80%) of the authorized number of directors of
the corporation (which such number of authorized directors shall include such
number of directors as
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may at that time be entitled to be elected by holders of any series of Preferred
Stock of the corporation):
1. A sale, assignment, lease, transfer, conveyance or
other disposition involving all or substantially all of the assets or capital
stock of the corporation or any of its subsidiaries; a merger, consolidation or
other business combination, or a transaction in which all stockholders of the
corporation are not treated equally;
2. Adoption of a plan of dissolution or liquidation of the
corporation or any of its subsidiaries;
3. Any increase in the compensation to the person acting
as chief executive officer or president of the corporation, or any affiliates of
either of such officers, except any increase in compensation in the ordinary
course of business not materially different from past practices (including the
practices of any predecessor by merger);
4. The issuance of any shares of capital stock, or any
options, warrants or rights (including convertible or exchangeable securities)
to acquire shares of capital stock of the corporation, except shares of capital
stock issued for cash in connection with the exercise of compensatory employee
options issued by the corporation in the ordinary course of business not
materially different from past practices of the corporation (including the
practices of any predecessor by merger);
5. The corporation entering into, or permitting any
subsidiary to enter into, any arrangement or contract with any person which,
together with its affiliates, beneficially owns or has any options, warrants or
rights (including convertible or exchangeable securities) to acquire, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class
of stock of the corporation or with any affiliate of such person, except for any
arrangement or contract that exists as of the date of this Restated Certificate
of Incorporation and any extensions and non-material modifications and
amendments thereof;
6. The (a) redemption, retirement, purchase or other
acquisition for value of any shares of the corporation, (b) assignment to any
person of the corporation's right to purchase or acquire shares of the
corporation pursuant to Article ELEVENTH, or (c) making of any determination
with respect to any shares of the corporation pursuant to Article ELEVENTH,
other than the redemption or repurchase of Common Stock in the ordinary course
of business (i) constituting (in a transaction or series of related
transactions) less than one (1) percent of the outstanding Common Stock of the
corporation on the date or dates of purchase pursuant (x) to Article ELEVENTH or
(y) to a contractual obligation to the holder of any such security, or (ii) in
amounts that are not material pursuant to any management stock purchase
agreement consistent with past practices (including the practices of any
predecessor by merger);
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7. The determination to have the corporation or any of its
subsidiaries enter into any lines of business other than retail merchandising of
sporting goods and other business activities ancillary thereto;
8. The transfer, disposition or issuance of any shares of
capital stock, or any options, warrants or rights (including convertible or
exchangeable securities) to acquire shares of capital stock, of or by any
subsidiary of the corporation, or by any other person that is a wholly-owned
subsidiary of such subsidiary, other than issuances by such a wholly-owned
subsidiary to its immediate parent; and
9. Any amendment of the Certificate of Incorporation or
bylaws of the corporation that would alter or affect in any way the foregoing
supermajority director voting requirements.
(B) This Article TENTH which sets forth the supermajority
director voting requirements may be amended only by the vote or written consent
of the holders of at least sixty-six and two thirds (66-2/3%) of the outstanding
stock of the corporation entitled to vote.
ELEVENTH: The corporation reserves the right to amend and repeal
any provision contained in this Certificate of Incorporation in the manner from
time to time prescribed by the laws of the State of Delaware and all rights
herein conferred upon stockholders are granted subject to this reservation.
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EXHIBIT 3-2
CERTIFICATE OF OWNERSHIP AND MERGER
Merging
UNITED MERCHANDISING CORP.,
a California corporation,
With and Into
NEW BIG 5 CORP.
a Delaware corporation
United Merchandising Corp., a corporation organized and existing under
the laws of the State of California does hereby certify that:
FIRST: United Merchandising Corp. was incorporated on September 7, 1955
pursuant to the California General Corporation Law.
SECOND: United Merchandising Corp. is the owner of all of the issued and
outstanding shares of capital stock of New Big 5 Corp., a corporation
incorporated on October 27, 1997, pursuant to the Delaware General Corporation
Law.
THIRD: At a meeting held on November 7, 1997, the Board of Directors of
United Merchandising Corp., and by written consent pursuant to Section 603(a) of
the California Corporation Law dated as of November 12, 1997 the holders of all
of the outstanding capital stock of United Merchandising Corp. entitled to vote,
approved and adopted resolutions approving the merger of United Merchandising
Corp. with and into New Big 5 Corp. pursuant to Section 1110 of the California
General Corporation Law and Section 253 of the Delaware General Corporation Law
and the pro rata issuance of stock of New Big 5 Corp. upon surrender of any
certificates therefor, effective upon the filing of a Certificate of Ownership
and Merger with the Delaware Secretary of State. Such resolutions read as
follows:
RESOLVED, that United Merchandising Corp. merge with and
into New Big 5 Corp. with New Big 5 Corp. being the surviving
corporation (the "Surviving Corporation") (the "Merger") pursuant
to the provisions of Section 1110 of the California General
Corporation Law, Section 253 of the Delaware General Corporation
Law ("Delaware Law"), and Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "IRC");
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RESOLVED FURTHER, that the Merger be, and it hereby is,
approved and authorized;
RESOLVED FURTHER, that the Merger shall become effective
upon the effectiveness of the filing of the Certificate of
Ownership and Merger with the Delaware Secretary of State in
accordance with Delaware Law (the "Effective Date"), and that
upon the Effective Date, the separate existence and corporate
organization of United Merchandising Corp. shall cease and New
Big 5 Corp. shall thereupon become the Surviving Corporation,
which shall continue its existence under Delaware Law;
RESOLVED FURTHER, that, upon the Effective Date, New Big 5
Corp. shall assume all of the debts, obligations and liabilities
of United Merchandising Corp.;
RESOLVED FURTHER, that, without limitation of the
immediately preceding resolution, the Surviving Corporation shall
assume all of the debts, obligations and liabilities of United
Merchandising Corp., with respect to those certain 13-5/8% Senior
Subordinated Notes due 2002 (the "Senior Subordinated Notes") and
under that certain Indenture (the "Indenture") dated as of
September 25, 1992 pursuant to which the Senior Subordinated
Notes were issued and, following the Merger, shall cause the
defeasance of the Senior Subordinated Notes;
RESOLVED FURTHER, that, to effectuate the pro rata
issuance of shares of New Big 5 Corp. in connection with the
Merger, each share of outstanding Common Stock of United
Merchandising Corp. immediately prior to the Merger shall, upon
surrender of any certificates therefor, be exchanged for one
share of Common Stock of the Surviving Corporation having the
same preferences, privileges and restrictions as the capital
stock for which it was exchanged;
RESOLVED FURTHER, that the issued and outstanding shares
of New Big 5 Corp. immediately prior to the Merger shall not be
converted in any manner, but each said share which is issued as
of the Effective Date shall be surrendered and canceled;
2
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RESOLVED FURTHER, that Article FIRST of the Restated
Certificate of Incorporation of New Big 5 Corp. shall be amended
in the Merger to read in full as follows:
"FIRST: The name of the corporation is Big 5 Corp."
RESOLVED FURTHER, that the Bylaws of New Big 5 Corp. shall
not be amended in any respect by the Merger and that the officers
and directors of New Big 5 Corp. immediately prior to the
Effective Date shall be the officers and directors of the
Surviving Corporation to hold office until their successors have
been duly elected and qualified in accordance with the Restated
Certificate of Incorporation and Bylaws of the Surviving
Corporation;
RESOLVED FURTHER, that upon the Effective Date, all right,
title and interest in and to all real estate and other property
owned by United Merchandising Corp. shall be allocated to and
vested in the Surviving Corporation without reversion or
impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens
thereon;
RESOLVED FURTHER, that notwithstanding the approval of the
sole shareholder of United Merchandising Corp., at any time prior
to the effectiveness of the Merger, the Board of Directors of
United Merchandising Corp. may amend or terminate the Merger by
adopting resolutions to that effect.
3
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IN WITNESS WHEREOF, United Merchandising Corp. has caused this
Certificate of Ownership and Merger to be duly executed by its duly authorized
officer this _____ day of November, 1997.
United Merchandising Corp.,
a California corporation
By ______________________________
Its _____________________________
4
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EXHIBIT 3-3
NEW BIG 5 CORP.
BYLAWS
Name change to "BIG 5 CORP." effective upon
the filing of the Certificate of Ownership
and Merger merging United Merchandising
Corp., a California corporation, with and
into "New Big 5 Corp." filed November 12,
1997.
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TABLE OF CONTENTS
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ARTICLE I OFFICES..................................................................... 1
Section 1. Registered Office....................................... 1
Section 2. Other Offices........................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS................................................... 1
Section 1. Place of Meetings....................................... 1
Section 2. Annual Meetings......................................... 1
Section 3. Special Meetings........................................ 1
Section 4. Notice of Meetings...................................... 2
Section 5. Quorum; Adjournment..................................... 2
Section 6. Proxies and Voting...................................... 2
Section 7. Stock List.............................................. 3
Section 8. Actions by Stockholders................................. 3
ARTICLE III BOARD OF DIRECTORS........................................................ 3
Section 1. Duties and Powers....................................... 3
Section 2. Number and Term of Office............................... 3
Section 3. Vacancies............................................... 4
Section 4. Meetings................................................ 4
Section 5. Quorum.................................................. 4
Section 6. Actions of Board Without a Meeting...................... 4
Section 7. Meetings by Means of Conference Telephone................ 4
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Section 8. Committees.............................................. 5
Section 9. Compensation............................................ 5
Section 10. Removal................................................ 5
ARTICLE IV OFFICERS................................................................... 5
Section 1. General................................................. 5
Section 2. Election; Term of Office................................ 6
Section 3. Chairman of the Board................................... 6
Section 4. President............................................... 6
Section 5. Vice President.......................................... 6
Section 6. Secretary............................................... 6
Section 7. Assistant Secretaries................................... 7
Section 8. Treasurer............................................... 7
Section 9. Assistant Treasurers.................................... 7
Section 10. Other Officers......................................... 7
ARTICLE V STOCK....................................................................... 8
Section 1. Form of Certificates.................................... 8
Section 2. Signatures.............................................. 8
Section 3. Lost Certificates....................................... 8
Section 4. Transfers............................................... 8
Section 5. Record Date............................................. 8
Section 6. Beneficial Owners....................................... 9
Section 7. Voting Securities Owned by the Corporation............... 9
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ARTICLE VI NOTICES.................................................................... 9
Section 1. Notices................................................. 9
Section 2. Waiver of Notice........................................ 9
ARTICLE VII GENERAL PROVISIONS........................................................ 10
Section 1. Dividends............................................... 10
Section 2. Disbursements........................................... 10
Section 3. Corporation Seal........................................ 10
ARTICLE VIII DIRECTORS' LIABILITY AND INDEMNIFICATION................................. 10
Section 1. Directors' Liability.................................... 10
Section 2. Right to Indemnification................................ 11
Section 3. Right of Claimant to Bring Suit......................... 11
Section 4. Non-Exclusivity of Rights............................... 12
Section 5. Insurance and Trust Fund................................ 12
Section 6. Indemnification of Employees and Agents of
the Corporation.............................................. 12
Section 7. Amendment............................................... 12
ARTICLE IX AMENDMENTS................................................................. 12
</TABLE>
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<PAGE> 5
BYLAWS OF
NEW BIG 5 CORP.
