AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 13, 1996
REGISTRATION NO. 333-16877
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE SPORTS AUTHORITY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 5940 36-3511120
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Identification Number)
organization) Number)
3383 NORTH STATE ROAD 7
FORT LAUDERDALE, FLORIDA 33319
(954) 735-1701
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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FRANK W. BUBB III, ESQ.
THE SPORTS AUTHORITY, INC.
3383 NORTH STATE ROAD 7
FORT LAUDERDALE, FLORIDA 33319
(954) 735-1701
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
WITH A COPY TO:
JOHN S. FLETCHER, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
5300 FIRST UNION FINANCIAL CENTER
200 SOUTH BISCAYNE BOULEVARD
MIAMI, FLORIDA 33131
(305) 579-0432
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO
TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.|_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED PRICE PER UNIT PRICE (1) FEE
<S> <C> <C> <C> <C>
5 1/4% Convertible Subordinated Notes due September 15,
2001..................................................... $149,500,000 100.00% $149,500,000 $45,303.03
Common Stock, $.01 par value per share................... 4,580,964(2) --- --- ---
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</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(i).
(2) Such number represents the number of shares of Common Stock initially
issuable upon conversion of the Notes registered hereby and, pursuant
to Rule 416 under the Securities Act of 1933, as amended, such
indeterminate number of shares of Common Stock as may be issued from
time to time upon conversion of the Notes by reason of adjustment of
the conversion price under certain circumstances outlined in the
Prospectus.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
<TABLE>
<CAPTION>
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
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<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus........ Facing Page of the Registration Statement; Cross
Reference Sheet; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.................................... Inside Front Cover Page; Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges..................... Prospectus Summary; Risk Factors
4. Use of Proceeds............................... *
5. Determination of Offering Price............... *
6. Dilution...................................... *
7. Selling Securityholders....................... Selling Securityholders
8. Plan of Distribution.......................... Plan of Distribution
9. Description of Securities to be Registered.... Price Range of Common Stock; Dividend Policy
10. Interests of Named Experts and Counsel........ *
11. Material Changes.............................. *
12. Incorporation of Certain Information by
Reference..................................... Inside Front Cover Page
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities *
</TABLE>
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* Not applicable or answer thereto is negative.
<PAGE>
THE SPORTS AUTHORITY, INC.
$149,500,000 5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE SEPTEMBER 15, 2001
4,580,964 SHARES OF COMMON STOCK
This Prospectus relates to the offering for resale by the selling
securityholders named herein (the "Selling Securityholders") of 5 1/4%
Convertible Subordinated Notes due September 15, 2001 (the "Notes") of The
Sports Authority, Inc. (the "Company") up to the aggregate principal amount of
$149,500,000. In addition, this Prospectus relates to the offering of 4,580,964
shares (subject to adjustment under certain circumstances) of the Company's
common stock, par value $.01 per share (the "Common Stock" and, together with
the Notes, the "Securities"), issued or issuable upon conversion of the Notes.
The Notes were originally issued and sold in September 1996 in the United States
in transactions exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act").
The Notes are convertible into shares of Common Stock, prior to redemption
or maturity, at a conversion rate of 30.6419 shares per $1,000 principal amount
of Notes (equivalent to a conversion price of $32.635 per share), subject to
adjustment in certain events. See "Description of the Notes-- Conversion." The
Notes are designated for trading on the Private Offerings, Resales and Trading
through Automated Linkages ("PORTAL") Market. The Notes are neither listed on
any stock exchange nor included on any automated quotation system. The Common
Stock is traded on the New York Stock Exchange under the symbol "TSA." On
December 11, 1996, the last reported sale price for the Common Stock on the New
York Stock Exchange was $23.75 per share.
Interest on the Notes is payable semi-annually in arrears on March 15 and
September 15 of each year, commencing on March 15, 1997 and ending on September
15, 2001. Payments will be made without deduction for United States withholding
taxes, to the extent described herein. The Notes will mature on September 15,
2001. The Notes are not redeemable at the option of the Company prior to
September 15, 1999. At any time on or after such date, the Notes will be
redeemable, in whole or in part, upon not less than 30 nor more than 60 days'
prior notice at the option of the Company at redemption prices (expressed as a
percentage of principal amount) for the 12-month period beginning on September
15, 1999 equal to 102.10% and beginning on September 15, 2000 equal to 101.05%,
and thereafter equal to 100% of the principal amount, plus accrued interest to
the redemption date. In the event of a Change in Control (as defined herein),
each holder of Notes may require the Company to repurchase its Notes, in whole
or in part, for cash or, at the Company's option, Common Stock (valued at 95% of
the average closing sale prices for the five trading days immediately preceding
the second trading day prior to the repurchase date) at a repurchase price of
100% of the principal amount of Notes to be repurchased, plus accrued interest
to the repurchase date. See "Description of the Notes--Optional Redemption by
the Company" and "Repurchase at Option of Holders Upon a Change in Control."
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company and effectively subordinated in right of payment to all
indebtedness and other liabilities of the Company's subsidiaries. See
"Description of the Notes--Subordination." As of December 11, 1996, the Company
had Senior Indebtedness of approximately $7.8 million and the Company's
subsidiaries had indebtedness of approximately $4.5 million. Neither the
Indenture (as defined herein) nor the Notes limit the amount of Senior
Indebtedness or other indebtedness that the Company or its subsidiaries may
incur.
The Company will not receive any of the proceeds from the sale of the
Securities offered hereby. The Selling Securityholders directly, through agents
designated from time to time, or through dealers or underwriters to be
designated, may sell the Securities from time to time on terms to be determined
at the time of sale. To the extent required, the specific amount of Securities
to be sold, the respective purchase price and public offering price, the names
of any such agent, dealer or underwriter, and any applicable commission or
discount with respect to the particular offer will be set forth in a Prospectus
Supplement. The Company has agreed to bear all expenses of registration of the
Securities under federal and state securities laws and to indemnify the Selling
Securityholders against certain liabilities under the Securities Act. See "Plan
of Distribution."
The Selling Securityholders and any broker-dealer, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profits on the
resale of the Securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
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SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN RISKS
ASSOCIATED WITH AN INVESTMENT IN THE SECURITIES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SECURITYHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
THE DATE OF THIS PROSPECTUS IS DECEMBER 17, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
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Incorporation of Certain Information by Reference.......................2
Available Information...................................................3
Prospectus Summary......................................................4
Selected Financial Data.................................................8
Risk Factors...........................................................10
Price Range of Common Stock............................................13
Dividend Policy........................................................13
Description of Notes ..................................................14
Description of Capital Stock...........................................21
Selling Securityholders ...............................................23
Plan of Distribution...................................................25
Legal Matters..........................................................25
Experts................................................................25
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents of the Company filed with the Securities and Exchange
Commission (the "Commission") (File No. 1-13420) are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
January 28, 1996;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
April 28, 1996, July 28, 1996 and October 27, 1996;
(c) The Company's Form 8-K filed September 24, 1996; and
(d) The Company's Proxy Statement dated April 25, 1996.
In addition, all reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), prior to the termination
of the offering made hereby, shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of the filing of such reports and
documents. Any statement incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide a copy of any or all such
documents (exclusive of exhibits unless such exhibits are specifically
incorporated by reference therein), without charge, to each person to whom this
Prospectus is delivered, upon written or oral request to Secretary, The Sports
Authority, Inc., 3383 North State Road 7, Fort Lauderdale, Florida 33319,
telephone number (954) 735-1701. In order to ensure timely delivery of the
documents, any request should allow at least five business days for delivery.
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<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-3 under the Securities Act, with respect to the
securities offered hereby. This Prospectus, which constitutes part of the
Registration Statement, omits certain of the information contained in the
Registration Statement and the exhibits and schedules thereto on file with the
Commission pursuant to the Securities Act and the rules and the regulations of
the Commission thereunder. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, and each such
statement is qualified in all respects by such reference. The Company is subject
to the informational requirements of the Exchange Act, and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Seven World
Trade Center, Suite 1300, New York, New York 10048; and 500 West Madison Avenue,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates, or from the Commission's internet
web site at http://www.sec.gov. In addition, such materials also may be
inspected and copied at the offices of the New York Stock Exchange, SEC Library,
4th Floor, 20 Broad Street, New York, New York 10015.
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<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES THERETO APPEARING ELSEWHERE IN THIS
PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN. SEE "RISK FACTORS" FOR A
DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE SECURITIES.
UNLESS THE CONTEXT OTHERWISE REQUIRES, (I) THE TERM "COMPANY" REFERS TO THE
SPORTS AUTHORITY, INC., A DELAWARE CORPORATION, AND ITS SUBSIDIARIES AND
PREDECESSORS, (II) ALL REFERENCES TO YEARS REFER TO THE COMPANY'S FISCAL YEARS,
EACH OF WHICH ENDS IN JANUARY OF THE FOLLOWING CALENDAR YEAR, AND (III) THE
INFORMATION CONTAINED IN THIS PROSPECTUS REFLECTS A THREE-FOR-TWO STOCK SPLIT
EFFECTED ON JULY 16, 1996. THIS PROSPECTUS IS BEING USED BY THE SELLING
SECURITYHOLDERS TO OFFER $149,500,000 AGGREGATE PRINCIPAL AMOUNT OF NOTES AND
THE UNDERLYING 4,580,964 SHARES OF COMMON STOCK (SUBJECT TO ADJUSTMENT UNDER
CERTAIN CIRCUMSTANCES) ISSUED OR ISSUABLE UPON CONVERSION OF THE NOTES (THE
"OFFERING"). THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE, MAY CONTAIN STATEMENTS DEEMED TO BE FORWARD LOOKING WHICH ARE
INHERENTLY UNCERTAIN. ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE
DISCUSSED IN SUCH FORWARD LOOKING STATEMENTS FOR THE REASONS, AMONG OTHERS, SET
FORTH UNDER THE HEADING "RISK FACTORS."
THE COMPANY
The Sports Authority, Inc. (the "Company") is the largest operator of
large format sporting goods stores in the United States in terms of both sales
and number of stores and is also the largest full-line sporting goods retailer
in the United States in terms of sales. At December 11, 1996, the Company
operated 168 sporting goods megastores, virtually all in excess of 40,000 gross
square feet. The Company's business strategy is to offer customers extensive
selections of quality, brand name sporting equipment and athletic and active
footwear and apparel, everyday fair prices and premium customer service. The
Company has a national presence, with 159 stores in 27 states in the United
States, six stores in Canada and three stores in Japan operated by a joint
venture 51% owned by the Company. The Company had sales of approximately $1.047
billion in 1995, a 24.8% increase over 1994. The Company is the first full-line
sporting goods retailer to have achieved annual revenues in excess of $1
billion.
The Company was founded by Mr. Jack A. Smith, its current Chairman and
Chief Executive Officer, who opened the first store in Fort Lauderdale, Florida
in 1987. During the following two years, the Company added nine more stores. In
1990, the Company was acquired by Kmart Corporation ("Kmart"), which provided
additional capital to fund the Company's expansion program as well as its
continual investment in infrastructure and technology. Following public
offerings in November 1994 and October 1995, Kmart no longer owns any interest
in the Company.
