EXHIBIT 10.7
[XXXXXXX XXXXX LOGO]
CONFIRMATION OF OTC WARRANT TRANSACTION
AMENDED AND RESTATED AS OF FEBRUARY 13, 2004
ORIGINAL DATE: FEBRUARY 11, 2004 ML REF:
TO: DICK'S SPORTING GOODS, INC. ("COUNTERPARTY")
ATTENTION: XXXX X. XXXXXXX
FROM: XXXXXXX XXXXX INTERNATIONAL ("ML")
Xxxxxxx Xxxxx Financial Centre
0 Xxxx Xxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Dear Sir / Madam:
The purpose of this letter agreement (this "CONFIRMATION") is to
confirm the terms and conditions of the above-referenced transaction entered
into between Counterparty and ML through its agent Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx
& Xxxxx Incorporated ("MLPFS" or "AGENT") on the Trade Date specified below (the
"TRANSACTION"). This Confirmation constitutes a "Confirmation" as referred to in
the Agreement specified below. This letter agreement amends and restates the
letter agreement between the parties hereto dated as of February 11, 2004.
The definitions and provisions contained in the 2000 ISDA Definitions
(the "SWAP DEFINITIONS") and the 2002 ISDA Equity Derivatives Definitions (the
"EQUITY DEFINITIONS" and, together with the Swap Definitions, the
"DEFINITIONS"), in each case as published by the International Swaps and
Derivatives Association, Inc., are incorporated into this Confirmation. In the
event of any inconsistency between the Swap Definitions and the Equity
Definitions, the Equity Definitions will govern, and in the event of any
inconsistency between the Definitions and this Confirmation, this Confirmation
will govern. References herein to a "Transaction" shall be deemed to be
references to a "Share Option Transaction" for the purposes of the Equity
Definitions and to a "Swap Transaction" for the purposes of the Swap
Definitions. For purposes of this Transaction, "Warrant Style", "Warrant Type",
"Number of Warrants" and "Warrant Entitlement" (each as defined below) shall be
used herein as if such terms were referred to as "Option Style", "Option Type",
"Number of Options" and "Option Entitlement", respectively, in the Definitions.
This Confirmation evidences a complete binding agreement between you
and us as to the terms of the Transaction to which this Confirmation relates.
This Confirmation (notwithstanding anything to the contrary herein), shall be
subject to an agreement in the 1192 form of the ISDA Master Agreement
(Multicurrency Cross Border) (the "MASTER AGREEMENT" or "AGREEMENT") as if we
had executed an agreement in such form (but without any Schedule and with
elections specified in the "ISDA Master Agreement" Section of this Confirmation)
on the Trade Date of the first such Transaction between us. In the event of any
inconsistency between the provisions of that Agreement and this Confirmation,
this Confirmation will prevail for the purpose of this Transaction.
The terms of the particular Transaction to which this Confirmation
relates are as follows:
GENERAL TERMS:
Trade Date: February 11, 2004
Warrant Style: European
Warrant Type: Call
Seller: Counterparty
Buyer: ML
Shares: Shares of common stock, par value of USD
0.01, of Counterparty (Security Symbol:
"DKS").
Number of Warrants: 2,193,987
Multiple Exercise: Inapplicable
Strike Price: $[amount redacted]
Premium: $[amount redacted] mm
Premium Payment Date: The fourth Business Day following the Trade
Date.
Exchange: NYSE
Related Exchange(s): Applicable
PROCEDURES FOR EXERCISE:
Expiration Time: 11:59 pm
Expiration Date: February 11, 2009
Exercise Date: Expiration Date
Multiple Exercise: Not Applicable
Automatic Exercise: Applicable
VALUATION:
Valuation Date: The last Averaging Date
Averaging Dates: The eleven (11) Full Exchange Business Days
beginning on the Averaging Period Start
Date.
Full Exchange Business Day: A Scheduled Trading Day that has a scheduled
closing time for its regular trading session
that is 4 pm (New York City time) or the
then standard closing time for regular
trading on the Exchange.
Averaging Date Market
Disruption: Modified Postponement
Averaging Period
Start Date: The third (3rd) Full Exchange Business Day
following the Expiration Date.