(hereinafter called the "Corporation")
NAME CHANGE TO "BIG 5 CORP." EFFECTIVE UPON THE FILING OF THE
CERTIFICATE OF OWNERSHIP AND MERGER MERGING UNITED MERCHANDISING CORP.,
A CALIFORNIA CORPORATION, WITH AND INTO "NEW BIG 5 CORP." FILED NOVEMBER
12, 1997.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders may be
called by the Board of Directors, the Chairman of the Board, the President, or
by the holders of shares entitled to cast not less than 10% of the votes at the
meeting. Upon request in writing to the Chairman of the Board, the President,
any Vice President or the Secretary by any person (other than the board)
entitled to call a special meeting of stockholders, the officer forthwith shall
cause notice to be given to the stockholders entitled to vote that a meeting
will be held at a time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after the receipt
of the request. If the notice is not given within 20 days after receipt of the
request, the persons entitled to call the meeting may give the notice.
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Section 4. Notice of Meetings. Written notice of the place, date, and
time of all meetings of the stockholders shall be given not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or as required from time to time by the Delaware General
Corporation Law or the Certificate of Incorporation.
Section 5. Quorum; Adjournment. At any meeting of the stockholders, the
holders of a majority of all of the shares of the stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law or the Certificate of Incorporation. If a quorum shall
fail to attend any meeting, the chairman of the meeting or the holders of a
majority of the shares of stock entitled to vote who are present, in person or
by proxy, may adjourn the meeting to another place, date, or time without notice
other than announcement at the meeting, until a quorum shall be present or
represented.
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 6. Proxies and Voting. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his name on the record date for the meeting,
except as otherwise provided herein or required by law or the Certificate of
Incorporation.
All voting, including on the election of directors but excepting where
otherwise provided herein or required by law or the Certificate of
Incorporation, may be by a voice vote; provided, however, that upon demand
therefor by a stockholder entitled to vote or such stockholder's proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of Incorporation, all
other matters shall be determined by a majority of the votes cast.
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Section 7. Stock List. A complete list of stockholders entitled to vote
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in such stockholder's name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 8. Actions by Stockholders. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 2. Number and Term of Office. The Board of Directors shall
consist of one (1) or more members. The number of directors shall be fixed and
may be changed from time to time by resolution duly adopted by the Board of
Directors or the stockholders, except as otherwise provided by law or the
Certificate of Incorporation. Except as provided in Section 3 of this Article,
directors shall be elected by the holders of record of a plurality of the votes
cast at Annual Meetings of Stockholders, and each director so elected shall hold
office until the next Annual Meeting and until his or her successor is duly
elected and qualified, or until his or her earlier resignation or removal. Any
director may resign at any time upon written notice to the Corporation.
Directors need not be stockholders.
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Section 3. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director or by the stockholders entitled to vote at any
Annual or Special Meeting held in accordance with Article II, and the directors
so chosen shall hold office until the next Annual or Special Meeting duly called
for that purpose and until their successors are duly elected and qualified, or
until their earlier resignation or removal.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. The first meeting of each newly-elected Board of Directors shall be
held immediately following the Annual Meeting of Stockholders and no notice of
such meeting shall be necessary to be given the newly-elected directors in order
legally to constitute the meeting, provided a quorum shall be present. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman of the
Board, the President or a majority of the directors then in office. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances. Meetings may be held at any time
without notice if all the directors are present or if all those not present
waive such notice in accordance with Section 2 of Article VI of these Bylaws.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these Bylaws, at all meetings of the
Board of Directors, a majority of the directors then in office shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions of Board Without a Meeting. Unless otherwise provided
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these Bylaws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all
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persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 7 shall constitute presence in person at such
meeting.
Section 8. Committees. The Board of Directors may, by resolution passed
by a majority of the directors then in office, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member of
a committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such absent
or disqualified member. Any committee, to the extent allowed by law and provided
in the Bylaw or resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Each
committee shall keep regular minutes and report to the Board of Directors when
required.
Section 9. Compensation. Unless otherwise restricted by the Certificate
of Incorporation or these Bylaws, the Board of Directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 10. Removal. Unless otherwise restricted by the Certificate of
Incorporation or Bylaws, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be appointed
by the Board of Directors and shall consist of a Chairman of the Board or a
President, or both, a Secretary and a Treasurer (or a position with the duties
and responsibilities of a Treasurer). The Board of Directors may also appoint
one or more vice presidents, assistant secretaries or assistant treasurers, and
such other officers as the Board of Directors, in its discretion, shall deem
necessary or appropriate from time to time. Any
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number of offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws otherwise provide.
Section 2. Election; Term of Office. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall elect a Chairman of
the Board or a President, or both, a Secretary and a Treasurer (or a position
with the duties and responsibilities of a Treasurer), and may also elect at that
meeting or any other meeting, such other officers and agents as it shall deem
necessary or appropriate. Each officer of the Corporation shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors together with the powers and duties customarily exercised by
such officer; and each officer of the Corporation shall hold office until such
officer's successor is elected and qualified or until such officer's earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. The Board of Directors may at any time, with or without
cause, by the affirmative vote of a majority of directors then in office, remove
any officer.
Section 3. Chairman of the Board. The Chairman of the Board, if there
shall be such an officer, shall be the chief executive officer of the
Corporation. The Chairman of the Board shall preside at all meetings of the
stockholders and the Board of Directors and shall have such other duties and
powers as may be prescribed by the Board of Directors from time to time.
Section 4. President. The President shall be the chief operating officer
of the Corporation, shall have general and active management of the business of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall have and exercise such
further powers and duties as may be specifically delegated to or vested in the
President from time to time by these Bylaws or the Board of Directors. In the
absence of the Chairman of the Board or in the event of his inability or refusal
to act, or if the Board has not designated a Chairman, the President shall
perform the duties of the Chairman of the Board, and when so acting, shall have
all of the powers and be subject to all of the restrictions upon the Chairman of
the Board.
Section 5. Vice President. In the absence of the President or in the
event of his inability or refusal to act, the Vice President (or in the event
there be more than one vice president, the vice presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. The vice presidents shall perform such other duties and have such
other powers as the Board of Directors or the President may from time to time
prescribe.
Section 6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be
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given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or the President. If the Secretary shall be unable or
shall refuse to cause to be given notice of all meetings of the stockholders and
special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the President may choose
another officer to cause such notice to be given. The Secretary shall have
custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his or her signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
Section 7. Assistant Secretaries. Except as may be otherwise provided in
these Bylaws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, or the Secretary, and shall have the authority to
perform all functions of the Secretary, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Secretary.
Section 8. Treasurer. The Treasurer shall be the Chief Financial
Officer, shall have the custody of the corporate funds and securities, shall
keep complete and accurate accounts of all receipts and disbursements of the
Corporation, and shall deposit all monies and other valuable effects of the
Corporation in its name and to its credit in such banks and other depositories
as may be designated from time to time by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation, taking proper vouchers and receipts
for such disbursements, and shall render to the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
his or her transactions as Treasurer and of the financial condition of the
Corporation. The Treasurer shall, when and if required by the Board of
Directors, give and file with the Corporation a bond, in such form and amount
and with such surety or sureties as shall be satisfactory to the Board of
Directors, for the faithful performance of his or her duties as Treasurer. The
Treasurer shall have such other powers and perform such other duties as the
Board of Directors or the President shall from time to time prescribe.
Section 9. Assistant Treasurers. Except as may be otherwise provided in
these Bylaws, Assistant Treasurers, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, or the Treasurer, and shall have the authority to
perform all functions of the Treasurer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Treasurer.
Section 10. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be
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assigned to them by the Board of Directors. The Board of Directors may delegate
to any other officer of the Corporation the power to choose such other officers
and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board or the President or a Vice
President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by such holder in the Corporation.
Section 2. Signatures. Any or all the signatures on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or such owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by such person's attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be cancelled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more
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than sixty (60) days prior to any other action. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
Section 7. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chairman of the Board, the President,
any Vice President or the Secretary and any such officer may, in the name of and
on behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at such
person's address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Written notice may also
be given personally or by telegram, telex or cable and such notice shall be
deemed to be given at the time of receipt thereof if given personally or at the
time of transmission thereof if given by telegram, telex or cable.
Section 2. Waiver of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these Bylaws to be given to any director, member
or a committee or stockholder, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to notice.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special meeting
or by any Committee of the Board of Directors having such authority at any
meeting thereof, and may be paid in cash, in property, in shares of the capital
stock or in any combination thereof. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in its absolute
discretion, deems proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for any proper purpose, and the Board of Directors may modify or
abolish any such reserve.
Section 2. Disbursements. All notes, checks, drafts and orders for the
payment of money issued by the Corporation shall be signed in the name of the
Corporation by such officers or such other persons as the Board of Directors may
from time to time designate.
Section 3. Corporation Seal. The corporate seal, if the Corporation
shall have a corporate seal, shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
DIRECTORS' LIABILITY AND INDEMNIFICATION
Section 1. Directors' Liability. A director of the Corporation shall not
be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware General
Corporation Law is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended. Any repeal or
modification of this provision shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
This Section 1 is also contained in Article SEVENTH of the Corporation's
Certificate of Incorporation, and accordingly, may be altered, amended or
repealed only to the extent and at the time such Certificate Article is altered,
amended or repealed.
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Section 2. Right to Indemnification. Each person who was or is made a
party to or is threatened to be made a party to or is involuntarily involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that he or she is or was a
director or officer of the Corporation, or is or was serving (during his or her
tenure as director and/or officer) at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, whether the basis of such Proceeding
is an alleged action or inaction in an official capacity as a director or
officer or in any other capacity while serving as a director or officer, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law (or other applicable law), as
the same exists or may hereafter be amended, against all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection with such Proceeding. Such director or
officer shall have the right to be paid by the Corporation for expenses incurred
in defending any such Proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law (or other applicable law)
requires, the payment of such expenses in advance of the final disposition of
any such Proceeding shall be made only upon receipt by the Corporation of an
undertaking by or on behalf of such director or officer to repay all amounts so
advanced if it should be determined ultimately that he or she is not entitled to
be indemnified under this Article or otherwise.