Approximately 82% of the Company's stores have achieved profitability
(before allocation of central overhead) within the first full fiscal year of
operation. In addition, the Company has increased its inventory turnover
(calculated by dividing cost of goods sold by the average quarter end inventory
for four quarters) from 2.6 times in 1990 to 3.2 times in 1994 and in 1995.
These favorable results have been achieved during a period of rapid growth, as
the Company realized compound annual growth in sales of 57% during the period
from 1990 to 1995. The Company believes that fundamental elements of its success
have been the consistent execution of its business strategy in each of its
markets as well as its culture that demands high standards of performance
throughout the entire organization.
The Company has engaged in a rapid expansion program pursuant to which
it opened 80 stores over the last three years, including 29 stores in 1995. In
1996, the Company has opened 32 stores, resulting in a year-end total of 168
stores, including six stores in Canada, three stores in Japan and two smaller
format stores to be operated in New York City under the name "The Sports
Authority Ltd." The Company currently plans to open at least 30 new stores in
1997. In excess of two-thirds of those stores that were opened or are planned to
be opened in 1996 and 1997 are in the Company's existing markets.
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<PAGE>
The Company's business strategy is to consistently offer the extensive
selection and competitive pricing associated with category dominant retailers
while, at the same time, offering the brand names and professional service
associated with smaller specialty shops and pro shops. The key elements of this
strategy are as follows:
MEGASTORE FORMAT. The Company operates large format stores,
virtually all of which are in excess of 40,000 gross square feet. This
megastore format enables the Company to provide under one roof an
extensive selection of merchandise for sports and leisure activities
that ordinarily are associated with specialty shops and pro shops, such
as golf, tennis, snow skiing, cycling, hunting, fishing, bowling,
archery, boating and water sports, as well as for activities ordinarily
associated with traditional sporting goods retailers, such as team
sports, physical fitness and men's, women's and children's athletic and
active apparel and footwear. Each megastore offers approximately 45,000
active SKUs (without regard to color and size and excluding
discontinued items) across 16 major departments. The Company's
megastores provide ease of shopping through pleasant and well-designed
store layouts, informative and easily identifiable signage, individual
price ticketing of each product, speedy and courteous check-out, easy
store access and convenient customer parking.
QUALITY BRAND NAME SPORTING GOODS. The Company's merchandising
strategy is to offer a large breadth and depth of selection in quality
brand name sporting goods in each of its over 1,200 merchandise
categories. The Company's comprehensive merchandise assortment includes
over 900 brand names, including Adidas, Asics, Champion, Coleman,
Columbia, Ektelon, Fila, Huffy, K2, Nike, Prince, Pro Player, Rawlings,
Reebok, Rollerblade, Rossignol, Russell, Spalding, Starter, Teva,
Timberland and Wilson. The Company utilizes a sophisticated inventory
management system in conjunction with strong store operating controls
to achieve optimal in-stock levels of brand name merchandise.
PREMIUM CUSTOMER SERVICE. The Company seeks to distinguish
itself from other large format sporting goods retailers, traditional
sporting goods retailers and mass merchandisers by emphasizing the
higher levels of customer service generally associated with smaller
specialty stores and pro shops. In addition to hiring many sales
associates who are sports enthusiasts skilled in various disciplines,
the Company provides extensive training for its sales associates and
offers incentives that reward achievement of customer service goals.
EVERYDAY FAIR PRICES. The Company maintains a policy of
consistent everyday fair pricing that is designed to assure customers
that they will receive good value at the Company's stores and is
focused on depth and breadth of merchandise and customer service
relative to price. The Company's everyday fair pricing policy is to
maintain prices that are generally below prices at traditional and
specialty sporting goods retailers and comparable with prices at other
sporting goods superstores and mass merchandisers. Unlike many of its
large format competitors, the Company generally does not take temporary
price reductions to promote product sales. The Company also seeks to be
a price leader on certain highly identifiable items.
FOCUS ON MULTI-STORE MARKETS. The Company seeks to establish a
significant presence in each of its markets and pursues a store
expansion strategy that primarily focuses on opening multiple stores in
its markets. This focus enables the Company to obtain significant
market penetration and to leverage management and advertising expenses,
thereby achieving greater economies of scale. In addition, the Company
believes its multi-store expansion strategy results in greater name
recognition and enhanced customer convenience in each market. The
Company believes that achieving greater market penetration will enable
it to compete more effectively and increase profitability and return on
capital over the long term.
The Company is a Delaware corporation. Its principal executive
offices are located at 3383 North State Road 7, Fort Lauderdale,
Florida 33319 and the Company's telephone number is (954) 735-1701.
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<PAGE>
THE OFFERING
THIS PROSPECTUS RELATES TO THE OFFERING BY THE SELLING SECURITYHOLDERS
OF BOTH THE NOTES AND, TO THE EXTENT THE NOTES HAVE BEEN, OR ARE, CONVERTED, THE
COMMON STOCK. THE FOLLOWING SUMMARY OF CERTAIN TERMS OF THE NOTES IS NOT
COMPLETE AND IS QUALIFIED BY ALL OF THE TERMS AND CONDITIONS CONTAINED IN THE
NOTES AND IN THE INDENTURE (AS DEFINED). FOR A MORE DETAILED DESCRIPTION OF THE
TERMS OF THE NOTES, SEE "DESCRIPTION OF NOTES."
<TABLE>
<CAPTION>
THE COMMON STOCK
<S> <C>
Common Stock outstanding as of December 11, 1996 31,449,631 shares (1)
Common Stock outstanding assuming conversion of the Notes 36,030,595 shares (1)(2)
Common Stock to be outstanding assuming conversion of the Notes, including the
Offered Notes 36,030,595 shares (1)
New York Stock Exchange Symbol TSA
<FN>
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(1) EXCLUDES 3,853 SHARES OF COMMON STOCK ISSUABLE PURSUANT TO OPTIONS
EXERCISABLE AS OF DECEMBER 11, 1996.
(2) ASSUMES NO ADJUSTMENT TO THE CONVERSION PRICE (AS DEFINED) OF THE NOTES.
</FN>
</TABLE>
<TABLE>
<CAPTION>
THE NOTES
<S> <C>
The Notes.......................... $149,500,000 principal amount of 5 1/4% Convertible Subordinated Notes due
September 15, 2001.
Interest Payment Dates............. March 15 and September 15, beginning March 15, 1997.
Maturity........................... September 15, 2001.
Conversion Rate.................... 30.6419 shares per $1,000 principal amount of Notes (equivalent to $32.635 per share),
subject to adjustment.
Conversion Rights.................. The Notes will be convertible into shares of Common Stock at any time on or after the 90th
day following the last original issue date of the Notes and prior to the close of business
on the maturity date, unless previously redeemed or repurchased, at the conversion rate
set forth above. Holders of Notes called for redemption or repurchase will be entitled
to convert the Notes up to and including, but not after, the date fixed for redemption or
repurchase, as the case may be. See "Description of the Notes--Conversion Rights."
Optional Redemption................ The Notes are not redeemable at the option of the Company prior to September 15, 1999.
At any time on or after such date, the Notes will be redeemable, in whole or in part, upon
not less than 30 nor more than 60 days' prior notice at the option of the Company, at
redemption prices (expressed as a percentage of principal amount) for the 12-month period
beginning on September 15, 1999 equal to 102.10% and beginning on September 15, 2000
equal to 101.05%, and thereafter equal to 100% of the principal amount, plus accrued
interest to the redemption date. See "Description of the Notes--Optional Redemption by the
Company."
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<PAGE>
Repurchase at Option of Holders
Upon a Change in Control........ Upon a Change in Control (as defined), each holder of the Notes will have the right, subject
to certain conditions and restrictions, to require the Company to purchase all or part of its
Notes at 100% of the principal amount thereof, plus accrued interest to the repurchase date.
The repurchase price is payable in cash or, at the option of the Company but subject to the
satisfaction of certain conditions on the part of the Company, in shares of Common Stock
(valued at 95% of the average closing sale prices of the Common Stock for the five trading
days preceding the second trading day prior to the repurchase date). See "Risk Factors--
Limitations on Repurchase of Notes Upon a Change in Control" and "Description of the
Notes--Repurchase at Option of Holders Upon a Change in Control."
Subordination...................... The Notes are subordinated to present and future Senior Indebtedness (as defined) of the
Company. The Notes are also effectively subordinated in right of payment to all
indebtedness and other liabilities of the Company's subsidiaries. As of December 11, 1996,
the aggregate amount of outstanding Senior Indebtedness was approximately $7.8 million and
the aggregate amount of outstanding indebtedness of the Company's subsidiaries was
approximately $4.5 million. The Indenture does not restrict the incurrence of Senior
Indebtedness or other indebtedness by the Company or any of its subsidiaries.
Events of Default.................. Events of default include: (a) failure to pay principal of or premium, if any, on any Note
when due, whether or not such payment is prohibited by the subordination provisions of the
Notes and the Indenture; (b) failure to pay any interest on any Note when due, continuing
for 30 days, whether or not such payment is prohibited by the subordination provisions of
the Notes and Indenture; (c) default in the Company's obligation to provide notice of a
Change in Control, whether or not prohibited by the subordination provisions of the Notes
and the Indenture; (d) failure to perform any other covenant of the Company in the
Indenture, continuing for 90 days after written notice as provided in the Indenture; (e) any
indebtedness for money borrowed by the Company in an outstanding principal amount in
excess of $10,000,000 is not paid at final maturity or upon acceleration thereof and such
default in payment or acceleration is not cured or rescinded within 30 days after written
notice as provided in the Indenture; and (f) certain events of bankruptcy, insolvency or
reorganization. See "Description of Notes--Events of Default."
Trading............................ The Notes are designated for trading in the PORTAL Market. The Notes are neither listed
on any stock exchange nor included on any automated quotation system.
Risk Factors....................... An investment in the Securities involves a high degree of risk. See "Risk Factors" for a
discussion of certain factors that should be considered in evaluating an investment in the
Securities.
</TABLE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Securities offered hereby.
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<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data set forth below reflect the
consolidated results of operations, financial condition and operating data of
the Company for the periods indicated and should be read in conjunction with the
consolidated financial statements and notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations, which are
incorporated herein by reference. The consolidated financial data for the fiscal
years ended January 28, 1996, January 22, 1995, January 23, 1994, January 24,
1993 and January 26, 1992 are derived from the consolidated financial statements
of the Company which have been audited by Price Waterhouse LLP, independent
accountants. The consolidated financial data for the 39-week periods ended
October 27, 1996 and October 22, 1995, are derived from unaudited consolidated
financial statements of the Company and reflect all adjustments, consisting only
of normal recurring accruals, that the Company considers necessary for a fair
presentation of the consolidated financial position and consolidated results of
operations for these periods.