SETTLEMENT TERMS:
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Cash Settlement: Counterparty may elect to settle this
Transaction by Cash Settlement or Net
Physical Settlement by providing ML with
irrevocable notice ("SETTLEMENT NOTICE") in
accordance with the Settlement Method
Election provisions herein and in Section
7.1 of the Equity Definitions. In the event
that Counterparty does not so notify ML,
this Transaction shall be settled pursuant
to the Default Settlement Method provision
below.
Settlement Currency: USD
Settlement Price: The arithmetic mean of the closing price of
the Shares on the Exchange on each Averaging
Date.
Cash Settlement
Payment Date: Four (4) Currency Business Day after the
Valuation Date
Settlement Method Election: Applicable with respect to Cash Settlement
or Net Physical Settlement only.
Electing Party: Counterparty
Settlement Method
Election Date: Exercise Date
Default Settlement Method: Net Physical Settlement. In the event that
this Transaction is settled by Net Physical
Settlement, Counterparty shall deliver to ML
on the seventh Full Exchange Business Day
following the Valuation Date a number of
Shares (the "DELIVERED SHARES") equal to the
Net Physical Settlement Amount divided by
the Settlement Price, with any fractional
Share amounts to be settled in cash.
Net Physical Settlement Amount: With respect to the Valuation Date, an
amount, as calculated by the Calculation
Agent, equal to the Number of Warrants
multiplied by the Strike Price Differential.
Strike Price Differential: In respect of the Valuation Date, an amount
equal to the greater of: (a) the excess, if
any, of the Settlement Price over the Strike
Price, and (b) zero.
Net Physical Settlement
Adjustment: Subject to the Maximum Deliverable Share
Amount, if ML receives any Delivered Shares
under this Transaction:
(a) ML shall sell the Delivered Shares in a
commercially reasonable manner until the
amount received by ML for the sale of the
Shares (the "PROCEEDS AMOUNT") is equal to
the Net Physical Settlement Amount. Any
remaining Delivered Shares shall be returned
to Counterparty.
(b) If the Proceeds Amount is less than the
Net Physical Settlement Amount, Counterparty
shall promptly deliver upon notice from ML
additional Shares to ML until the dollar
amount from the sale of such Shares by ML
equals the difference between the Net
Physical Settlement Amount and the Proceeds
Amount. In no event shall Counterparty be
required to deliver to ML a number of Shares
greater than the Maximum Deliverable Share
Amount.
Conditions to Net
Physical Settlement: (1) At least 15 Exchange Business Days prior
to the Expiration Date, Counterparty shall
(i) make available to ML an effective
registration statement (the "REGISTRATION
STATEMENT") filed pursuant to Rule 415 under
the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and such prospectuses as
ML
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may reasonably request to comply with the
applicable prospectus delivery requirements
(the "PROSPECTUS") for the resale by ML of
such number of Shares as ML shall reasonably
specify, such Registration Statement to be
effective and Prospectus to be current until
the earliest of the date on which (A) all
Delivered Shares have been sold by ML or
returned to Counterparty pursuant to the Net
Physical Settlement Adjustment provision
above or (B) ML has advised Counterparty
that it no longer requires that such
Registration Statement be effective (the
"REGISTRATION PERIOD") or (ii) Counterparty
has provided a legal opinion in form and
substance satisfactory to ML (with customary
assumptions and exceptions) that the Shares
issuable upon exercise of these Warrants
will be freely tradable under the Securities
Act upon delivery to ML and not subject to
any legend restricting transferability. It
is understood that the Registration
Statement and Prospectus may cover a number
of Shares equal to the aggregate number of
Shares (if any) reasonably estimated by ML
to be potentially deliverable by
Counterparty in connection with Net Physical
Settlement hereunder;
In addition, the following representation,
which Counterparty shall be deemed to make
on each day during the Registration Period,
shall be true and correct:
"Counterparty represents that the
Registration Statement, at the time
the same became effective, did not
contain an untrue statement of a
material fact or omit to state a
material fact required to be stated
therein or necessary to make the
statements therein not misleading;
Counterparty represents the
Prospectus (as the same may be
supplemented from time to time)
does not include an untrue
statement of a material fact or
omit to state a material fact
necessary in order to make the
statements therein, in the light of
the circumstances under which they
were made, not misleading."