Section 3. Right of Claimant to Bring Suit. If a claim under Section 2
of this Article is not paid in full by the Corporation within ninety (90) days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim, together with interest thereon, and, if successful in whole
or in part, the claimant shall also be entitled to be paid the expense of
prosecuting such claim, including reasonable attorneys' fees incurred in
connection therewith. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
Proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law (or other applicable law) for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation (or
of its full Board of Directors, its directors who are not parties to the
Proceeding with respect to which indemnification is claimed, its stockholders,
or independent legal counsel) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law (or other applicable law), nor
an actual determination by any such person or persons that such claimant has not
met such applicable standard of conduct, shall be a defense to such action or
create a presumption that the claimant has not met the applicable standard of
conduct.
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Section 4. Non-Exclusivity of Rights. The rights conferred by this
Article shall not be exclusive of any other right which any director, officer,
representative, employee or other agent may have or hereafter acquire under the
Delaware General Corporation Law or any other statute, or any provision
contained in the Corporation's Certificate of Incorporation or Bylaws, or any
agreement, or pursuant to a vote of stockholders or disinterested directors, or
otherwise.
Section 5. Insurance and Trust Fund. In furtherance and not in
limitation of the powers conferred by statute:
(1) the Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of law; and
(2) the Corporation may create a trust fund, grant a
security interest and/or use other means (including, without limitation, letters
of credit, surety bonds and/or other similar arrangements), as well as enter
into contracts providing indemnification to the fullest extent permitted by law
and including as part thereof provisions with respect to any or all of the
foregoing, to ensure the payment of such amount as may become necessary to
effect indemnification as provided therein, or elsewhere.
Section 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, including the right to be paid by
the Corporation the expenses incurred in defending any Proceeding in advance of
its final disposition, to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article VIII or otherwise with respect
to the indemnification and advancement of expenses of directors and officers of
the Corporation.
Section 7. Amendment. Any repeal or modification of this Article VIII
shall not change the rights of an officer or director to indemnification with
respect to any action or omission occurring prior to such repeal or
modification.
ARTICLE IX
AMENDMENTS
Except as otherwise specifically stated within an Article to be altered,
amended or repealed, these Bylaws may be altered, amended or repealed and new
Bylaws may be adopted at any meeting of the Board of Directors or of the
stockholders, provided notice of the proposed change was given in the notice of
the meeting.
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<PAGE> 1
EXHIBIT 99-1
STOCKHOLDERS AGREEMENT
DATED AS OF NOVEMBER 13, 1997
By and Among
GREEN EQUITY INVESTORS, L.P.,
ROBERT W. MILLER,
STEVEN G. MILLER,
and
BIG 5 HOLDINGS CORP.
<PAGE> 2
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "AGREEMENT") is entered into as of
November 13, 1997, by and among Green Equity Investors, L.P., a Delaware limited
partnership ("GEI"), Robert W. Miller ("RW MILLER"), Steven G. Miller ("SG
MILLER" and together with RW Miller, the "MILLERS") and Big 5 Holdings Corp., a
Delaware corporation (the "PARENT"), with respect to the following facts and
circumstances:
A. Substantially simultaneously with the execution of this Agreement,
Parent and Big 5 Corp, a Delaware corporation, successor to United Merchandising
Corp., a California corporation ("SUBSIDIARY"), are consummating the
transactions described under the caption "The Recapitalization" contained in
that certain Offering Memorandum, dated November 8, 1997 (the "OFFERING
MEMORANDUM"), (the "RECAPITALIZATION").
B. Upon consummation of the Recapitalization, GEI will own 723,577
shares of the Common Stock, par value $0.01 per share, of Parent (the "COMMON
STOCK"), RW Miller will own approximately 250,509 shares of Common Stock, SG
Miller will own 200,000 shares of Common Stock and members of the families of
the Millers will own 100,000 shares of Common Stock.
C. Parent, GEI and the Millers desire, for their mutual benefit and
protection, to enter into this Agreement to set forth their respective rights
and obligations with respect to certain corporate governance issues respecting
Parent and Subsidiary.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
1.1 Definitions. In addition to certain terms that are defined elsewhere
herein, as used in this Agreement, the following definitions shall apply:
1.1.1 "AFFILIATE" means, with respect to any Person, any other
Person (other than Parent or Subsidiary) directly or indirectly, through one or
more intermediaries, controlling, controlled by or under common control with any
such Person and, when used with reference to any natural Person, shall also
include such Person's spouse, parents and descendants (whether by blood or
adoption, and including stepchildren), the spouses of such Persons, the siblings
of such Persons and trusts for the benefit of any of the foregoing Persons;
provided, however, that there shall be excluded from the foregoing any entity
formed or existing as part of a transaction or activity in the course of
Parent's or Subsidiary's business. The term "control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession,
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<PAGE> 3
direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities of a Person, by contract or otherwise.
1.1.2 "NASDAQ" means The Nasdaq Stock Market, Inc.'s National Market
or SmallCap systems.
1.1.3 "OPTIONS" means any warrant, option, security convertible or
exchangeable into Common Stock (or stock of any subsidiary) or other right to
acquire Common Stock (or stock of any subsidiary), including, without
limitation, employee stock options.
1.1.4 "PERSON" means an association, a corporation, an individual, a
partnership, a limited liability company or limited liability partnership, a
trust or any other entity, association or organization.
1.1.5 "PREFERRED STOCK" means Parent's Series A 13.45% Senior
Exchangeable Preferred Stock.
1.1.6 "STOCKHOLDER" means each of GEI and the Millers, in each case
together with its and their respective Affiliates, and any other Person who
shall become a party to or agree to be bound by the terms of this Agreement
after the date hereof, together with its and their Affiliates.
1.1.7 "SHARES" means shares of Common Stock and shares of Preferred
Stock, whether now directly or indirectly owned or controlled by any Stockholder
(or Affiliate thereof) or hereafter acquired by any Stockholder (or Affiliate
thereof) in any manner, including upon exercise of any Option.
1.1.8 "SUBSIDIARY" means in addition to Big 5 Corp, a Delaware
corporation, successor to United Merchandising Corp., a California corporation,
any direct or indirect wholly-owned subsidiary of Parent, whether now existing
or hereafter organized or acquired.
ARTICLE 2
Voting Agreements
2.1 Board of Directors. Each Stockholder shall, and shall cause its
Affiliates to, vote any and all Common Stock held by such Stockholder and its
Affiliates in order to effect the following at all times:
2.1.1 Number of Directors. Parent and Subsidiary each shall be
governed by a Board of Directors consisting of five (5) members. Of such
directors, (i) two (2) shall be designated by GEI (the "GEI DIRECTORS") and (ii)
two (2) shall be the Millers and one (1) or, if either of the Millers shall for
reasons of health be unable to serve as a director, then two (2), shall be
designated by the Millers (the "MILLERS'
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<PAGE> 4
DIRECTORS"). Each of GEI and the Millers, respectively, (the "REMOVING PARTY"),
by notice to the other such party, shall be entitled to cause the parties hereto
to act to remove any of the GEI Directors or Miller Directors, respectively,
originally designated by such Removing Party. In such event the parties shall
act promptly to cause such removal of any of the GEI Directors or Miller
Directors originally designated by the Removing Party and to cause the election
of a replacement GEI Director or Miller Director as designated by the Removing
Party and permitted by this Section. In the event that the size of the Board of
Directors of Parent or Subsidiary is increased or decreased, the number of GEI
Directors and Miller Directors on such Board of Directors shall be equitably
adjusted so that the Miller Directors shall constitute a simple majority of the
Board of Directors and the number of GEI Directors shall be increased
proportionately to the number of Miller Directors.
2.1.2 Initial Board of Directors. The Board of Directors of Parent
and of Subsidiary as of the date of this Agreement consist of the following
members:
Name of Director Designated By:
---------------- --------------
RW Miller Millers
SG Miller Millers
Dr. Michael D. Miller Millers
John G. Danhakl GEI
John A. Seiffer GEI
Each of such persons shall hold office until his or her death,
resignation or removal or until his or her successor shall thereafter have been
duly elected and qualified. By signing this Agreement, each of the parties
hereby consents to the election of the foregoing designees to the initial Board
of Directors of Parent and Subsidiary.
2.1.3 Vacancies; Action by Board of Directors. If a vacancy is
created on the Board of Directors of either of Parent or Subsidiary by reason of
the death, disability, removal or resignation of any director, the party who
originally designated the director whose death, disability, removal or
resignation resulted in such vacancy shall be entitled to designate a new Miller
Director or GEI Director, as the case may be, to fill such vacancy, and Parent
or Subsidiary, as the case may be, shall cause the remaining directors to meet
within ten (10) business days after the date such vacancy occurs for the purpose
of electing the designated new director to fill such vacancy. Each Stockholder
with respect to Parent, and Parent with respect to Subsidiary, shall take such
steps as are necessary to cause the election of the person so designated to fill
such vacancy.
2.2 Supermajority Director Votes. The parties acknowledge and agree
that, under the Certificate of Incorporation and Bylaws of Parent and of
Subsidiary as they exist on the date hereof and shall exist during the term of
this Agreement, the approval of the following actions shall require a vote of at
least eighty percent (80%) of the authorized number of directors of the
corporation (which such number of authorized directors shall include such number
of directors as may at that time be entitled to be elected by holders of any
series of Preferred Stock of the corporation). If the number of
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authorized directors of Parent or of Subsidiary is ever increased above nine
(9), then the percentage vote required for approval of such actions shall be
equitably increased so that the affirmative vote of at least one of the GEI
Directors is required to approve such actions.