<TABLE>
<CAPTION>
39 WEEKS ENDED FISCAL YEAR ENDED(1)
------------------------ ----------------------------------------------------------------
OCTOBER 27, OCTOBER 22, JANUARY 28, JANUARY 22, JANUARY 23, JANUARY 24, JANUARY 26,
1996 1995 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
(IN THOUSANDS EXCEPT PER SHARE
DATA)
Sales........................ $ 895,074 $ 724,143 $ 1,046,652 $ 838,539 $ 606,871 $ 411,519 $ 240,873
-------- -------- --------- ------- ------- ------- -------
Gross profit................. 249,187 195,718 295,199 231,862 167,694 114,814 66,989
Selling, general and
administrative expenses.... 219,602 173,671 245,886 188,875 137,045 95,590 56,780
Pre-opening expense.......... 5,720 4,180 9,140 10,867 7,658 6,982 4,803
Goodwill amortization........ 1,473 1,473 1,963 1,963 2,070 2,070 2,070
-------- -------- --------- ------- ------- ------- -------
Operating income............. 22,392 16,394 38,210 30,157 20,921 10,172 3,336
Interest expense(2).......... 1,536 365 820 318 13 141 128
-------- -------- --------- ------- ------- ------- -------
Income before income taxes... 20,856 16,029 37,390 29,839 20,908 10,031 3,208
Income tax expense........... 8,700 6,817 15,305 12,980 8,156 4,299 1,882
Minority interest............ (1,056) - (245) - - - -
-------- -------- --------- ------- ------- ------- -------
Net income................... $ 13,212 $ 9,212 $ 22,330 $ 16,859 $ 12,752 $ 5,732 $ 1,326
======== ======== ========= ======= ======= ======= =======
Earnings per common share and
common share equivalents... $ .41 $ .29 .71 $ .54 $ .41
======== ======== ========= ======= =======
Weighted average common shares
common share equivalents
outstanding(3)............ 32,073 31,442 31,458 31,175 31,175
======== ======== ========= ======= =======
Ratio of earnings to fixed
charges(4)................ 2.13 2.16 2.90 3.05 3.18 2.69 1.92
======== ======== ========= ======= ======= ======= =======
PERCENT OF SALES DATA:
Gross margin................. 27.8% 27.0% 28.2% 27.6% 27.6% 27.9% 27.8%
Selling, general and
administrative expenses... 24.5 24.0 23.4 22.5 22.6 23.2 23.6
Pre-opening expense.......... 0.6 0.6 0.9 1.3 1.3 1.7 2.0
Operating income............. 2.5 2.2 3.7 3.6 3.4 2.5 1.4
Income before income taxes... 2.3 2.2 3.6 3.6 3.4 2.4 1.3
SELECTED FINANCIAL AND OPERATING
DATA:
End of period stores......... 150 119 136 107 80 56 36
Comparable store sales
increase(5)............... 4.2% 2.6% 1.1% 5.5% 2.6% 8.3% 15.9%
Weighted average sales per square
foot(6)(7)................ $ 145 $ 151 $ 214 $ 220 $ 224 $ 228 $ 222
Weighted average sales per store
(in thousands)(7)(8)...... 6,344 6,568 9,231 9,446 9,572 9,689 9,290
End of period inventory per store
(in thousands)............ 1,971 2,018 1,829 2,035 1,966 2,030 2,305
End of period inventory net of
accounts payable per store
(in thousands)............. 963 964 823 861 879 1,046 1,302
Average sale per transaction.. 44.56 43.72 43.83 43.23 41.55 39.86 38.48
Capital expenditures--owned
property (in thousands).... 74,346 40,704 55,321 51,449 23,487 25,911 15,645
Depreciation and amortization
(in thousands)............. 20,526 14,746 19,975 13,956 10,181 7,214 4,369
</TABLE>
- 8 -
<PAGE>
AS OF OCTOBER 27, 1996
----------------------
BALANCE SHEET DATA -- END OF PERIOD: (IN THOUSANDS)
Working capital.................................... $ 183,604
Total assets....................................... 705,711
Short-term debt ................................... 0
Long-term debt, including current maturities ...... 152,146
Total liabilities.................................. 411,821
Stockholders' equity............................... 293,274
- --------------------
(1) The fiscal year ended January 28, 1996 consisted of 53 weeks. All
other fiscal years shown each consisted of 52 weeks.
(2) The net interest expense for the fiscal year ended January 28, 1996
includes $1,069 related to the Revolving Credit Facility (as defined
below), $203 paid pursuant to a cash management agreement between the
Company and Kmart (the "Cash Management Agreement"), and $437 in interest
income from short-term investments. The historical financial statements
for the fiscal years prior to the Company's initial public offering in
November 1994 (the "IPO") present all cash used by or provided to the
Company from Kmart as an adjustment of Kmart's investment in the Company.
Net repayments to Kmart were treated as dividends. Accordingly, no
interest expense to or interest income from Kmart is reflected in the
financial statements of the Company for any period prior to the IPO date,
except for interest of $552 on a promissory note to Kmart in the
principal amount of $96,000. For the balance of 1994, after the IPO, the
Company recognized interest income from Kmart of $251 related to the cash
and equivalents held by Kmart pursuant to the Cash Management Agreement.
The Cash Management Agreement was terminated on April 26, 1995.
(3) Earnings per common share and common share equivalents and weighted
average common shares and common share equivalents outstanding for the
39-week period ended October 22, 1995 and for the fiscal years ended
January 28, 1996, January 22, 1995 and January 23, 1994 have been
adjusted to reflect a three-for-two stock split effected on July 16,
1996. Earnings per common share and common share equivalents and weighted
average common shares and common share equivalents outstanding for the
fiscal years ended January 22, 1995 and January 23, 1994 are pro forma
and are based on the actual number of shares outstanding at January 22,
1995 (as adjusted to reflect the three-for-two stock split).
(4) In computing the ratio of earnings to fixed charges: (i) earnings are
based on income before income taxes plus fixed charges and (ii) fixed
charges consist of interest expense, amortization of deferred financing
costs and the estimated interest component of rent expense.
(5) Comparable store sales include the sales of a store beginning in its
fourteenth month of operation.
(6) Sales for the period divided by the weighted average gross square footage
for stores operated during the period.
(7) Includes total sales by licensees of $7,575 and $7,217 in the 39-week
periods ended October 27, 1996 and October 22, 1995, respectively.
Includes total sales by licensees of $29,533, $20,891, $19,248, $10,234
and $5,228 in the fiscal years 1995, 1994, 1993, 1992 and 1991,
respectively.
(8) Sales for the period divided by the weighted average number of stores
operated during the period.
- 9 -
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY. THIS PROSPECTUS CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE EXCHANGE ACT, WHICH INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED
IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THIS SECTION.
EXPANSION STRATEGY
The Company has engaged in a rapid expansion program pursuant to which
it opened 80 stores over the last three years, including 29 stores in 1995. In
1996, the Company has opened 32 stores, resulting in a year-end total of 168
stores, including six stores in Canada, three stores in Japan to be operated by
a joint venture 51% owned by the Company and two smaller format stores to be
operated in New York City under the name "The Sports Authority Ltd." The Company
currently plans to open at least 30 new stores in 1997. The rate of the
Company's expansion will depend, among other things, on general economic and
business conditions affecting consumer confidence and spending, the availability
of qualified management personnel, the availability of desirable locations, the
negotiation of acceptable lease terms, the availability of adequate capital and
its ability to manage the operational aspects of its growth. The Company's
ability to maintain an aggressive growth rate will be dependent upon its ability
to open new stores. There can be no assurance that the Company will sustain the
growth in the number of stores and the revenue growth achieved historically or
that it will maintain consistent levels of profitability, particularly as it
expands into markets now served by other large format sporting goods retailers
and mass merchandisers.
The Company's expansion program includes opening stores
internationally. The Company operates six stores in Canada and three stores in
Japan. In addition, the Company is considering expansion into other countries.
There can be no assurance that the retail formula for the Company's stores that
has worked successfully to date in the United States will work successfully in
foreign markets. Further, in addition to the risks associated with its expansion
program generally, the success of the Company's stores in foreign markets will
depend on the Company's ability to source and ship merchandise and to address
particular challenges in each country it enters, such as the availability of a
suitable work force, the condition of the local real estate market, applicable
regulatory requirements, the stability of such country's currency and the
overall economic and political climate.
The Company's expansion strategy focuses primarily on multi-store
markets where it can achieve significant market penetration and can leverage
management personnel and advertising expenses. For example, more than two-thirds
of those stores that were opened or are planned to be opened in 1996 and 1997
are in the Company's existing markets. This strategy has resulted in some
cannibalization of sales at existing stores. While management believes that
achieving greater market penetration will enable the Company to compete more
effectively and increase profitability and return on capital in the long term,
there can be no assurance that the level of cannibalization that results in the
future will not adversely affect the Company's sales and profitability.
COMPETITION AND MERCHANDISING
The retail sporting goods industry is highly competitive and
fragmented. In order to be successful, the Company must remain competitive in
the areas of selection and price of quality brand name merchandise. The Company
faces competition from a variety of retailers, including traditional sporting
goods retailers, specialty sporting goods retailers, large format sporting goods
retailers and mass merchandisers. The expansion of the Company into markets
served by competitors or the entry of new competitors or the expansion of
operations by existing competitors in the Company's markets could have a
material adverse effect on the Company's financial condition or results of
operations.
The Company's success depends to a large degree on its ability to
provide a merchandise selection that appeals to its customers' changing desires
and that appropriately reflects geographical differences in seasonality, brands
and sports preferences and sizes for footwear and apparel. A failure by the
Company to identify and respond to emerging trends in sports equipment or
athletic apparel, footwear and accessories could have a material adverse effect
on its sales and profitability. Moreover, while the Company believes it has good
relationships with its vendors, the inability to obtain merchandise from
existing or new vendors in the future could have a material adverse effect on
the Company's financial condition or results of operations.
- 10 -
<PAGE>
DISCRETIONARY CONSUMER SPENDING
Sales of sports and leisure equipment have historically been dependent
upon discretionary consumer spending, which may be affected by general economic
conditions. A decline in consumer spending on sports and leisure equipment,
apparel and footwear could have a material adverse effect on the Company's
financial condition or results of operations.
SEASONALITY
The Company's business is highly seasonal, with sales generally highest
in the fourth quarter and lowest in the first quarter. During 1995,
approximately 31% of the Company's sales and approximately 57% of the Company's
operating income were generated in the fourth quarter. The Company's results of
operations depend significantly upon the holiday selling season in the fourth
quarter and any decrease in net sales for such period could have a material
adverse effect on the Company's financial condition or results of operations for
the year. The Company's expansion program generally is weighted with store
openings in the second half of the fiscal year. In the future, changes in the
number and timing of store openings may result in different seasonality trends.
RELIANCE ON KEY PERSONNEL
Management believes that the Company's continued success will depend to
a significant extent upon the efforts and abilities of Mr. Jack A. Smith, who
founded the Company and serves as its Chairman and Chief Executive Officer, Mr.