2.2.1 a sale, assignment, lease, transfer, conveyance or other
disposition involving all or substantially all of the assets or capital stock of
the corporation or any of its subsidiaries; a merger, consolidation or other
business combination, or a transaction in which all stockholders of Parent are
not treated equally;
2.2.2 adoption of a plan of dissolution or liquidation of the
corporation or any of its subsidiaries;
2.2.3 any increase in the compensation to either of the Millers, or
any Affiliates of the Millers, except any increase in compensation in the
ordinary course of business not materially different from past practices
(including the practices of any predecessor by merger);
2.2.4 the issuance of any shares of capital stock, or any options,
warrants or rights (including convertible or exchangeable securities) to acquire
shares of capital stock, of the corporation, except shares of capital stock
issued for cash in connection with the exercise of compensatory employee Options
issued by the corporation in the ordinary course of business not materially
different from past practices (including the practices of any predecessor by
merger), provided that Subsidiary may only issue shares of capital stock to
Parent;
2.2.5 the corporation entering into, or permitting any subsidiary to
enter into, any arrangement or contract with any Person which, together with its
Affiliates, beneficially owns or has a Option to acquire, directly or
indirectly, five percent (5%) or more of the outstanding shares of any class of
stock of the corporation or with any Affiliate of such Person, except for any
arrangement or contract that exists as of the date hereof and any extensions and
non-material modifications and amendments thereof;
2.2.6 the (i) redemption, retirement, purchase or other acquisition
for value of any shares of the corporation, (ii) assignment to any person of
Parent's right to purchase or acquire shares of the corporation pursuant to
Article ELEVENTH of the Certificate of Incorporation of Parent, or (iii) making
of any determination with respect to any shares of the corporation pursuant to
such Article ELEVENTH, other than the redemption or repurchase of Common Stock
in the ordinary course of business (A) constituting (in a transaction or series
of related transactions) less than one (1) percent of the outstanding Common
Stock of the corporation on the date or dates of purchase pursuant (x) to
Article ELEVENTH or (y) to a contractual obligation to the holder of any such
security, or (B) in amounts that are not material pursuant to any management
stock purchase agreement consistent with past practices (including the practices
of any predecessor by merger);
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<PAGE> 6
2.2.7 the determination to have the corporation or any of its
subsidiaries enter into any lines of business other than retail merchandising of
sporting goods and other business activities ancillary thereto;
2.2.8 the transfer, disposition or issuance of any shares of capital
stock, or any options, warrants or rights (including convertible or exchangeable
securities) to acquire shares of capital stock, of or by any subsidiary of the
corporation, or by any other Person that is a wholly-owned subsidiary of such
subsidiary, other than issuances by such a wholly-owned subsidiary to its
immediate parent; and
2.2.9 any amendment of the Certificate of Incorporation or Bylaws of
the corporation that would alter or affect in any way the supermajority director
voting requirements.
The parties agree that during the term of this Agreement, without the prior
written consent of GEI, no Stockholder shall take any action or vote or give its
consent to any amendment or change of the Certificate of Incorporation or Bylaws
of either Parent or Subsidiary that would alter or affect in any way the
supermajority director voting requirements set forth above. Further, the parties
agree that if for any reason they cannot agree on an equitable adjustment to the
supermajority vote as a result of a change in the number of directors, then the
number of directors necessary to approve any of the actions enumerated above
shall be changed by amendment to the Certificate of Incorporation and/or Bylaws
(as applicable) of the corporation to require the affirmative vote of all of the
directors less one (1).
2.3 Binding Agreements on Affiliates and Transferees. Each of the
Millers and GEI agrees to cause its Affiliates who own Common Stock from time to
time to enter into a counterpart of this Agreement (at the date hereof as to
Affiliates who own such Common Stock at the date hereof or upon acquiring such
Common Stock hereafter) and thereby such Affiliate shall agree to vote such
Common Stock in the same manner as the party with respect to whom such Person is
an Affiliate is obligated to vote any Common Stock owned by such party. In the
event that prior to the Common Stock being listed or admitted to trading on a
national securities exchange or quoted on the NASDAQ and the rules and
regulations of such national securities exchange or the NASDAQ, as the case may
be, any Stockholder shall transfer any of the Common Stock owned by any of them
to a person who is not an Affiliate of the transferor, then as a condition to
such transfer, the transferee shall be obligated to enter into a counterpart of
this Agreement and thereby agree to vote such Common Stock in the same manner as
such person's transferor was obligated to vote such Common Stock and to cause
such Person's transferees to be bound by the terms and conditions of this
Agreement.
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ARTICLE 3
Tag-Along Rights
3.1 Right to Participate in Sale. If (i) the Millers (and any Affiliated
transferee or transferees of equity securities of the Millers) enter into an
agreement to transfer, sell or otherwise dispose of any interest (including the
grant of an option) in ("Transfer") more than fifty percent (50%) of the
aggregate shares of Common Stock held by them or (ii) the Millers (and any
Affiliated transferee or transferees of equity securities of the Millers) and
any other stockholders of Parent, with or without the participation or
involvement of Parent, acting as a group within the meaning of Rule 13d or 14d
of the Securities Exchange Act of 1934, as amended, whether or not applicable,
enter into an agreement, arrangement or series of agreements or arrangements (A)
to Transfer more than fifty percent (50%) of the then outstanding shares of
Common Stock of Parent or (B) to Transfer a combination of outstanding and newly
issued Common Stock that would constitute more than fifty percent (50%) of the
shares of Common Stock of Parent to be outstanding upon the completion of the
Transfer or related series of Transfers (collectively, any such proposed
transferor or transferors (excluding Parent), the "MAJORITY STOCKHOLDER" and
each such Transfer or related series of Transfers, a "TAG-ALONG SALE"), then the
Millers, and Parent if it is a Transferor, shall as a condition of such
Tag-Along Sale, arrange for GEI (including, for purposes of this Article 3, the
Affiliates and transferees of GEI) to have the right, but not the obligation, to
participate in such Tag-Along Sale with respect to the Common Stock proposed to
be sold by the Majority Stockholder. The number of shares of Common Stock that
GEI will be entitled to include in a Tag-Along Sale ("GEI'S ALLOTMENT") shall be
determined by multiplying (a) the total number of shares of such Common Stock
proposed to be Transferred pursuant to the Tag-Along Sale (other than shares
proposed to be issued by Parent), by (b) a fraction, the numerator of which
shall equal the aggregate number of shares of such Common Stock owned by GEI on
the day immediately preceding the Tag-Along Notice Date (as defined below) and
the denominator of which shall equal the sum of (I) the aggregate number of
shares of such Common Stock owned by the Majority Stockholder plus (II) the
aggregate number of shares of such Common Stock held by all other Persons
holding shares of such Common Stock of Parent and the aggregate number of shares
of such Common Stock subject to stock options to acquire such Common Stock held
by Persons who have tag-along rights with regard to such shares or shares
subject to stock options, and others who may have tag-along rights relative to
the Majority Stockholder, in each case, on the day immediately preceding the
Tag-Along Notice Date. The "TAG-ALONG NOTICE DATE" shall be the date that the
Tag-Along Sale Notice (as defined below) is first delivered, mailed or sent by
courier or telecopy to GEI.
3.2 Limitation on Representations; Indemnity. Any sales of Common Stock
by GEI (and Persons with similar or derivative tag-along rights) as a result of
the "Tag- Along Rights" granted to GEI pursuant to this Agreement shall be on
the same terms and conditions as the proposed Tag-Along Sale by the Majority
Stockholder; provided, however, that in negotiating a Tag-Along Sale, the
Millers and, if applicable, Parent
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<PAGE> 8
shall use their or its reasonable, good faith efforts to provide (i) that the
only representation and warranty which GEI shall be required to make in
connection with any Transfer is a warranty with respect to its own ownership of
the shares to be sold by it and its ability to convey title thereto free and
clear of liens, encumbrances or adverse claims, and (ii) that the liability of
GEI with respect to any representation and warranty made in connection with any
Transfer is the several (and not joint) liability of GEI and that such liability
is limited to the amount of proceeds actually received by GEI.
3.3 Sale Notice. The Millers and, if applicable, Parent shall provide
GEI with written notice (the "TAG-ALONG SALE NOTICE") not more than sixty (60)
nor less than twenty (20) days prior to the proposed date of the Tag-Along Sale
(the "TAG-ALONG SALE DATE"). Each Tag-Along Sale Notice shall set forth: (i) the
name and address of each proposed transferee or purchaser of shares in the
Tag-Along Sale; (ii) the number of shares proposed to be Transferred by the
Majority Stockholder and, if applicable, Parent; (iii) the proposed amount and
form of consideration to be paid for such shares and the terms and conditions of
payment offered by each proposed transferee or purchaser; (iv) the aggregate
number of shares of Common Stock proposed to be Transferred that are held of
record as of the close of business on the day immediately preceding the
Tag-Along Notice Date by the Majority Stockholder; (v) GEI's Allotment assuming
GEI elected to sell the maximum number of shares of Common Stock possible; (vi)
confirmation that the proposed purchaser or transferee has been informed of the
"Tag-Along Rights" provided for herein and has agreed to purchase shares of such
Common Stock in accordance with the terms hereof; and (vii) the Tag-Along Sale
Date.
3.4 Tag-Along Notice. If GEI wishes to participate in the Tag-Along
Sale, it shall provide written notice (the "TAG-ALONG NOTICE") to the Millers
and, if applicable, Parent no less than ten (10) business days prior to the
Tag-Along Sale Date. The Tag-Along Notice shall set forth the number of shares
of Common Stock proposed to be Transferred that GEI elects to include in the
Tag-Along Sale, which shall not exceed GEI's Allotment. The Tag-Along Notice
shall also specify the aggregate number of additional shares of Common Stock
owned of record as of the close of business on the day immediately preceding the
Tag-Along Notice Date by GEI, if any, which GEI desires also to include in the
sale ("ADDITIONAL SHARES") in the event there is any under-subscription for the
entire amount of shares that may be included by Persons having, and pursuant to,
tag-along rights relative to the Majority Stockholder (collectively, the
"SELLERS' ALLOTMENTS"). In the event there is an under-subscription of the
entire amount of such Sellers' Allotments, the Millers and, if applicable,
Parent shall apportion the unsubscribed Sellers' Allotments to such holders
whose tag-along notices specified an amount of Additional Shares, which
apportionment shall be on a pro rata basis among such holders in accordance with
the number of Additional Shares specified by all such holders in their Tag-Along
Notice. The Tag-Along Notice given by GEI shall constitute its binding agreement
to sell such Common Stock on the terms and conditions applicable to the
Tag-Along Sale, subject to the provisions of Section 3.2 above and provided
further that, in the event that there is any material change in the terms and
conditions of such Tag-Along Sale applicable to GEI after GEI gives such
Tag-Along Notice, then, notwithstanding anything herein to the contrary, GEI
shall have the right to elect not to
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participate in the Tag-Along Sale with respect to any or all of its shares of
Common Stock affected thereby. If the proposed transferee or purchaser does not
purchase all of such shares on the same terms and conditions applicable to the
Millers (except as otherwise provided herein), then the Millers and, if
applicable, Parent shall not consummate the Tag-Along Sale of any of their or
its shares to such transferee or purchaser, unless the shares of GEI and the
Majority Stockholder are reduced or limited pro rata in proportion to the
respective number of shares actually sold in any such Tag-Along Sale and GEI
elects to Transfer its shares on such revised terms.
3.5 Failure to Exercise. If a Tag-Along Notice is not received by the
Millers and, if applicable, Parent from GEI prior to the ten (10)-day period
specified above, the Majority Stockholder shall have the right to Transfer the
number of shares specified in the Tag-Along Sale Notice to the proposed
purchaser or transferee without any participation by GEI, but only on terms and
conditions which are no more favorable in any material respect to each of the
Millers and, if applicable, Parent than as stated in the Tag-Along Sale Notice
to GEI and only if such Tag-Along Sale occurs on a date within sixty (60)
business days of the Tag-Along Sale Date.
3.6 Exempt Transfers. The provisions of Section 3.1 shall not apply to
(i) any bona fide offering of Common Stock pursuant to an effective registration
statement under the Act or any bona fide public distribution of Common Stock
pursuant to Rule 144 thereunder, or (ii) any Transfer without consideration
(other than nominal consideration to satisfy legal title transfer requirements)
by the Millers to one of their affiliates (except that (A) prior to any such
disposition the party receiving such shares of Common Stock shall agree in
writing to be bound by the terms of this Agreement applicable to the Millers as
if such Transferee were an original party hereto and (B) any such shares of
Common Stock shall continue to be subject to this Agreement).
ARTICLE 4
Representations and Warranties
4.1 Representations and Warranties of Parent.
Parent represents and warrants to the Stockholders as follows:
4.1.1 Organization. It is a corporation duly organized and validly
existing under the laws of the State of Delaware.
4.1.2 Authority. It has full corporate power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
4.1.3 Binding Obligation. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on its part, and,
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assuming the due authorization, execution and delivery of this Agreement by each
of the other parties hereto, this Agreement constitutes its binding obligation,
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally.
4.1.4 No Conflict. The execution, delivery and performance of this
Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its Certificate of Incorporation or Bylaws or any material
agreement or other material instrument to which it is a party or by which it or
its property is bound or affected.
4.2 Representations and Warranties of GEI. GEI represents and warrants
to the Millers and to Parent as follows:
4.2.1 Organization. It is a limited partnership duly organized and
validly existing under the laws of its state of organization.
4.2.2 Authority. It has full power and authority to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby.
4.2.3 Binding Obligation. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions contemplated
hereby have been duly and validly authorized by all necessary action on its
part, and, assuming the due authorization, execution and delivery of this
Agreement by each of the other parties hereto, this Agreement constitutes its
binding obligation, enforceable against it in accordance with its terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws and equitable principles relating to or limiting creditors'
rights generally.
4.2.4 No Conflict. The execution, delivery and performance of this
Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its charter, bylaws or equivalent governing documents or any
material agreement or other material instrument to which it is a party or by
which it or its property is bound or affected.
4.3 Representations and Warranties of the Millers. Each of the Millers,
severally and not jointly, represents and warrants to GEI and to Parent as
follows:
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4.3.1 Authority. He has full power and authority to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby.
4.3.2 Binding Obligation. Assuming the due authorization, execution
and delivery of this Agreement by each of the other parties hereto, this
Agreement constitutes his binding obligation, enforceable against him in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors' rights generally.
4.3.3 No Conflict. The execution, delivery and performance of this
Agreement by him and the consummation by him of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time or
both, (i) violate any provision of law, statute, rule or regulation to which he
is subject, (ii) violate any order, judgment or decree applicable to him, or
(iii) conflict with, or result in a breach or default under, any term or
condition of any material agreement or other material instrument to which he is
a party or by which he or his property is bound or affected.
ARTICLE 5
Miscellaneous
5.1 Termination. The provisions of Article 2 of this Agreement shall
terminate on, and be of no further force and effect after, the first to occur of
the following: (i) the date the Common Stock is listed or admitted to trading on
a national securities exchange or quoted on NASDAQ, (ii) the date the Millers
and their Affiliates own less than fifty percent (50%) of the Common Stock owned
by them immediately following the consummation of the Recapitalization, (iii)
the date the shares of Common Stock of Parent outstanding immediately following
the consummation of the Recapitalization constitute less than fifty percent
(50%) of the outstanding Common Stock of Parent on a fully diluted basis taking
into account Options, (iv) the death or permanent disability of both of the
Millers so that they are no longer willing or able to serve as Miller Directors
or (v) December 1, 2007.
5.2 Recapitalization, Exchanges, etc. Affecting the Common Stock. The
provisions of this Agreement shall apply to the full extent set forth herein
with respect to (i) the Common Stock and any Option to acquire Common Stock,
(ii) any and all shares of capital stock or other securities of Parent or any
successor or assign of Parent (whether by merger, consolidation, stock sale,
sale of assets, exchange or otherwise) which may be issued in respect of, in
exchange for, or in substitution for the Common Stock or any Options, by
combination, recapitalization, reclassification, merger, consolidation or
otherwise, and (iii) any shares of capital stock or other securities of Parent
or any successor or assign received in connection with any stock split, stock
dividend, stock combination or other recapitalization or similar event; and in
each such case the provisions of this Agreement shall be appropriately adjusted
so that the
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<PAGE> 12
Stockholders receive all of the benefits of, and have all of the obligations
under, this Agreement with respect to all such securities.
5.3 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given upon receipt if delivered personally or sent by facsimile
transmission (receipt of which is confirmed) or by courier service promising
overnight delivery (with delivery confirmed the next day) or three (3) business
days after sent by registered or certified mail (postage prepaid, return receipt
requested). Notices shall be addressed as follows:
To Parent: Big 5 Holdings Corp.
2525 East El Segundo Boulevard
El Segundo, California 90245
Attention: Gary Meade, General Counsel
Facsimile: (310) 297-7592
With a copy to: Irell & Manella LLP
333 South Hope Street, 33rd Floor
Los Angeles, California 90071
Attention: Edmund M. Kaufman, Esq.
Facsimile: (213) 229-0515
To GEI: Green Equity Investors, L.P.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, California 90025
Attention: Jennifer Holden Dunbar
Facsimile: (310) 954-0404
To the Millers: Robert W. Miller
Steven G. Miller
c/o Big 5 Holdings Corp.
2525 East El Segundo Boulevard
El Segundo, California 90245
Facsimile: (310) 297-7595
Any party may from time to time change its address for the purpose of notices by
a similar notice specifying the new address but no such change shall be
effective as against any Person until such Person shall have actually received
it.
5.4 Specific Performance. The parties hereto agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled
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<PAGE> 13
to specific performance of the terms hereof (without requirement to post bond),
in addition to any and all other remedies at law or in equity.
5.5 Amendment; Waiver. This Agreement may be amended, modified,
supplemented or terminated only by a written instrument signed by Parent and
each Stockholder. No provision of this Agreement may be waived orally, but only
by a written instrument signed by the party against whom enforcement of such
waiver is sought. Stockholders shall be bound from and after the date of the
receipt of a written notice from Parent setting forth such amendment or waiver,
whether or not the Common Stock shall have been marked to indicate the same. No
alteration, modification or impairment shall be implied by reason of any
previous waiver, extension of time, delay or omission in exercise, or other
indulgence.
5.6 Further Assurances. Each party hereto agrees to execute any and all
further documents and writings and to perform such other actions which may be or
become necessary or expedient to effectuate and carry out this Agreement.
5.7 No Third-Party Benefits. None of the provisions of this Agreement
shall be for the benefit of, or enforceable by, any third-party beneficiary.
5.8 Interpretation. For all purposes of this Agreement, except as
otherwise expressly provided, all terms defined herein include the plural as
well as the singular and the words "include," "includes" and "including" shall
be deemed in each case to be followed by the words "without limitation."
5.9 Assignability. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and assigns.
5.10 Severability. If any provision hereof shall be held to be
unenforceable or invalid by any court of competent jurisdiction or as a result
of future legislative action, such holding or action shall be strictly construed
and shall not alter the enforceability, validity or effect of any other
provision hereof.
5.11 Entire Agreement. This Agreement contains the final and entire
agreement among the parties with respect to the matters contemplated hereby and
supersedes all written or verbal representations, warranties, commitments and
other understandings prior to the date hereof. No reference shall be made to any
draft of this Agreement for purposes of interpretation or resolution of
ambiguity or otherwise.
5.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
5.13 Attorney's Fees. In any suit or proceeding arising out of this
Agreement to interpret or enforce any provision of this Agreement, the
prevailing party shall be entitled to all reasonable out-of-pocket expenses and
reasonable attorneys' fees incurred by such party in connection with such suit
or proceeding.
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<PAGE> 14
5.14 Captions. The descriptive headings herein are inserted for
convenience only and are not intended to be part of or to affect the meaning
or interpretation of this Agreement.
5.15 Information Regarding Beneficial Ownership. Each Stockholder agrees
to promptly provide to Parent any information or representations that Parent
may request regarding such Stockholder's beneficial ownership of Common Stock.
5.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first set forth above.
[SIGNATURE BLOCKS OMITTED]
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<PAGE> 1
EXHIBIT 99-2
BIG 5 HOLDINGS CORP.
1997 MANAGEMENT EQUITY PLAN
1. Purpose. The purpose of this Plan is to secure for Big 5 Holdings
Corp. (the "COMPANY") and its stockholders the benefits arising from stock
ownership by officers, directors and selected key employees of the Company and
its subsidiaries, including without limitation, Big 5 Corp. ("BIG 5"), a
wholly-owned subsidiary of the Company, as the Committee (as hereinafter
defined) may from time to time determine.
The Company intends that awards of Purchased Shares and Stock Options, and
the issuance of Common Stock upon exercise of Stock Options hereunder (all as
hereinafter defined), shall constitute the offer and sale of securities pursuant
to a compensatory benefit plan within the meaning of Rule 701 promulgated under
the Securities Act of 1933, as amended, and that this 1997 Management Equity
Plan (the "PLAN") constitutes a stock option plan and stock purchase plan within
the meaning of Section 25102(o) of the California Corporate Securities Law of
1968, as amended.
With respect to Stock Options, the Plan will provide a means whereby (i)
key employees may purchase shares of Common Stock of the Company pursuant to
Stock Options that will qualify as "incentive stock options" under Section 422
of the Internal Revenue Code of 1986, as amended (the "CODE"), and (ii) such
employees may purchase shares of Common Stock of the Company pursuant to
"non-incentive" or "non-qualified" Stock Options.
2. Administration. The Plan shall be administered by the Board of
Directors of the Company or, in the discretion of the Board, a Committee (in
either case, the "COMMITTEE") consisting of three or more directors of the
Company to whom administration of the Plan has been duly delegated. If the
Committee is not the entire Board of Directors, the Committee shall be appointed
by the Board of Directors of the Company. From and after such time as the
Company is subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), no director
shall be appointed to or shall serve on the Committee who is not a "Non-Employee
Director" (as defined in Rule 16b-3 promulgated under the Exchange Act). Except
as otherwise provided in the Company's Certificate of Incorporation or Bylaws,
any action of the Committee with respect to administration of the Plan shall be
taken by a majority vote at a meeting at which a quorum is duly constituted or
unanimous written consent of the Committee's members.