Richard J. Lynch, Jr., President and Chief Operating Officer, and certain other
key officers. The loss of the services of such key officers could have a
material adverse effect on the Company. The Company does not maintain "key man"
life insurance on any of its officers.
EXTERNAL FINANCING
The Company has entered into a Credit Agreement, dated as of April 26,
1995, with a group of banks for which First Union National Bank of Florida
("First Union") acts as agent, to establish a $110 million revolving line of
credit (the "Revolving Credit Facility") to fund working capital requirements.
The Revolving Credit Facility contains certain restrictive financial covenants
relating to the maintenance of a minimum fixed charge coverage ratio, a maximum
leverage ratio and a minimum tangible net worth, and restrictive covenants
pertaining to limitations on dividends and the incurrence of additional debt and
other areas affecting the management and operations of the Company.
LEASE GUARANTY AGREEMENT
Pursuant to a Lease Guaranty, Indemnification and Reimbursement
Agreement between the Company and Kmart (the "Lease Guaranty Agreement"), the
Company has agreed to indemnify Kmart for any liability incurred by Kmart in
connection with its guarantees of 70 Company leases and the Company is subject
to certain cross default and related provisions contained in the Lease Guaranty
Agreement. The Lease Guaranty Agreement contains certain financial covenants
that are applicable to the Company except in the event, and for so long as, the
Company achieves and maintains the investment grade status specified in the
Lease Guaranty Agreement. These covenants include restrictions on the ability of
the Company to incur indebtedness and to make certain restricted payments
(including dividends or other distributions on, and repurchase of, capital stock
of the Company). In the event of certain payment defaults by the Company under
the Lease Guaranty Agreement in excess of $10 million, and in the event of
certain other defaults, Kmart will have the right to assume any or all of the
guaranteed leases and to take possession of all of the premises underlying such
leases upon 100 days' notice. The Lease Guaranty Agreement will remain in effect
until the expiration of all lease guarantees, which the Company believes will be
during or after November 2022. The terms of the Lease Guaranty Agreement may
adversely affect the Company's ability to obtain certain types of financing or
the terms on which financing might be obtained.
CONTINGENT REFINANCING OBLIGATIONS
Leases with respect to five of the Company's stores serve as collateral
for certain mortgage pass-through certificates. These mortgage pass-through
certificates include a provision (the "Contingent Refinancing Obligations")
which would permit the holders of the mortgage pass-through certificates to
require the Company or, upon the Company's failure, Kmart to repurchase the
underlying mortgage notes in certain events, including the failure by the
Company to make payments of rent under the related lease, the failure by Kmart
to maintain required debt ratings or the termination of the guarantee by Kmart
of the Company's obligations under the related lease. In the event the Company
is required to repurchase all of the underlying mortgage notes, the Company
would be obligated to either refinance or pay approximately $27 million. See
Note 9 to the Notes to Consolidated Financial Statements contained in the
- 11 -
<PAGE>
Company's Annual Report to Stockholders for the year ended January 28, 1996,
which was incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended January 28, 1996, which is incorporated herein by
reference.
ABSENCE OF TRADING MARKET FOR THE NOTES
The Notes are designated for trading on the PORTAL Market. There can be
no assurance that an active trading market for the Notes will develop or as to
the liquidity of any such market that may develop. If such market were to exist,
the Notes could trade at prices higher or lower than their principal amount,
depending on many factors, including prevailing interest rates, the market for
similar securities and the operating results of the Company.
CERTAIN ANTI-TAKEOVER CONSIDERATIONS
Certain provisions of the Company's Restated Certificate of
Incorporation (the "Certificate") and Amended and Restated By-laws (the
"By-laws"), including those relating to the classification of its Board of
Directors, may have the effect of making more difficult or discouraging a proxy
contest, a merger involving the Company, a tender offer, an open-market purchase
program or other purchases of Common Stock that could give stockholders of the
Company the opportunity to realize a premium over the then-prevailing market
price for their shares of Common Stock.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock could be highly volatile. Factors
such as announcements of fluctuations in the Company's or its competitors'
operating results and market conditions for growth stocks or retail industry
stocks in general could have a significant impact on the future price of the
Common Stock. Although the Common Stock is listed on the New York Stock Exchange
("NYSE"), there can be no assurance that an active trading market will be
sustained.
- 12 -
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the NYSE under the symbol "TSA." On
December 11, 1996, the last sale price of the Common Stock was $ 23.75 per
share. As of December 11, 1996, the Common Stock was held by approximately 776
holders of record. The following table sets forth, for the fiscal quarters
indicated, the high and low market sale prices for the Common Stock as reported
on the NYSE, as adjusted to reflect a three-for-two stock split effected on July
16, 1996:
HIGH LOW
---- ---
Fiscal 1994
4th Quarter (from November 18)...... $16.58 $10.83
Fiscal 1995
1st Quarter......................... 14.25 11.25
2nd Quarter......................... 16.33 11.42
3rd Quarter......................... 20.17 16.00
4th Quarter......................... 16.67 11.25
Fiscal 1996
1st Quarter......................... 20.25 12.50
2nd Quarter......................... 24.17 19.17
3rd Quarter ........................ 29.00 18.50
4th Quarter (through December 11)... 26.38 23.63
DIVIDEND POLICY
The Company has not declared any dividends in 1995 or 1996 and intends
to retain its earnings to finance future growth. Therefore, the Company does not
anticipate paying any cash dividends in the foreseeable future. The declaration
and payment of dividends, if any, is subject to the discretion of the Board of
Directors and to certain limitations under the General Corporation Law of the
State of Delaware. In addition, the Company's Revolving Credit Facility and
Lease Guaranty Agreement contain restrictions on the Company's ability to pay
dividends. The timing, amount and form of dividends, if any, will depend, among
other things, on the Company's results of operations, financial condition, cash
requirements and other factors deemed relevant by the Board of Directors.
- 13 -
<PAGE>
DESCRIPTION OF NOTES
The Notes were issued under an Indenture dated as of September 20, 1996
(the "Indenture"), between the Company and The Bank of New York, as trustee (the
"Trustee"). Wherever particular defined terms of the Indenture (including the
Notes and the various forms thereof) are referred to, such defined terms are
incorporated herein by reference. As used in this section, the "Company" refers
solely to The Sports Authority, Inc. and not its subsidiaries unless the context
otherwise indicates. The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, the detailed provisions of the Notes and the
Indenture, including the definition therein of certain terms. A copy of the
Indenture is filed as an exhibit to the Registration Statement on Form S-3, of
which this Prospectus forms a part.
GENERAL
In September 1996, the Company issued an aggregated principal amount of
$149,500,000 of the Notes pursuant to exemptions from the Securities Act. The
Notes were offered and sold to Qualified Institutional Buyers (as defined in the
Indenture) in reliance on Rule 144A ("Rule 144A Notes") and in offshore
transactions in reliance on Regulation S ("Regulation S Notes"). In addition,
Notes were offered and sold to a limited number of Institutional Accredited
Investors (as defined in the Indenture) in transactions exempt from registration
under the Securities Act not made in reliance on Rule 144A or Regulation S
("Initial IAI Notes").
The Notes are unsecured, subordinated obligations of the Company. The
Notes will mature on September 15, 2001 and be payable at a price of 100% of the
principal amount thereof. The Notes bear interest at the rate of 5 1/4% per
annum, payable semi-annually in arrears on March 15 and September 15 of each
year, commencing on March 15, 1997.
The Notes are convertible into Common Stock initially at the rate of
30.6419 shares per $1,000 of principal amount of Notes (equivalent to a
conversion price of $32.635 per share), subject to adjustment upon the
occurrence of certain events described under "--Conversion Rights," at any time
on or after December 19, 1996 and prior to the close of business on September
15, 2001, unless previously redeemed or repurchased.
The Notes are redeemable at the option of the Company, on or after
September 15, 1999, in whole or in part, at the redemption prices set forth
below under "--Redemption," plus accrued interest to the redemption date.
CONVERSION RIGHTS
The Holder of any Note has the right, at the Holder's option, to
convert any portion of the principal amount of any Note that is an integral
multiple of $1,000 into shares of Common Stock at any time on or after December
19, 1996 and prior to the close of business on September 15, 2001, unless
previously redeemed or repurchased, at a conversion rate of 30.6419 shares of
Common Stock per $1,000 principal amount of Notes (the "Conversion Rate")
(equivalent to a conversion price of $32.635 per share of Common Stock), subject
to adjustment as described below. The right to convert a Note called for
redemption or delivered for repurchase will terminate at the close of business
on the Redemption Date for such Note or the Repurchase Date, as the case may be.
The right of conversion attaching to any Note may be exercised by the
Holder by delivering the Note at the Corporate Trust Office of the Trustee in
the Borough of Manhattan, The City of New York, accompanied by a duly signed and
completed notice of conversion. Such notice of conversion can be obtained at the
office of the Trustee at its Corporate Trust Office in New York City. The
conversion date will be the date on which the Note and the duly signed and
completed notice of conversion are so delivered. As promptly as practicable on
or after the conversion date, the Company will issue and deliver to the Trustee
a certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share. Such certificate will be sent by the Trustee to the Conversion Agent for
delivery to the Holder. Such shares of Common Stock issuable upon conversion of
the Notes, in accordance with the provisions of the Indenture, will be fully
paid and nonassessable and will rank pari passu with the other shares of Common
Stock outstanding from time to time. Any Note surrendered for conversion during
the period from the close of business on any Regular Record Date to the opening
of business on the next succeeding Interest Payment Date (except Notes (or
portions thereof) called for redemption on a Redemption Date or repurchaseable
on a Repurchase Date occurring, in either case, within such period) must be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of Notes being surrendered for
conversion, and the interest payable on such Interest Payment Date in respect of
any such Note (or portion thereof, as the case may be) shall be paid to the
Holder of such Note as of such Regular Record Date. The interest payable on such
Interest Payment Date with respect to any Note (or portion thereof, if
applicable) which has been called for redemption on a Redemption Date, or is
repurchaseable on a Repurchase Date, occurring, in either case, during the
period referred to in the parenthetical in the immediately preceding sentence,
which Note (or portion thereof, if applicable) is surrendered for conversion
during
- 14 -
<PAGE>
such period, shall be paid to the Holder of such Note being converted in an
amount equal to the interest that would have been payable on such Note if such
Note had been converted as of the close of business on such Interest Payment
Date. Interest payable in respect of any Note surrendered for conversion on or
after an Interest Payment Date shall be paid to the Holder of such Note as of
the next preceding Regular Record Date, notwithstanding the exercise of the
right of conversion. As a result of the foregoing provisions, Holders that
surrender Notes for conversion on a date that is not an Interest Payment Date
will not receive any interest for the period from the Interest Payment Date next
preceding the date of conversion to the date of conversion or for any later
period, even if the Notes are surrendered after a notice of redemption (except
for the payment of interest on Notes called for redemption on a Redemption Date
or repurchaseable on a Repurchase Date between a Regular Record Date and the
Interest Payment Date to which it relates, as provided above). No other payment
or adjustment for interest, or for any dividends in respect of Common Stock,
will be made upon conversion. Holders of Common Stock issued upon conversion
will not be entitled to receive any dividends payable to holders of Common Stock
as of any record time or date before the close of business on the conversion
date. No fractional shares will be issued upon conversion but, in lieu thereof,
an appropriate amount will be paid in cash by the Company based on the closing
sale price of the Common Stock on the day of conversion.
A Holder delivering a Note for conversion will not be required to pay
any taxes or duties in respect of the issue or delivery of Common Stock on
conversion but will be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of the Common Stock in
a name other than that of the Holder of the Note. Certificates representing
shares of Common Stock will not be issued or delivered unless all taxes and
duties, if any, payable by the Holder have been paid.
The Conversion Rate is subject to adjustment in certain events,
including, without duplication: (a) dividends (and other distributions) payable
in Common Stock, (b) the issuance to all holders of Common Stock of rights,
options or warrants entitling them to subscribe for or purchase Common Stock at
less than the then Current Market Price of such Common Stock (determined as
provided in the Indenture) as of the record date for stockholders entitled to
receive such rights, options or warrants, (c) subdivisions, combinations and
reclassifications of Common Stock, (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock, cash
or assets (including securities, but excluding those dividends, rights, options,
warrants and distributions referred to above, dividends and distributions paid
exclusively in cash and in mergers and consolidations to which the next
succeeding paragraph applies), (e) distributions consisting exclusively of cash
(excluding any cash portion of distributions referred to in (d) above, or cash
distributed upon a merger or consolidation to which the next succeeding
paragraph applies) to all holders of Common Stock in an aggregate amount that,
combined together with (i) other such all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made and (ii) any
cash and the fair market value of other consideration payable in respect of any
tender offer (including the type described in (f) below) by the Company or any
of its subsidiaries for Common Stock concluded within the preceding 12 months in
respect of which no adjustment has been made, exceeds 10% of the Company's
market capitalization (being the product of the Current Market Price per share
of the Common Stock on the record date for such distribution times the number of
shares of Common Stock outstanding) on such date, and (f) the successful
completion of a tender offer made by the Company or any of its subsidiaries for
Common Stock which involves an aggregate consideration that, together with (i)
any cash and other consideration payable in a tender offer by the Company or any
of its subsidiaries for Common Stock expiring within the 12 months preceding the
expiration of such tender offer in respect of which no adjustment has been made
and (ii) the aggregate amount of any such all-cash distributions referred to in
(e) above to all holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 10% of the Company's market capitalization on the expiration of
such tender offer. The Company reserves the right to make such reductions in the
Conversion Rate in addition to those required in the foregoing provisions as it
considers to be advisable in order that any event treated for United States
federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the recipients. No adjustment of the Conversion Rate will be required
to be made until the cumulative adjustments amount to 1.0% or more of the
Conversion Rate. The Company will compute any adjustments of the Conversion Rate
pursuant to this paragraph and will give notice by mail to Holders of the Notes
of any adjustments.
In case of any consolidation or merger of the Company with or into
another Person or any merger of another Person into the Company (other than a
merger which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in case of any sale or transfer of all or
substantially all of the assets of the Company, each Note then outstanding will,
without the consent of the Holder of any Note, become convertible only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Note was convertible immediately prior thereto
(assuming such holder of Common Stock failed to exercise any rights of election
and that such Note was then convertible).
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
United States federal income tax purposes (e.g., distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends on
common stock or rights to subscribe for common stock) and, pursuant to the
anti-dilution provisions
- 15 -
<PAGE>
of the Indenture, the number of shares into which Notes are convertible is
increased, such increase may be deemed for federal income tax purposes to be the
payment of a taxable dividend to Holders of Notes. See "United States
Taxation--United States Holders--Dividends."
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the
Notes (including any Liquidated Damages (as defined in the Indenture) and any
amounts payable upon the redemption or the repurchase of the Notes permitted by
the Indenture) will be subordinated in right of payment to the extent set forth
in the Indenture to the prior payment in full of the principal of, premium, if
any, interest and other amounts in respect of all Senior Indebtedness of the
Company. The aggregate amount of outstanding Senior Indebtedness was
approximately $7.8 million at December 11, 1996.
"Senior Indebtedness" is defined in the Indenture to mean: the
principal of (and premium, if any) and interest (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) on, and all fees and other amounts payable in connection with, the
following, whether absolute or contingent, secured or unsecured, due or to
become due, outstanding on the date of the Indenture or thereafter created,
incurred or assumed: (a) indebtedness of the Company evidenced by credit or loan
agreements, notes, bonds, debentures, or other written obligations; (b) all
obligations of the Company for money borrowed; (c) all obligations of the
Company evidenced by a note or similar instrument given in connection with the
acquisition or any businesses, properties or assets of any kind; (d) obligations
of the Company as lessee under leases capitalized on the balance sheet of the
lessee under generally accepted accounting principles; (e) obligations of the
Company under interest rate and currency swaps, caps, floors, collars, hedge
agreements, forward contracts, or similar agreements or arrangements intended to
protect the Company against fluctuations in interest or currency exchange rates
or commodity prices; (f) all reimbursement obligations of the Company with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of the Company; (g) all obligations of the Company issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (h) all obligations of the type referred to in clauses (a) through
(g) above of another Person and all dividends of another Person, the payment of
which, in either case, the Company has assumed or guaranteed, or for which the
Company is responsible or liable, directly or indirectly, jointly or severally,
as obligor, guarantor or otherwise, or which is secured by a lien on property of
the Company; and (i) renewals, extensions, modifications, replacements,
restatements and refundings of, or any indebtedness or obligation issued in
exchange for, any such indebtedness or obligation described in clauses (a)
through (g) of this paragraph; provided, however, that Senior Indebtedness shall
not include the Notes or any such indebtedness or obligation if the terms of
such indebtedness or obligation (or the terms of the instrument under which or
pursuant to which it is issued) provides that such indebtedness or obligation is
not superior in right of payment to the Notes.
No payment on account of principal of, premium, if any, or interest on
the Notes (including any Liquidated Damages and any amounts payable upon the
redemption or the repurchase of the Notes permitted by the Indenture) may be
made by the Company if there is a default in the payment of principal, premium,
if any, or interest (including a default under any repurchase or redemption
obligation) or other amounts with respect to any Senior Indebtedness or if any
other event of default with respect to any Senior Indebtedness, permitting the
holders to accelerate the maturity thereof, shall have occurred and shall not
have been cured or waived or shall not have ceased to exist after written notice
to the Company and the Trustee by any holder of Senior Indebtedness. Upon any
acceleration of the principal due on the Notes or payment or distribution of
assets of the Company to creditors upon any dissolution, winding up, liquidation
or reorganization, whether voluntary or involuntary, marshaling of assets,
assignment for the benefit of creditors, or in bankruptcy, insolvency,
receivership or other similar proceedings of the Company, all principal,
premium, if any, and interest or other amounts due on all Senior Indebtedness
must be paid in full before the Holders of the Notes are entitled to receive any
payment. By reason of such subordination, in the event of insolvency, creditors
of the Company who are holders of Senior Indebtedness may recover more, ratably,
than the Holders of the Notes, and such subordination may result in a reduction
or elimination of payments to the Holders of the Notes.
In addition, the Notes are structurally subordinated to all
indebtedness and other liabilities (including trade payables and lease
obligations) of the Company's subsidiaries, as any right of the Company to
receive any assets of its subsidiaries upon their liquidation or reorganization
(and the consequent right of the Holders of the Notes to participate in those
assets) will be effectively subordinated to the claims of that subsidiary's
creditors (including trade creditors), except to the extent that the Company
itself is recognized as a creditor of such subsidiary, in which case the claims
of the Company would still be subordinate to any security interest in the assets
of such subsidiary and any indebtedness of such subsidiary senior to that held
by the Company. As of December 11, 1996, the aggregate amount of outstanding
indebtedness of subsidiaries of the Company (excluding intercompany
indebtedness) was approximately $4.5 million.
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The Indenture does not limit the Company's or its subsidiaries' ability
to incur Senior Indebtedness or any other indebtedness.
REDEMPTION
The Notes may not be redeemed at the option of the Company prior to
September 15, 1999. On and after September 15, 1999, the Notes may be redeemed,
in whole or in part, at the option of the Company, at the redemption prices
specified below, upon not less than 30 nor more than 60 days' prior notice as
provided under "--Notices" below.
The redemption price (expressed as a percentage of principal amount) is
as follows for the 12-month periods beginning on September 15 of the following
years:
REDEMPTION
YEAR PRICE
---- ------
1999................ 102.100
2000................ 101.050
and thereafter is equal to 100% of the principal amount, in each case together
with accrued interest to the date of redemption. No sinking fund is provided for
the Notes.
PAYMENT AND CONVERSION
The principal of Notes will be payable in U.S. dollars, against
surrender thereof at the Corporate Trust Office of the Trustee in the Borough of
Manhattan, The City of New York, by dollar check drawn on, or by wire transfer
to a dollar account (such wire transfer to be made only to Holders of an
aggregate principal amount of Notes in excess of $2,000,000) maintained by the
Holder with, a bank in New York City. Payment of any installment of interest on
Notes will be made to the Person in whose name such Notes (or any predecessor
Notes) are registered at the close of business on the March 1 or the September 1
(whether or not a Business Day) immediately preceding the relevant Interest
Payment Date (a "Regular Record Date"). Payments of such interest will be made
by a dollar check drawn on a bank in New York City mailed to the Holder at such
Holder's registered address or, upon application by the Holder thereof to the
Trustee not later than the applicable Regular Record Date, by wire transfer to a
dollar account (such wire transfer to be made only to Holders of an aggregate
principal amount of Notes in excess of $2,000,000) maintained by the Holder with
a bank in New York City. No wire transfer to a dollar account will be made
unless the Trustee has received written wire instructions not less than 15 days
prior to the relevant payment date.
Any payment on the Notes due on any day which is not a Business Day
need not be made on such day, but may be made on the next succeeding Business
Day with the same force and effect as if made on such due date, and no interest
shall accrue on such payment for the period from and after such date. "Business
Day," when used with respect to any place of payment, place of conversion or any
other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in such place of
payment, place of conversion or other place, as the case may be, are authorized
or obligated by law or executive order to close; provided, however, that a day
on which banking institutions in New York, New York are authorized or obligated
by law or executive order to close shall not be a Business Day for certain
purposes.
Notes may be surrendered for conversion at the Corporate Trust Office
of the Trustee in the Borough of Manhattan, The City of New York. Notes
surrendered for conversion must be accompanied by appropriate notices and any
payments in respect of interest or taxes, as applicable, as described above
under "--Conversion Rights."