Subject to the provisions of the Plan, the Committee shall have sole and
final authority (i) to construe and interpret the Plan, (ii) to define the terms
used herein, (iii) to prescribe, amend and rescind rules and regulations
relating to the Plan, (iv) to make awards of Purchased Shares and Stock Options
hereunder, (v) to determine the individuals to whom and the time or times at
which such awards shall be made, the
<PAGE> 2
number of shares of Common Stock to be subject to such awards, the vesting of
such awards and the other terms of such awards, (vi) in the case of Stock
Options, to determine whether such Stock Options shall be intended as "incentive
stock options" or "non-incentive" or "non-qualified" Stock Options under Section
422 of the Code, and (vii) to make all other determinations necessary or
advisable for the administration of the Plan. All determinations and
interpretations made by the Committee shall be binding and conclusive on all
participants in the Plan and their legal representatives and beneficiaries.
3. Shares Subject to the Plan. The shares to be allocated under this
Plan shall consist of the Company's authorized but unissued Common Stock, $.01
par value per share ("COMMON STOCK"). Subject to adjustment as provided in
Section 8 hereof, the aggregate number of shares of the Common Stock which may
be allocated to awards made to Participants (as hereinafter defined) shall not
exceed Five Hundred Sixty Thousand (560,000) of such shares (no more than One
Hundred Thousand (100,000) of which shall be subject to Stock Options
outstanding at any time). Shares of Common Stock issued pursuant to the Plan and
subsequently reacquired by the Company shall be available for reissuance under
the Plan; and shares of Common Stock that are subject to Stock Options that
lapse or terminate without exercise shall be available to be subject to newly
issued Stock Options under the Plan or otherwise reissued under the Plan.
4. Eligibility and Participation. All key employees of Big 5 shall be
eligible for selection to participate in the Plan (each, a "PARTICIPANT").
5. Awards. A Participant may receive one of more awards hereunder, at
any time and from time to time, as determined by the Committee. Awards may be in
the form of (i) permitted purchases of Common Stock ("PURCHASED SHARES") or (ii)
options to purchase Common Stock ("STOCK OPTIONS"), or any combination of the
foregoing, as determined by the Committee. All awards of Purchased Shares shall
be pursuant to, and shall be subject to the terms and restrictions provided in,
a Management Subscription and Stockholders Agreement substantially in the form
approved from time to time by the Committee; and all awards of Stock Options
shall be pursuant to, and shall be subject to the terms and restrictions
provided in, either a Management Stock Option and Stockholders Agreement or an
Employee Stock Option Agreement substantially in the form attached hereto or as
approved from time to time by the Committee (collectively, the "GRANT
DOCUMENTS"). Subject to the terms of this Plan, the Committee shall determine
the exact terms and restrictions included in each of the foregoing agreements,
as applicable, with respect to each award to a Participant.
6. Provisions Applicable to Stock Options.
(a) No Stock Option granted hereunder shall have an exercise price
which is less than 85% of the fair market value of the Common Stock at the time
the Stock Option is granted. In the case of a Stock Option granted to any person
who owns Common Stock possessing more than 10% percent of the total combined
voting power of all classes of stock of the Company, no Stock Option shall be
granted with an exercise
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<PAGE> 3
price of less than 110% of the fair market value of the Common Stock at the time
of the grant.
(b) If a holder of an "incentive stock option" ceases to be
employed by Big 5, the Company or another subsidiary of the Company for any
reason other than the option holder's death or permanent disability (within the
meaning of Section 22(e)(3) of the Code), the option holder's "incentive stock
option" shall not be entitled to incentive treatment under the Code if exercised
after more than three months after the date the option holder ceased to be an
employee of one of such corporations (unless by its terms such Stock Option
sooner expires). If a holder of an "incentive stock option" ceases to be
employed by Big 5, the Company or another subsidiary of the Company on account
of death or permanent disability (within the meaning of Section 22(e)(3) of the
Code), such Stock Option shall not be entitled to incentive treatment under the
Code if exercised after one year after the date of such death or permanent
disability unless by its terms it sooner expires. During such period after
death, any vested unexercised portion of the Stock Option may be exercised by
the person or persons to whom the option holder's rights under the Stock Option
shall pass by will or the laws of descent and distribution.
To the extent that the aggregate fair market value of Common Stock or
other capital stock with respect to which "incentive stock options" are
exercisable for the first time by any individual during any calendar year (under
all plans of the Company and its parent and subsidiary corporations) exceeds
$100,000, such Stock Options shall be treated as Stock Options which are not
"incentive stock options."
(c) Stock Options granted hereunder shall have an exercise period
not to exceed 120 months from the date the Stock Option is granted.
(d) The right to exercise Stock Options granted hereunder shall
vest at a rate of at least 20% per year over five years from the date the option
is granted, provided, however, that all Stock Options shall cease to vest
immediately upon termination of a Participant's employment for any reason
(unless otherwise approved by the Committee); and provided further, that in the
case of Stock Options granted to officers or directors, such Stock Options may
become fully exercisable, subject to continued employment (unless otherwise
approved by the Committee), at any time or during any period as the Committee
shall determine.
(e) In the event that any Participant previously granted Stock
Options hereunder ceases to be employed by Big 5, the Company or another
subsidiary of the Company by which Stock Options such Participant had the right
to exercise as of the date such individual ceases to be employed by Big 5, the
Company or another subsidiary of the Company, such Stock Options will be
exercisable:
(i) For at least six months if the Participant ceases to be
employed by Big 5, the Company or another subsidiary of the Company because of
death or disability; or
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<PAGE> 4
(ii) For at least thirty days if the Participant ceases to be
employed by Big 5, the Company or another subsidiary of the Company for reasons
other than death or disability.
Notwithstanding the foregoing or any provision to the contrary contained
in any Grant Document, unless otherwise approved by the Committee, Stock Options
granted to any Participant whose employment is terminated for "just cause" shall
terminate immediately and cease to be exercisable. "Just Cause" shall mean
termination of the Participant's employment as a result of (i) such
Participant's violation of any rule or policy of the Company or its subsidiaries
that results in damage to the Company or its subsidiaries or which, after
written notice to do so, the Participant fails to correct within a reasonable
time; (ii) any material failure by the Participant to comply with a reasonable
direction of the Board of Directors of the Company or its subsidiaries or the
willful misconduct by the Participant in the responsibilities reasonably
assigned to him or her; (iii) any willful failure by the Participant to perform
his or her job as required to meet the objectives of the Company or its
subsidiaries; (iv) the Participant's performing services for any other
corporation or person which competes with the Company or its subsidiaries while
he or she is employed by the Company or its subsidiaries and without the written
approval of the Chief Executive Officer of the Company (or, in case the Chief
Executive Officer is the Participant, then by approval of the Company's Board of
Directors); (v) conviction by a court of competent jurisdiction of a felony; or
(vi) any other action or condition that may result in termination of an employee
for cause pursuant to any generally applied standard adopted by the Board of
Directors of the Company from time to time.
7. Provisions Applicable to Purchased Shares. No grant of Purchased
Shares hereunder shall have a purchase price which is less than 85% of the fair
market value of the stock at the time the right to purchase Purchased Shares is
granted. In the case a right to purchase Purchased Shares is granted to any
person who owns stock possessing more than 10% percent of the total combined
voting power of all classes of stock of the Company, such right to purchase
Purchased Shares shall be granted with a purchase price of at least 100% of the
fair market value of the stock at the time of the grant.
8. Adjustments. If the outstanding shares of the Common Stock of the
Company are increased, decreased, changed into or exchanged for a different
number or kind of shares or securities of the Company or any other corporation
through reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar transaction, or in connection
with any merger or reorganization, (i) an appropriate and proportionate
adjustment shall be made in the maximum number and kind of shares which may be
awarded under this Plan and (ii) the restrictions and rights set forth in this
Plan or any of the Grant Documents shall apply with respect to such other
capital stock to the same extent as they are, or would have been applicable, to
the Common Stock on or with respect to which such other capital stock was
distributed or exchanged.
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<PAGE> 5
Adjustments under this paragraph 8 shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
9. Nontransferability of Stock Options or Rights to Purchase Shares.
Stock Options and a Participant's rights to purchase Purchased Shares granted
hereunder may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Participant, only
by the Participant.
10. Amendment and Termination of the Plan. Subject to Section 11 of the
Plan, the Plan shall become effective upon the earlier to occur of its adoption
by the Board of Directors or its approval by the stockholders of the Company as
described in Section 11 of the Plan and shall continue in effect for a term of
ten (10) years; provided, however, that the Committee may at any time suspend or
terminate the Plan. The Committee may also at any time amend or revise the terms
of the Plan.
Notwithstanding the foregoing, no amendment, suspension or termination of
the Plan that would materially adversely affect any rights or obligations of any
Participant under any Management Subscription and Stockholders Agreement,
Management Stock Option and Stockholders Agreement or Employee Stock Option
Agreement shall be effective as to such Participant unless there shall have been
specific action of the Committee and consent of the Participant.
11. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
Stock Options may be granted but not exercised and Purchased Shares may be
granted and purchased prior to shareholder approval of the Plan. If any Stock
Options are so granted and stockholder approval shall not have been obtained
within twelve months of the date of adoption of this Plan by the Board of
Directors, such Stock Options shall terminate retroactively as of the date they
were granted. If any Purchased Shares are so granted and purchased and
shareholder approval shall not have been obtained within twelve months of the
date of adoption of this Plan by the Board of Directors, the sale of such
Purchased Shares shall be rescinded as of the date granted.
12. No Employment Rights. The selection of any person to receive an
award under this Plan shall not give such person any right to be retained in the
employment of Big 5, the Company or any of their affiliates and the right and
the power of Big 5 to discharge any such person shall not be affected by such
award. No person shall have any right or claim whatever, directly, indirectly or
by implication, to receive an award, nor any expectancy thereof, unless and
until an award in fact shall have been made to such person by the Committee as
provided herein. The award to any person hereunder at any time shall not create
any right or implication that any other or further award may or shall be made at
another time. Each award hereunder shall be separate and distinct
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<PAGE> 6
from every other award and shall not be construed as a part of any continuing
series of awards or compensation.
13. Annual Financial Information. Each Participant who receives Grant
Shares, Purchased Shares or Stock Options shall be provided with a copy of the
financial statements of the Company at least annually.
14. Repurchase Rights. The Grant Documents may include provisions which
grant the Company the right to repurchase Purchased Shares, Stock Options or
shares of Common Stock acquired upon the exercise of Stock Options substantially
similar to the repurchase rights in the form of the Grant Documents attached
hereto, provided that such rights comply with any state securities laws or
regulations, if any, applicable to the Plan or grants thereunder.