The Company has initially appointed the Trustee as Paying Agent and
Conversion Agent. The Company may at any time terminate the appointment of any
Paying Agent or Conversion Agent and appoint additional or other Paying Agents
and Conversion Agents, provided that until the Notes have been delivered to the
Trustee for cancellation, or moneys sufficient to pay the principal of, premium,
if any, and interest on the Notes have been made available for payment and
either paid or returned to the Company as provided in the Indenture, it will
maintain an office or agency in the Borough of Manhattan, The City of New York
for surrender of Notes for conversion. Notice of any such termination or
appointment and of any change in the office through which any Paying Agent or
Conversion Agent will act will be given in accordance with "--Notices" below.
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All moneys deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of principal of, premium, if any, or
interest on any Notes which remain unclaimed at the end of two years after such
payment has become due and payable will be repaid to the Company, and the Holder
of such Note will thereafter look only to the Company for payment thereof.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control (as defined below) occurs, each Holder of Notes
shall have the right, at the Holder's option, to require the Company to
repurchase all of such Holder's Notes not theretofore called for redemption, or
any portion of the principal amount thereof that is $1,000 or an integral
multiple thereof, on the date (the "Repurchase Date") that is 45 days after the
date of the Company Notice (as defined below), at a price equal to 100% of the
principal amount of the Notes to be repurchased, together with interest accrued
to the Repurchase Date (the "Repurchase Price").
The Company may, at its option, in lieu of paying the Repurchase Price
in cash, pay the Repurchase Price in Common Stock valued at 95% of the average
of the closing sale prices of the Common Stock for the five trading days
immediately preceding the second trading day prior to the Repurchase Date;
provided that payment may not be made in Common Stock unless the Company
satisfies certain conditions with respect to such payment prior to the
Repurchase Date as provided in the Indenture.
Within 30 days after the occurrence of a Change in Control, the Company
is obligated to give to all Holders of the Notes notice, as provided in the
Indenture (the "Company Notice"), of the occurrence of such Change in Control
and of the repurchase right arising as a result thereof. The Company must also
deliver a copy of the Company Notice to the Trustee. To exercise the repurchase
right, a Holder of Notes must deliver on or before the 30th day after the date
of the Company Notice irrevocable written notice to the Trustee of the Holder's
exercise of such right, together with the Notes with respect to which the right
is being exercised.
A "Change in Control" shall be deemed to have occurred at such time
after the original issuance of the Notes as there shall occur:
(i) the acquisition by any Person of beneficial ownership,
directly or indirectly, through a purchase, merger or other acquisition
transaction or series of transactions, of shares of capital stock of the Company
entitling such Person to exercise 50% or more of the total voting power of all
shares of capital stock of the Company entitled to vote generally in elections
of directors, other than any such acquisition by the Company, any subsidiary of
the Company or any employee benefit plan of the Company; or
(ii) any consolidation or merger of the Company with or into,
any other Person, any merger of another Person into the Company, or any
conveyance, sale, transfer or lease of all or substantially all of the assets of
the Company to another Person (other than (a) any such transaction (x) which
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of capital stock of the Company and (y) pursuant to which the
holders of the Common Stock immediately prior to such transaction have the
entitlement to exercise, directly or indirectly, 50% or more of the total voting
power of all shares of capital stock entitled to vote generally in the election
of directors of the continuing or surviving corporation immediately after such
transaction and (b) any merger which is effected solely to change the
jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock solely into shares
of common stock);
provided, however, that a Change in Control shall not be deemed to have occurred
if the closing sale price per share of the Common Stock for any five trading
days within the period of 10 consecutive trading days ending immediately after
the later of the Change in Control or the public announcement of the Change in
Control (in the case of a Change in Control under clause (i) above) or the
period of 10 consecutive trading days ending immediately before the Change in
Control (in the case of a Change in Control under clause (ii) above) shall equal
or exceed 105% of the Conversion Price of the Notes in effect on each such
trading day. The "Conversion Price" is equal to $1,000 divided by the Conversion
Rate. "Beneficial Owner" shall be determined in accordance with Rule 13d-3
promulgated by the Commission under the Exchange Act, as in effect on the date
of execution of the Indenture. "Person" includes any syndicate or group which
would be deemed to be a "person" under Section 13(d)(3) of the Exchange Act.
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to Securityholders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Notes. The Company will comply with this rule to the extent applicable at
that time.
The Company may, to the extent permitted by applicable law, at any time
purchase Notes in the open market or by tender at any price or by private
agreement. Any Note so purchased by the Company may, to the extent permitted by
applicable law and subject
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<PAGE>
to restrictions contained in the Purchase Agreement, be re-issued or resold or
may, at the Company's option, be surrendered to the Trustee for cancellation.
Any Notes surrendered as aforesaid may not be re-issued or resold and will be
canceled promptly.
The foregoing provisions would not necessarily afford Holders of the
Notes protection in the event of highly leveraged or other transactions
involving the Company that may adversely affect Holders.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other Person or
convey, transfer, sell or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer, sell or lease
such Person's properties and assets substantially as an entirety to the Company
unless (a) the Person formed by such consolidation or into or with which the
Company is merged or the Person to which the properties and assets of the
Company are so conveyed, transferred, sold or leased shall be a corporation,
limited liability company, partnership or trust organized and existing under the
laws of the United States, any State thereof or the District of Columbia and, if
other than the Company, shall expressly assume the payment of the principal of,
premium, if any, and interest on the Notes and the performance of the other
covenants of the Company under the Indenture, and (b) immediately after giving
effect to such transaction, no Event of Default, and no event that, after notice
or lapse of time or both, would become an Event of Default, shall have occurred
and be continuing.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Note when due, whether or not such
payment is prohibited by the subordination provisions of the Notes and the
Indenture; (b) failure to pay any interest (including any Liquidated Damages) on
any Note when due, continuing for 30 days, whether or not such payment is
prohibited by the subordination provisions of the Notes and the Indenture; (c)
failure to provide a Company Notice in the event of a Change in Control, whether
or not such notice is prohibited by the subordination provisions of the Notes
and the Indenture; (d) failure to perform any other covenant of the Company in
the Indenture, continuing for 90 days after written notice as provided in the
Indenture; (e) default in respect of any indebtedness for money borrowed by the
Company that results in acceleration of the maturity of an amount in excess of
$10,000,000 of indebtedness if such indebtedness is not discharged, or such
acceleration is not annulled, within 30 days after written notice as provided in
the Indenture; and (f) certain events of bankruptcy, insolvency or
reorganization. Subject to the provisions of the Indenture relating to the
duties of the Trustee in case an Event of Default shall occur and be continuing,
the Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
If an Event of Default shall occur and be continuing, either the
Trustee or the Holders of at least 25% in principal amount of the Outstanding
Notes may accelerate the maturity of all Notes; provided, however, that after
such acceleration, but before a judgment or decree based on acceleration, the
Holders of a majority in aggregate principal amount of Outstanding Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of principal of the Notes which have
become due solely by such declaration of acceleration, have been cured or waived
as provided in the Indenture. For information as to waiver of defaults, see
"--Meetings, Modification and Waiver."
No Holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such Holder
shall have previously given to the Trustee written notice of a continuing Event
of Default and the Holders of at least 25% in aggregate principal amount of the
Outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the Outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder of a
Note for the enforcement of payment of the principal of, premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note or of the right to convert such Note in accordance with the Indenture.
The Company is required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
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<PAGE>
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provision for convening meetings of the Holders
of Notes to consider matters affecting their interests.
Certain limited modifications of the Indenture may be made without the
necessity of obtaining the consent of the Holders of the Notes. Other
modifications and amendments of the Indenture may be made, and certain past
defaults by the Company may be waived, either (i) with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes at the time Outstanding or (ii) by the adoption of a resolution, at a
meeting of Holders of the Notes at which a quorum is present, by the Holders of
at least 66 2/3% in aggregate principal amount of the Notes represented at such
meeting. However, no such modification or amendment may, without the consent of
the Holder of each Outstanding Note affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of interest on, any Note, (b)
reduce the principal amount of, or the premium, if any, or interest on, any
Note, (c) reduce the amount payable upon a redemption or mandatory repurchase,
(d) modify the provisions with respect to the repurchase right of the Holders in
a manner adverse to the Holders, (e) change the place or currency of payment of
principal of, premium, if any, or interest on, any Note (including any payment
of Liquidated Damages or of the Repurchase Price in respect of such Note), (f)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Note, (g) modify the obligation of the Company to maintain an
office or agency in New York City, (h) except as otherwise permitted or
contemplated by provisions concerning consolidation, merger, conveyance,
transfer, sale or lease of all or substantially all of the property and assets
of the Company, adversely affect the right of Holders to convert any of the
Notes or to require the Company to repurchase any Note other than as provided in
the Indenture, (i) modify the subordination provisions in a manner adverse to
the Holders of the Notes, (j) reduce the above-stated percentage of Outstanding
Notes necessary to modify or amend the Indenture, (k) reduce the percentage of
aggregate principal amount of Outstanding Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults, (l) reduce the percentage in aggregate principal amount of Outstanding
Notes required for the adoption of a resolution or the quorum required at any
meeting of Holders of Notes at which a resolution is adopted, or (m) modify the
obligation of the Company to deliver information required under Rule 144A to
permit resales of Notes and Common Stock issuable upon conversion thereof in the
event the Company ceases to be subject to certain reporting requirements under
the United States securities laws. The quorum at any meeting called to adopt a
resolution will be persons holding or representing a majority in aggregate
principal amount of the Notes at the time Outstanding and, at any reconvened
meeting adjourned for lack of a quorum, 25% of such aggregate principal amount.
The Holders of a majority in aggregate principal amount of the
Outstanding Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture by written consent or by the adoption of a
resolution at a meeting. The Holders of a majority in aggregate principal amount
of the Outstanding Notes also may waive any past default under the Indenture,
except a default in the payment of principal, premium, if any, or interest, by
written consent.
TRANSFER, EXCHANGE AND WITHDRAWAL
At the option of the Holder upon request confirmed in writing, and
subject to the terms of the Indenture, any Note will be exchangeable at any time
into an equal aggregate principal amount of Notes of different authorized
denominations provided that any applicable transfer restrictions are satisfied.
Notes may be presented for registration of transfer (with the form of
transfer endorsed thereon duly executed) or exchange, at the office of any
transfer agent or at the office of the security registrar, without service
charge but, in the case of a transfer, upon payment of any taxes and other
governmental charges as described in the Indenture. Any registration of transfer
or exchange will be effected upon the transfer agent or the security registrar,
as the case may be, being satisfied with the documents of title and identity of
the person making the request, and subject to such reasonable regulations as the
Company may from time to time agree upon with the transfer agents and the
security registrar, all as described in the Indenture. Subject to the applicable
transfer restrictions, Notes may be transferred in whole or in part in
authorized denominations.
The Company has initially appointed the Trustee as security registrar
and transfer agent, acting through its Corporate Trust Office in New York City.
The Company reserves the right to vary or terminate the appointment of the
security registrar or of any transfer agent or to appoint additional or other
transfer agents or to approve any change in the office through which any
security registrar or any transfer agent acts.
In the event of a redemption of the Notes for any of the reasons set
forth below under "--Redemption," the Company will not be required (a) to
register the transfer or exchange of Notes for a period of 15 days immediately
preceding the date notice is given
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<PAGE>
identifying the serial numbers of the Notes called for such redemption or (b) to
register the transfer of or exchange any Note, or portion thereof, called for
redemption.
TITLE
The Company, the Trustee, any Paying Agent and any Conversion Agent may
treat the registered owner (as reflected in the Security Register) of any Note
as the absolute owner thereof (whether or not such Note shall be overdue) for
the purpose of making payment and for all other purposes.
NOTICES
Notice to Holders of the Notes will be given by mail to the addresses
of such Holders as they appear in the Security Register. Such notices will be
deemed to have been given on the date of such mailing.
Notice of a redemption of Notes will be given at least once not less
than 30 nor more than 60 days prior to a redemption date (which notice shall be
irrevocable) and will specify the redemption date.
REPLACEMENT OF NOTES
Notes that become mutilated, destroyed, stolen or lost will be replaced
by the Company at the expense of the Holder upon delivery to the Trustee of the
mutilated Notes or evidence of the loss, theft or destruction thereof
satisfactory to the Company and the Trustee. In the case of a lost, stolen or
destroyed Note, indemnity satisfactory to the Trustee and the Company may be
required at the expense of the Holder of such Note before a replacement Note
will be issued.
PAYMENT OF STAMP AND OTHER TAXES
The Company will pay all stamp and other duties, if any, which may be
imposed by the United States or any political subdivision thereof or taxing
authority thereof or therein with respect to the issuance of the Notes. The
Company will not be required to make any payment with respect to any other tax,
assessment or governmental charge imposed by any government or any political
subdivision thereof or taxing authority thereof or therein.
THE TRUSTEE
In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders of
Notes, unless they shall have offered to the Trustee reasonable security or
indemnity.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Certificate authorizes 105 million shares of capital stock, 100
million of such shares being Common Stock, par value $.01 per share, and five
million of such shares being preferred stock, par value $.01 per share. As of
December 11, 1996, a total of 31,449,631 shares of Common Stock were issued and
outstanding.
COMMON STOCK
Subject to the rights of holders of any preferred stock then
outstanding, holders of Common Stock are entitled to receive such dividends out
of assets legally available therefor as may from time to time be declared by the
Board of Directors (the "Board"). Holders of Common Stock are entitled to one
vote per share on all matters on which the holders of Common Stock are entitled
to vote. Because holders of Common Stock do not have cumulative voting rights,
holders of a majority of the shares of Common Stock represented at a meeting can
elect all of the directors that could be elected at such meeting. In the event
of liquidation, dissolution or winding up of the Company, holders of Common
Stock would be entitled to share ratably in assets of the Company available for
distribution to holders of Common Stock. All outstanding shares of Common Stock
are, and shares of Common Stock issuable upon conversion of the Notes will be,
when so issued upon conversion, fully paid and nonassessable.
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<PAGE>
Holders of Common Stock are not liable to further calls or assessments
by the Company and holders of Common Stock are not liable for any liabilities of
the Company. Holders of Common Stock have no preemptive rights under the
Certificate.
PREFERRED STOCK
The Certificate authorizes the Board to provide for the issuance, from
time to time, of classes or series of preferred stock, to establish the number
of shares to be included in any such series and to fix the designations, voting
powers, preferences and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. Because the Board has the
power to establish the preferences and rights of the shares of any such series
of preferred stock, it may afford holders of any preferred stock preferences,
powers and rights (including voting rights) senior to the rights of holders of
Common Stock, which could adversely affect the rights of holders of Common
Stock. There are no shares of preferred stock currently outstanding and the
Company has no current intention to issue any shares of preferred stock.
CERTAIN CERTIFICATE AND BY-LAW PROVISIONS
Certain provisions of the Certificate and By-laws could be deemed to
have an anti-takeover effect. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the Board and in
the policies formulated by the Board and to discourage an unsolicited takeover
of the Company if the Board determines that such takeover is not in the best
interests of the Company and its stockholders. However, these provisions could
have the effect of discouraging certain attempts to acquire the Company or to
remove incumbent management even if some or a majority of stockholders deem such
an attempt to be in their best interests.
The Certificate provides for a classified Board consisting of three
classes as nearly equal in size as the then authorized number of directors
constituting the Board permits. At each annual meeting of stockholders, the
class of directors to be elected at such meeting will be elected for a
three-year term and the directors in the other two classes will continue in
office. Each class shall hold office until the date of the third annual meeting
for the election of directors following the annual meeting at which such
director was elected, except that the initial terms of Class III directors
expire on the date of the annual meeting in 1997. As a result, approximately
one-third of the Board will be elected each year. Under the Delaware General
Corporation Law, in the case of a corporation having a classified board,
stockholders may remove a director only for cause. This provision, when coupled
with provisions of the Certificate and By-laws authorizing the Board to fill
vacant directorships, precludes a stockholder from removing incumbent directors
without cause and simultaneously gaining control of the Board of Directors by
filling the vacancies created by such removal with its own nominees.
The By-laws establish an advance notice procedure for the nomination,
other than by or at the direction of the Board, of candidates for election as
directors as well as for other stockholder proposals to be considered at annual
meetings of stockholders. In general, notice must be received by the Company not
less than 60 days nor more than 90 days prior to the meeting and must contain
certain specified information concerning the persons to be nominated or the
matters to be brought before the meeting and concerning the stockholder
submitting the proposal.
The Certificate provides that no action may be taken by stockholders
except at an annual or special meeting of stockholders and prohibits action by
written consent in lieu of a meeting. The By-laws provide that special meetings
of stockholders of the Company may be called only by the Chairman of the Board,
the President or the Secretary or by a majority of the members of the Board.
This provision will make it more difficult for stockholders to take action
opposed by the Board.
First Union National Bank of North Carolina acts as transfer agent and
registrar for the Common Stock.
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SELLING SECURITYHOLDERS
The following table sets forth the name of each Selling Securityholder
and such Selling Securityholder's relationship, if any, with the Company and (i)
the amount of Notes owned by each Selling Securityholder as of December 11, 1996
(assuming no Notes have been sold in transactions exempt from registration
according to the terms of the Indenture), (ii) the maximum amount of Notes which
may be offered for the account of such Selling Securityholder under the
Prospectus, (iii) the amount of Common Stock owned by each Selling
Securityholder as of December 11, 1996 and (iv) the maximum amount of Common
Stock which may be offered for the account of such Selling Securityholder under
the Prospectus.
<TABLE>
<CAPTION>
COMMON
PRINCIPAL AMOUNT STOCK OWNED
NAME OF SELLING PRINCIPAL AMOUNT OF OF NOTES OFFERED PRIOR TO COMMON STOCK
SECURITYHOLDER NOTES OWNED HEREBY OFFERING (1) OFFERED HEREBY(2)
-------------- ------------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
CFW-C, L.P. $10,500,000 $10,500,000 321,739 321,739
Deutsche Morgan Grenfell, Inc. 7,050,000 7,050,000 216,025 216,025
Lipper Convertibles, L.P. 5,150,000 5,150,000 157,805 157,805
Paloma Securities L.L.C. 5,050,000 5,050,000 154,741 154,741
AIM Charter Fund(3) 5,000,000 5,000,000 153,209 153,209
The TCW Group, Inc.(4) 4,855,000 4,855,000 148,766 148,766
SMM Co. BV 4,850,000 4,850,000 148,613 148,613
OCM Convertible Trust 3,545,000 3,545,000 108,625 108,625
Oppenheimer Total Return Fund, Inc. 3,000,000 3,000,000 91,925 91,925
State of Connecticut Combined
Investment Funds 2,690,000 2,690,000 82,426 82,426
Tour Societe Generale 2,500,000 2,500,000 76,604 76,604
Delta Air Lines Master Trust 2,470,000 2,470,000 75,685 75,685
Strong Total Return Fund, Inc. 2,000,000 2,000,000 61,283 61,283
Vanguard Convertible Securities
Fund, Inc. 1,720,000 1,720,000 52,704 52,704
Lincoln National Life Insurance
Company 1,500,000 1,500,000 45,962 45,962
Teachers Retirement System of Texas 1,250,000 1,250,000 38,302 38,302
Ramius Fund, L.P. 1,125,000 1,125,000 34,472 34,472
Lipper Offshore Convertibles, L.P. 1,000,000 1,000,000 30,641 30,641
State Employees' Retirement Fund of
the State of Delaware 920,000 920,000 28,190 28,190
Hughes Aircraft Company Master
Retirement Trust 905,000 905,000 27,730 27,730
Palladin Partners, L.P. 860,000 860,000 26,352 26,352
Colonial Penn Insurance Company 725,000 725,000 22,215 22,215
Colonial Penn Life Insurance
Company 725,000 725,000 22,215 22,215
Gleneagles Fund, Ltd. 685,000 685,000 20,989 20,989
Gershon Partners, L.P. 505,000 505,000 15,474 15,474
Pacific Mutual Life Insurance
Company 500,000 500,000 15,320 15,320
Salomon Brothers International
Limited(5) 450,000 450,000 13,788 13,788
AIM V.I. Growth and Income
Fund(6) 400,000 400,000 12,256 12,256
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
OCM Convertible Limited
Partnership 250,000 250,000 7,660 7,660
Goldman Sachs & Co. Bank,
Zurich(7) 200,000 200,000 6,128 6,128
------------- ------------ --------- ---------
Subtotal $ 72,380,000 $ 72,380,000 2,217,844 2,217,844
Unnamed Securityholders or any $ 77,120,000 $ 77,120,000 2,363,103 2,363,103
future transferees, pledges, donees or
successors of or from any such
unnamed Securityholder(8)(9)
Total $ 149,500,000 $ 149,500,000 4,580,947 4,580,947
============= ============= ========= =========
<FN>
- ----------
(1) Comprises the shares of Common Stock into which the Notes held
by such Selling Securityholder are convertible at the initial
Conversion Rate (as defined herein). The Conversion Rate and the number
of shares of Common Stock issuable upon conversion of the Notes are
subject to adjustment under certain circumstances. See "Description of
Notes--Conversion Rights." Accordingly, the number of shares of Common
Stock issuable upon conversion of the Notes may increase or decrease
from time to time.
(2) Assumes conversion into Common Stock of the full amount of Notes
held by the Selling Securityholder at the initial Conversion Rate and
the offering of such shares by such Selling Securityholder pursuant to
the Registration Statement of which this Prospectus forms a part. The
Conversion Rate and the number of shares of Common Stock issuable upon
Conversion of the Notes are subject to adjustment under certain
circumstances. See "Description of Notes--Conversion Rights."
Accordingly, the number of shares of Common Stock issuable upon
conversion of the Notes may increase or decrease from time to time.
(3) AIM Charter Fund is a series of AIM Equity Funds, Inc.
(4) The TCW Group, Inc. holds such Notes under management for various
entities.
(5) Salomon Brothers International Limited served as a co-manager
for public offerings of the Common Stock made in October 1995 and
November 1994. Salomon Brothers International Limited is an affiliate
of Salomon Brothers Inc. which served as a co-manager for public
offerings of the Common Stock made in October 1995 and November 1994.