14. Plan Not Exclusive. The Plan is not exclusive. The Company may have
other plans, programs and arrangements for compensation or the issuance of
shares or options. The Plan does not require that Participants hereunder be
precluded from participation in such other plans, programs and arrangements.
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<PAGE> 1
Exhibit 99-3
PLAN OF RECAPITALIZATION
AND
STOCK REPURCHASE AGREEMENT
DATED AS OF OCTOBER 31, 1997
By and Among
BIG 5 HOLDINGS CORP.
ROBERT W. MILLER,
STEVEN G. MILLER,
and
GREEN EQUITY INVESTORS, L.P.,
<PAGE> 2
PLAN OF RECAPITALIZATION AND
STOCK REPURCHASE AGREEMENT
This PLAN OF RECAPITALIZATION AND STOCK REPURCHASE AGREEMENT (the
"Agreement") is entered into as of October 31, 1997, by and among Big 5 Holdings
Corp., a Delaware corporation ("Parent"), Robert W. Miller ("RW Miller"), Steven
G. Miller ("SG Miller" and together with RW Miller, the "Millers") and Green
Equity Investors, L.P., a Delaware limited partnership ("GEI"), with respect to
the following facts and circumstances:
A. Parent and United Merchandising Corp., a California corporation
("UMC"), are wholly-owned subsidiaries of Big 5 Corporation, a Delaware
corporation ("Old Parent"). Parent, the Millers and GEI contemplate that UMC
will be merged into New Big 5 Corp., a Delaware corporation and wholly-owned
subsidiary of UMC ("Big 5"), with the result that UMC will be reincorporated in
Delaware (the "Subsidiary Merger") in a tax-free reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Thereafter, Old Parent will be merged into Parent so that Parent will be the
successor corporation and Big 5 will become a wholly-owned subsidiary of Parent
(the "Parent Merger" and together with the Subsidiary Merger, the "Mergers") in
a tax-free reorganization under Section 368(a) of the Code. Upon completion of
the Mergers the name of Big 5 will be Big 5 Corp.
B. Thereafter the parties will use their respective best efforts to
cause Parent and Big 5 to effect, as hereinafter set forth, the following
transactions (collectively referred to as the "Recapitalization"): (i) Big 5
will cause the offering and issuance and sale to qualified institutional buyers
under Rule 144A or Regulation S of the Securities Act of 1933 (the "Offering")
of its Senior Notes due 2007 (the "Notes"); (ii) Big 5 will defease and call for
repayment all of its outstanding 13 5/8% Senior Subordinated Notes due 2002 (the
"Old Notes"); (iii) Parent will issue and sell its Discount Notes (the "Parent
Discount Notes") with a warrant to purchase approximately three percent of the
common stock, $0.01 par value of Parent (the "Common Stock") at a nominal
exercise price (the "Warrant") (together, the "Parent Note Financing"); (iv)
Parent will accelerate vesting of substantially all of the outstanding options
and restricted stock held by management and employees of Big 5; (v) Parent will
redeem for cash its existing Series A 9% Cumulative Redeemable Preferred Stock
(the "Parent Old Preferred") for approximately twenty one million nine hundred
thousand dollars ($21,900,000) in the aggregate, including accrued dividends;
(vi) Parent will pay a cash distribution of fifteen dollars ($15.00) per share
on its outstanding shares of Common Stock (approximately sixty three million two
hundred thousand
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<PAGE> 3
dollars ($63,200,000) in the aggregate); (vii) Parent will repurchase from
Pacific Enterprises ("PE") that certain warrant dated September 25, 1992 to
purchase three hundred ninety seven thousand six hundred forty four (397,644)
shares of Common Stock and sixteen thousand six hundred sixty seven (16,667)
shares of Parent Old Preferred (the "PE Warrant") and will repurchase from the
Selling Stockholders (as hereinafter defined) approximately two million seven
hundred thirty seven thousand three hundred ten (2,737,310) shares of Common
Stock (of which GEI owns 86.8%) for an aggregate of approximately seventeen
million six hundred thirteen thousand four hundred ninety dollars ($17,613,490)
in cash and thirty five million dollars ($35,000,000) of Parent Senior
Exchangeable Preferred Stock (the "Parent New Preferred"); (viii) Parent will
sell additional Common Stock to middle and senior level management of Big 5; and
(ix) other transactions will occur, including a distribution from Big 5 to
Parent, so that the above referenced transactions can be effected and the
capital structure of Big 5 will be as set forth under "Capitalization" in
the Preliminary Offering Memorandum, subject to completion dated October 27,
1997 (the "Offering Memorandum").
C. Parent, GEI and the Millers desire, for their mutual benefit, to
enter into this Agreement to set forth their respective rights and obligations
with respect to the Recapitalization.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
The Recapitalization
1.1 Sale of Notes. As soon as practicable, Parent will use its best
efforts to cause Big 5 to issue and sell one hundred thirty one million dollars
($131,000,000) of Notes as described in the Offering Memorandum on terms
reasonably acceptable to the Millers and GEI.
1.2 Defeasance of Old Notes. Concurrently with the sale of the Notes,
Parent will cause Big 5 to defease and call for repayment all of the outstanding
Old Notes.
1.3 Sale of Parent Discount Notes. Concurrently with the sale of the
Notes, Parent will effect the Parent Note Financing for twenty four million five
hundred thousand dollars ($24,500,000) of proceeds, the terms and conditions of
the Parent Discount Notes and the Warrant to be reasonably acceptable to GEI and
the Millers.
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<PAGE> 4
1.4 Acceleration of Vesting. Concurrently with the sale of the Notes,
Parent will accelerate vesting of substantially all of the issued and
outstanding employee stock options and restricted stock under the various
agreements respecting such options and restricted stock held by management and
employees of Big 5. Parent will facilitate the exercise of such stock options by
existing employees by offering to such employees the option to pay the aggregate
exercise price of such outstanding options (other than the par value of such
shares) by way of a personal recourse obligation secured by such employee's
existing Common Stock and the Common Stock to be issued pursuant to the exercise
of the options, the proceeds of such Common Stock and other payments.
1.5 Redemption of Parent Old Preferred. Pursuant to the Parent Merger,
Parent will issue to the holders of the Parent Old Preferred the same number of
shares of new preferred stock with terms substantially the same as the terms of
the Series A 9% Cumulative Redeemable Preferred Stock of Old Parent which is
presently outstanding. This Series A 9% Cumulative Redeemable Preferred Stock
will be immediately redeemed by Parent as hereinafter provided pursuant to
Section 5(c) of the Statement of Designation of Rights, Preferences, Privileges
and Restrictions with respect to the Series A 9% Cumulative Redeemable Preferred
Stock of Old Parent and the comparable provisions of the Certificate of
Incorporation of Parent (the "Statement"). As soon as practical after the date
hereof, Parent will make an offer, pursuant to Section 5(c) of the Statement, to
exchange all of such Parent Old Preferred for cash equal to the face amount of
the Parent Old Preferred plus accrued and unpaid dividends thereon to the date
of redemption (the "Exchange Consideration"), (the "Preferred Redemption").
Concurrently with, and conditional upon, the consummation of the
Recapitalization, GEI agrees to accept, and will accept, the Exchange
Consideration for all of its Parent Old Preferred, amounting to one hundred
twenty nine thousand nine hundred thirty two (129,932) shares out of a total of
one hundred forty nine thousand six hundred fifty four (149,654) outstanding
shares of Parent Old Preferred (amounting to eighty six point eighty two percent
(86.82%) of the Parent Old Preferred). Inasmuch as GEI owns in excess of
two-thirds (2/3) in interest of the Parent Old Preferred, GEI's acceptance of
the offer and receipt of the Exchange Consideration for its Parent Old Preferred
will result on the date of the Recapitalization in the mandatory redemption
pursuant to Section 5(c) of the Statement of all of the Parent Old Preferred
issued in the Parent Merger.
1.6 Distribution on Big 5 Common Stock. Promptly following the
transactions set forth in Sections 1.1 through 1.5 above, Parent will cause Big
5 to make a cash distribution of approximately eighty two million dollars
($82,000,000) to Parent.
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<PAGE> 5
1.7 Distribution on Parent Common Stock. Promptly following the
transactions set forth in Sections 1.1 through 1.6 above, Parent will make a
cash distribution of fifteen dollars ($15.00) per share (the "Distribution") on
Parent's Common Stock. The record date for the Distribution shall be set so that
(i) the shares of Common Stock issued to senior and middle level management
pursuant to Section 1.9 below will not be entitled to the Distribution, but (ii)
the shares of Common Stock issued to employees of Big 5 upon the exercise of
employee stock options pursuant to the acceleration of vesting provided for in
Section 1.4 above will be entitled to the Distribution.
1.8 Repurchase of Parent Common Stock and PE Warrant.
1.8.1 Repurchase of Common Stock From Selling Stockholders.
Promptly following the transactions set forth in Sections 1.1 through 1.7 above,
Parent will purchase two million seven hundred thirty seven thousand three
hundred ten (2,737,310) shares of Common Stock in the aggregate from all persons
(or their successors and assigns) who purchased both Common Stock and Parent Old
Preferred of Old Parent in 1992 (the "Selling Stockholders"). Parent will
purchase seventy six point sixty six percent (76.66%) of the Common Stock owned
by each of the Selling Stockholders. It is a condition of this Agreement that
Parent purchase substantially all of such two million seven hundred thirty seven
thousand three hundred ten (2,737,310) shares of Common Stock in the aggregate.
The Common Stock will be purchased for cash and shares of Parent New Preferred,
amounting to eleven million nine hundred seven thousand two hundred ninety nine
dollars ($11,907,299) in cash and thirty one million four hundred ninety three
thousand dollars ($31,493,000) of liquidation preference of the Parent New
Preferred (the "Liquidation Value"), representing four dollars thirty five cents
($4.35) in cash and eleven dollars fifty cents and five mills ($11.505) of
Liquidation Value per share of Common Stock repurchased by Parent.
1.8.2 GEI Offer to Sell Common Stock to Parent. As of the date of
this Agreement, GEI owns three million one hundred thousand one hundred sixty
(3,100,160) shares of Common Stock. GEI hereby agrees to offer to sell to Parent
on the date of the substantial consummation of the Recapitalization, conditional
upon the consummation of the Recapitalization, two million three hundred seventy
six thousand five hundred eighty three (2,376,583) shares of Common Stock,
representing seventy six point sixty six percent (76.66%) of the Common Stock
owned by GEI for ten million three hundred thirty eight thousand one hundred
thirty six dollars ($10,338,136) in cash and twenty seven million three hundred
forty two thousand six hundred dollars ($27,342,600) of Liquidation Value of the
Parent New Preferred.