(6) AIM V.I. Growth and Income Fund is a series of AIM Variable Insurance
Funds, Inc.
(7) Goldman Sachs & Co. Bank, Zurich is an affiliate of Goldman, Sachs &
Co. Goldman, Sachs & Co. was the initial purchaser of the Notes and has
served as managing underwriter for public offerings of the Common Stock
made in October 1995 and November 1994.
(8) No such holder may offer Notes pursuant to the Registration Statement
of which this Prospectus forms a part until such holder is included as
a Selling Securityholder in a supplement to this Prospectus in
accordance with the Registration Rights Agreement.
(9) Assumes that the unnamed Securityholders or any future transferees,
pledgees, donees or successors of or from any such unnamed
Securityholder do not beneficially own any Common Stock other than the
Common Stock issuable upon conversion of the Notes at the initial
Conversion Rate.
</FN>
</TABLE>
Because the Selling Securityholders may, pursuant to this Prospectus,
offer all or some portion of the Notes they presently hold, no estimate can be
given as to the amount of the Notes that will be held by the Selling
Securityholders upon termination of any such sales. In addition, the Selling
Securityholders identified above may have sold, transferred or otherwise
disposed of all or a portion of their Notes since the date on which they
provided the information regarding their Notes, in transactions exempt from the
registration requirements of the Securities Act. See "Plan of Distribution."
Only Selling Securityholders identified above who beneficially own the
Notes set forth opposite each such Selling Securityholder's name in the
foregoing table on the effective date of the Registration Statement of which
this Prospectus forms a part may sell such Notes pursuant to the Registration
Statement. The Company may from time to time, in accordance with the
Registration Rights Agreement, include additional Selling Securityholders in
supplements to this Prospectus.
24
<PAGE>
PLAN OF DISTRIBUTION
The Notes were issued in connection with a private placement. The Notes
may be sold from time to time by the Selling Securityholders. The Selling
Securityholders may from time to time sell all or a portion of the Notes in
transactions in the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Notes may be sold directly or through broker-dealers. If the
Securities are sold through broker-dealers, the Selling Securityholders may pay
brokerage commissions and charges. The methods by which the Notes may be sold
include (a) a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the securities as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(b) by a broker or dealer as principal and resale by such broker or dealer for
its own account pursuant to this Prospectus; (c) exchange distributions and/or
secondary distributions; (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; and (e) privately negotiated transactions.
Pursuant to the provisions of the Registration Rights Agreement entered
into by and between the Company and Goldman, Sachs & Co., the Company will pay
the costs and expenses incident to its registration and qualification of the
Notes and Common Stock offered hereby, including registration and filing fees.
In addition, the Company has agreed to indemnify the Selling Securityholders
against certain liabilities, including liabilities arising under the Securities
Act.
The holders of the Notes and the Common Stock issuable upon conversion
of the Notes are qualified institutional buyers within the meaning of Rule 144A
of the Securities Act, institutional accredited investors within the meaning of
Rule 501 of the Securities Act or non-U.S. persons within the meaning of
Regulation S under the Securities Act. Prior to any use of this Prospectus for
the resale of the Notes and the Common Stock issuable upon conversion of the
Notes registered herein, this Prospectus will be amended or supplemented to set
forth the name of the Selling Securityholder, the amount of the Notes and/or the
number of shares of Common Stock beneficially owned by such Selling
Securityholder, and the amount of the Notes and/or the number of shares of
Common Stock to be offered for resale by such Selling Securityholder. The
supplemented or amended Prospectus will also disclose whether any Selling
Securityholder selling in connection with such supplemented or amended
Prospectus has held any position or office with, been employed by or otherwise
had a material relationship with, the Company or any of its affiliates during
the three years prior to the date of the supplemented or amended Prospectus.
The Selling Securityholders and any broker-dealer participating in the
distribution of the Notes and the Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any profit and any
commissions paid or any discounts or concessions allowed to any such
broker-dealer may be deemed to be underwriting discounts and commissions under
the Securities Act. The Selling Securityholders may indemnify any broker-dealer
that participates in transactions involving the sale of Notes and the Common
Stock against certain liabilities, including liabilities under the Securities
Act.
There can be no assurances that the Selling Securityholders will sell
any or all of the Notes and/or the Common Stock offered by them hereunder.
The resale of the Notes and/or the Common Stock issuable upon
conversion of the Notes will be freely transferable in the hands of persons
other than affiliates of the Company. The Common Stock is listed and principally
traded on the NYSE under the symbol "TSA."
The Company will receive none of the proceeds from the resale of the
Notes and the Common Stock issuable upon conversion of the Notes.
LEGAL MATTERS
The validity of the issuance of the Securities offered by this
Prospectus has been passed upon for the Company by Morgan, Lewis & Bockius LLP,
5300 First Union Financial Center, 200 South Biscayne Boulevard, Miami, Florida
33131-2339.
EXPERTS
The consolidated financial statements of the Company as of January 28,
1996 and January 22, 1995, and for each year in the three year period ended
January 28, 1996, have been audited by Price Waterhouse LLP, independent
accountants, whose report is incorporated herein by reference. Such financial
statements have been included in reliance on the reports of such independent
accountants given on the authority of such firms as experts in auditing and
accounting.
- 25 -
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than underwriting
compensation expected to be incurred) in connection with the offering described
in this Registration Statement. All of such amounts (except the SEC Registration
Fee) are estimated.
COMPANY
-------
SEC Registration Fee............................... $45,303.03
New York Stock Exchange Listing Fee................ 16,030.00
Printing and Engraving Costs....................... 40,000.00
Legal Fees and Expenses............................ 60,000.00
Ratings Agency Fees................................ 112,000.00
Accounting Fees and Expenses....................... 50,000.00
Transfer Agent and Registrar Fees and Expenses..... 30,000.00
Miscellaneous...................................... 2,000.00
------------
Total........................................ $ 355,333.03
============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Certificate of Incorporation (the "Certificate")
provides that the Company shall, to the fullest extent permitted by the Delaware
General Corporation Law, as amended from time to time, indemnify all directors
and officers.
Article Fifth of the Certificate provides that the directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty, except for liability in
connection with a breach of duty of loyalty, for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, for
dividend payments or stock repurchases illegal under Delaware law or any
transaction in which a director has derived an improper personal benefit.
Section 145 of the Delaware General Corporation Law Delaware permits a
corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses (including attorneys'
fees) actually and reasonably incurred by directors, officers, employees or
agents in connection with the defense or settlement of an action or suit, and
only with respect to a matter as to which they shall have acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made if
such persons shall have been adjudged liable to the corporation, unless and only
to the extent that the court in which the action or suit was brought shall
determine upon application that the defendant directors, officers, employees or
agents are fairly and reasonably entitled to indemnity for such expenses despite
such adjudication of liability.
II-1
<PAGE>
ITEM 16. EXHIBITS
(a) Exhibits:
1.1 Purchase Agreement, dated September 17, 1996, by and
between the Company and Goldman, Sachs & Co.*
4.1 Indenture, dated as of September 20, 1996, the Company and
The Bank of New York, as Trustee, relating to the
Company's $149,500,000 5 1/4% Convertible Subordinated
Notes due September 15, 2001 (including form of Note)*
4.2 Registration Rights Agreement, dated as of September 20,
1996, by and between the Company and Goldman, Sachs & Co.*
5.1 Opinion of Morgan, Lewis & Bockius LLP*
12.1 Statement Re Computation of Ratio of Earnings to Fixed
Charges
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Morgan, Lewis & Bockius LLP
(contained in Exhibit 5.1)*
24.1 Power of Attorney (included on signature page)*
25.1 Form T-1, Statement of Eligibility of The Bank of New
York.*
- -------------------
* Previously filed.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 14, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are
being made, a post-effective amendment to the registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any other material change to such information in
the registration statement;
II-2
<PAGE>
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities being offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities which are being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
Securityholders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No.1 to Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fort Lauderdale, State of
Florida, on December 12, 1996.
THE SPORTS AUTHORITY, INC.
By: /S/ JACK A. SMITH
-----------------------------
Name: Jack A. Smith
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----
<S> <C> <C>
/s/ JACK A. SMITH Chairman of the Board and Chief Executive Officer December 12, 1996
- -------------------------------------------- (Principal Executive Officer)
Jack A. Smith
* President, Chief Operating Officer and Director December 12, 1996
- --------------------------------------------
Richard J. Lynch, Jr.
/s/ ANTHONY F. CRUDELE Senior Vice President and Chief Financial Officer December 12, 1996
- -------------------------------------------- (Principal Financial Officer and Principal Accounting)
Anthony F. Crudele
* Director December 12, 1996
- --------------------------------------------
Nicholas A. Buoniconti
* Director December 12, 1996
- --------------------------------------------
Steve Dougherty
* Director December 12, 1996
- --------------------------------------------
Carol Farmer
* Director December 12, 1996
- --------------------------------------------
W. Mitt Romney
II-4
<PAGE>
* Director December 12, 1996
- --------------------------------------------
Harold Toppel
- -------------------
*By: /s/ FRANK W. BUBB, III
--------------------------------------
Attorney-in-Fact
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
12.1 Statement Re Computation of Ratio of Earnings to Fixed
Charges
23.1 Consent of Price Waterhouse LLP
<TABLE>
<CAPTION>
THE SPORTS AUTHORITY, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
39 WEEKS ENDED 39 WEEKS ENDED
COMPANY 1991 1992 1993 1994 1995 OCTOBER 1995 OCTOBER 1996
- --------------------------------------------- -------- -------- ------- ------- ------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C> <C>
1) Income before Income Taxes 3,208 10,031 20,908 29,839 37,390 16,029 20,856
Add:
2) Interest Expenses 128 141 13 318 820 365 1,536
3) Amortization of Deferred Financing Costs 0 0 0 0 177 100 246
4) Interest Component of Rent Expense 3,365 5,788 9,581 14,221 18,715 13,348 16,742
-------- -------- ------- ------- ------- -------- --------
5) Total 6,701 15,960 30,502 44,378 57,102 29,842 39,380
Divided by:
6) Fixed charges (2+3+4) 3,493 5,929 9,594 14,539 19,712 13,813 18,524
-------- -------- ------- ------- ------- -------- --------
7) Ratio of Earnings to Fixed Charges 1.92 2.69 3.18 3.05 2.90 2.16 2.13
======== ======== ======= ======= ======= ======== ========
</TABLE>
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 to the Registration Statement on Form
S-3 of our report dated March 5, 1996, except as to Note 9, which is as of March
22, 1996, which appears on page 22 of the 1995 Annual Report to Stockholders of
The Sports Authority, Inc., which is incorporated by reference in The Sports
Authority, Inc.'s Annual Report on Form 10-K for the fiscal year ended January
28, 1996. We also consent to the reference to us under the heading "Experts" in
such Prospectus.
/s/ PRICE WATERHOUSE LLP
Fort Lauderdale, Florida
December 11, 1996