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1.8.3 Fractional Shares. In the event of fractional shares of
Common Stock or Parent New Preferred, no fractional shares will be repurchased
or will be issued. Parent will round to the nearest whole share of Common Stock
in connection with the repurchase of Common Stock and to the nearest whole share
of Parent New Preferred based on a $100 Liquidation Value per share.
1.8.4 Repurchase of PE Warrant. Parent will, concurrently with
the repurchase of Common Stock from the Selling Stockholders, repurchase from PE
the PE Warrant for a payment of five million seven hundred six thousand one
hundred ninety one dollars ($5,706,191) in cash and thirty five thousand seventy
(35,070) shares of Parent New Preferred, representing three million five hundred
seven thousand dollars ($3,507,000) of Liquidation Value of the Parent New
Preferred.
1.9 Sale of Parent Common Stock to Management. Concurrently with the
transactions set forth in Section 1.8 above (other than the purchase from PE
referenced in clause 1.8.5), pursuant to Parent's 1997 Management Equity Plan,
Parent will sell to certain middle and senior level management employees of
Parent and Big 5 (as previously identified by the Millers) approximately four
hundred sixty two thousand and nine (462,009) shares of Common Stock for five
dollars ($5.00) per share pursuant to a form or forms of Management Subscription
and Stockholders Agreement reasonably acceptable to GEI and the Millers (the
"Management Agreement") for a total consideration of approximately two million
three hundred ten thousand forty five dollars ($2,310,045). To the extent that
any such management employees shall fail to purchase that number of shares of
Common Stock from Parent pursuant to the Management Agreement, the Millers agree
to arrange for the purchase of such shares by other management employee or
purchase such shares themselves, at the Millers' option, for five dollars
($5.00) per share.
ARTICLE 2
Interdependent Transactions; Representations; Termination
2.1 Interdependent Transactions. The parties hereto acknowledge that the
transactions constituting the Recapitalization are interdependent. In the event
that any of the transactions specified in Article 1 are not consummated
substantially on the terms and conditions set forth in the relevant section of
Article 1, then none of such transactions shall be consummated unless the
parties by written amendment to this Agreement shall agree otherwise prior to
the consummation of the transactions specified in Article 1.
2.2 Representations and Warranties of Parent.
Parent represents and warrants to the Millers and GEI as follows:
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2.2.1 Organization. It is a corporation duly organized and
validly existing under the laws of the State of Delaware.
2.2.2 Authority. It has full corporate power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
2.2.3 Binding Obligation. The execution, delivery and performance
of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on its part, and, assuming the due authorization, execution and
delivery of this Agreement by each of the other parties hereto, this Agreement
constitutes its binding obligation, enforceable against it in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
2.2.4 No Conflict. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its certificate of incorporation or bylaws or any material
agreement or other material instrument to which it is a party or by which it or
its property is bound or affected.
2.3 Representations and Warranties of GEI. GEI represents and warrants
to the Millers and to Parent as follows:
2.3.1 Organization. It is a limited partnership duly organized
and validly existing under the laws of its state of organization.
2.3.2 Authority. It has full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
2.3.3 Binding Obligation. The execution, delivery and performance
of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action on its part, and, assuming the due authorization, execution and delivery
of this Agreement by each of the other parties hereto, this Agreement
constitutes its binding obligation, enforceable against it in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium
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and other similar laws and equitable principles relating to or limiting
creditors' rights generally.
2.3.4 No Conflict. The execution, delivery and performance of
this Agreement by it and the consummation by it of the transactions contemplated
hereby will not, with or without the giving of notice or the lapse of time or
both, (i) violate any provision of law, statute, rule or regulation to which it
is subject, (ii) violate any order, judgment or decree applicable to it, or
(iii) conflict with, or result in a breach or default under, any term or
condition of its charter, bylaws or equivalent governing documents or any
material agreement or other material instrument to which it is a party or by
which it or its property is bound or affected.
2.4 Representations and Warranties of the Millers. Each of the Millers,
severally and not jointly, represents and warrants to GEI and to Parent as
follows:
2.4.1 Authority. He has full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby.
2.4.2 Binding Obligation. Assuming the due authorization,
execution and delivery of this Agreement by each of the other parties hereto,
this Agreement constitutes his binding obligation, enforceable against him in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors' rights generally.
2.4.3 No Conflict. The execution, delivery and performance of
this Agreement by him and the consummation by him of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time or both, (i) violate any provision of law, statute, rule or regulation
to which he is subject, (ii) violate any order, judgment or decree applicable to
him, or (iii) conflict with, or result in a breach or default under, any term or
condition of any material agreement or other material instrument to which he is
a party or by which he or his property is bound or affected.
2.5 Survival of Stock Subscription Agreements. Parent represents,
acknowledges and agrees that (i) the Stock Subscription Agreement dated
September 25, 1992 between GEI and Old Parent, (ii) the Stock Subscription
Agreements dated September 25, 1992 between each of Irell & Manella, DLJ Capital
Corp. and Yucaipa Capital Fund, L.P., on the one hand, and GEI and Old Parent on
the other hand and (iii) the Management Subscription and Stockholders Agreements
dated October 15, 1992 between each of Daniel A. Seigel, Philip L. Maslowe and
Christian K. Bement on the one hand, and GEI and Old Parent on the other hand
(collectively the "Stock
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Agreements") will be assumed by Parent in the Parent Merger. Each of the Stock
Agreements shall remain in full force and effect with respect to the Common
Stock as if such Selling Stockholders had entered into such Stock Agreements
directly with Parent, and after the Parent Merger and the Recapitalization, for
purposes of the "piggyback" registration rights provisions of such Stock
Agreements, the capital stock of the Parent that shall be subject to such
provisions shall be the Common Stock. In addition, Parent and GEI have agreed to
clarify and amend Section 4 of the Stock Agreement applicable to GEI to provide
that GEI and its Affiliates shall have two demand registration rights to cause
Parent to register shares of Common Stock (so long as the demand relates to at
least 10% of the outstanding Common Stock) and two demand registration rights to
cause Parent to register shares of Parent New Preferred (so long as the demand
relates to at least 30% of the outstanding Parent New Preferred (or notes issued
in exchange for such shares as permitted by the terms of the Preferred New
Preferred)) under the Securities Act of 1933, as amended, and applicable state
securities or blue sky laws in connection with a proposed sale or distribution
of such Common Stock or Preferred Stock (or the notes in exchange for such
shares), respectively. So long as the Common Stock or Parent New Preferred is
publicly traded, the respective demand registration may be a "shelf
registration" for such security that is publicly traded and Parent shall keep
such shelf registration effective for two years. The parties agree to enter into
a separate amendment agreement reflecting such registration rights of GEI for
the Common Stock and the Parent New Preferred, respectively.
2.6 Termination. This Agreement shall terminate on, and be of no further
force and effect after, the first to occur of the following: (i) January 31,
1998 or (ii) the date the parties are advised by the Initial Purchasers of the
Notes that it is not practical to effect the issuance and sale of the Notes.
ARTICLE 3
Miscellaneous
3.1 Purchase From PE. Parent and the Millers acknowledge that Leonard
Green & Partners, L.P. ("LGP") or an affiliate of LGP will purchase from PE for
cash, immediately after the consummation of the Recapitalization, the thirty
five thousand seventy (35,070) shares of Parent New Preferred, representing
three million five hundred seven thousand dollars ($3,507,000) of Liquidation
Value of the Parent New Preferred.
3.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given upon receipt if delivered personally or sent by facsimile
transmission (receipt of which is confirmed) or by courier service promising
overnight
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delivery (with delivery confirmed the next day) or three (3) business days after
sent by registered or certified mail (postage prepaid, return receipt
requested). Notices shall be addressed as follows:
To Parent: Big 5 Holdings Corp.
2525 East El Segundo Boulevard
El Segundo, California 90245
Attention: Gary Meade, General
Counsel
Facsimile: (310) 297-7592
With a copy to: Irell & Manella LLP
333 South Hope Street, 33rd Floor
Los Angeles, California 90071
Attention: Edmund M. Kaufman, Esq.
Facsimile: (213) 229-0515
To GEI: Green Equity Investors, L.P.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, California 90025
Attention: Jennifer Holden Dunbar
Facsimile: (310) 954-0404
To the Millers: Robert W. Miller
Steven G. Miller
c/o Big 5 Holdings Corp.
2525 East El Segundo Boulevard
El Segundo, California 90245
Facsimile: (310) 297-7595
Any party may from time to time change its address for the purpose of notices by
a similar notice specifying the new address but no such change shall be
effective as against any Person until such Person shall have actually received
it.
3.3 Specific Performance. The parties hereto agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof (without requirement to post bond), in addition to any and all other
remedies at law or in equity.
3.4 Amendment; Waiver. This Agreement may be amended, modified,
supplemented or terminated only by a written instrument signed by Parent and
each of GEI and the Millers.
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No provision of this Agreement may be waived orally, but only by a written
instrument signed by the party against whom enforcement of such waiver is
sought. No alteration, modification or impairment shall be implied by reason of
any previous waiver, extension of time, delay or omission in exercise, or other
indulgence.
3.5 Further Assurances. Each party hereto agrees to execute any and all
further documents and writings and to perform such other actions which may be or
become necessary or expedient to effectuate and carry out this Agreement.
3.6 No Third-Party Benefits. None of the provisions of this Agreement
(other than Section 2.5 with respect to the Selling Stockholders) shall be for
the benefit of, or enforceable by, any third-party beneficiary.
3.7 Interpretation. For all purposes of this Agreement, except as
otherwise expressly provided, all terms defined herein include the plural as
well as the singular and the words "include," "includes" and "including" shall
be deemed in each case to be followed by the words "without limitation."
3.8 Assignability. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and assigns.
3.9 Severability. If any provision hereof shall be held to be
unenforceable or invalid by any court of competent jurisdiction or as a result
of future legislative action, such holding or action shall be strictly construed
and shall not alter the enforceability, validity or effect of any other
provision hereof.
3.10 Entire Agreement. This Agreement and the agreement referenced in
Section 2.5 hereof contain the final and entire agreement among the parties with
respect to the matters contemplated hereby and supersede all written or verbal
representations, warranties, commitments and other understandings prior to the
date hereof. No reference shall be made to any draft of this Agreement for
purposes of interpretation or resolution of ambiguity or otherwise.
3.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
3.12 Attorney's Fees. In any suit or proceeding arising out of this
Agreement to interpret or enforce any provision of this Agreement, the
prevailing party shall be entitled to all reasonable out-of-pocket expenses and
reasonable attorneys' fees incurred by such party in connection with such suit
or proceeding.
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3.13 Captions. The descriptive headings herein are inserted for
convenience only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
3.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first set forth above.
[Signature Blocks Omitted]
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