(2) At least 10 Exchange Business Days prior
to the Expiration Date, Counterparty will
enter into a Registration Rights Agreement
with ML in form and substance reasonably
acceptable to ML, which agreement will
contain among other things, customary
representations and warranties and
indemnification and other rights relating to
the registration of a number of Shares equal
to the number of Delivered Shares and others
Shares deliverable hereunder up to the
Maximum Deliverable Share Amount.
(3) Counterparty shall promptly pay to ML a
$0.04 per Share fee with all Shares
delivered in connection with Net Physical
Settlement pursuant to a Registration
Statement.
In the event Counterparty fails to comply
with any of the conditions set forth in "NET
PHYSICAL SETTLEMENT TERMS" herein,
Counterparty shall settle the Transaction
through Cash Settlement; provided however,
that notwithstanding the foregoing, if
Counterparty shall have been unable to
obtain an effective Registration Statement
by the Cash Settlement Payment Date, then
upon notice to ML, Counterparty may deliver
to ML unregistered Shares in an amount
determined by ML based upon its commercially
reasonable judgment of the market value of
such Shares. In no event shall Counterparty
be required to deliver to ML a number of
Shares greater than the Maximum Deliverable
Share Amount.
Notwithstanding the foregoing, with respect
to any Shares delivered by Counterparty
pursuant to Net Physical Settlement
hereunder, in the event that ML is unable to
sell such Shares on the Exchange without
incurring material
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additional transaction costs, Counterparty
shall promptly pay in cash or Shares an
additional amount to ML equal to 2% of the
Strike Price.
LIMITATIONS ON NET PHYSICAL
SETTLEMENT BY COUNTERPARTY: The number of Shares that may be delivered
at settlement by Counterparty shall not
exceed two times the total number of
Warrants covered by this Transaction
("MAXIMUM DELIVERABLE SHARE AMOUNT").
Counterparty represents and warrants that
the number of Available Shares as of the
Trade Date is greater than the Maximum
Deliverable Share Amount. Counterparty
covenants and agrees that Counterparty shall
not take any action of corporate governance
or otherwise to reduce the number of
Available Shares below the Maximum
Deliverable Share Amount.
For this purpose, "AVAILABLE SHARES" means
the number of Shares Counterparty currently
has authorized (but not issued and
outstanding) less the maximum number of
Shares that may be required to be issued by
Counterparty in connection with stock
options, convertibles, and other commitments
of Counterparty that may require the
issuance or delivery of Shares in connection
therewith.
ADJUSTMENTS:
DIVIDENDS:
Extraordinary Dividends: Any and all dividends paid by Counterparty.
METHOD OF ADJUSTMENT: Calculation Agent Adjustment
EXTRAORDINARY EVENTS:
Consequences of Merger Events: (a) Share-for-Share: Modified
Calculation Agent
Adjustment
(b) Share-for-Other: Cancellation and
Agreed Model: Payment Applicable
Interest Rate: USD-LIBOR-BBA
(c) Share-for-Combined: Component
Adjustment
With respect to any Extraordinary Events hereunder, upon the occurrence of
Cancellation and Payment in whole or in part, the parties agree that the amount
to be paid, in accordance with the Equity Definitions, shall constitute a
Transaction Early Termination Amount, subject to satisfaction by the payment or
delivery of Shares or cash as set forth in the Early Termination section below.
Tender Offer: Not Applicable
Nationalization, Insolvency or Delisting: Cancellation and Payment
Additional Disruption Events:
Change in Law: Not Applicable
Failure to Deliver: Applicable; provided that
if there is an "illiquidity
on the market" on a day
that would have been a
Settlement Date, then the
Settlement Date shall be
the first succeeding
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Exchange Business Day on
which there is no
"illiquidity on the
market," but in no such
event shall the Settlement
Date be later than the date
that is twenty (20)
Exchange Business Days
immediately following what
would have been in the
Settlement Date but for
such "illiquidity on the
market."
Insolvency Filing: Applicable
Hedging Disruption Event: Not Applicable
Increased Cost of Hedging: Not Applicable
Hedging Party: ML
Loss of Stock Borrow: Not Applicable
Increased Cost of Stock Borrow: Not Applicable
Determining Party: ML
Non-Reliance: Applicable
Agreements and Acknowledgments
Regarding Hedging Activities: Applicable
Additional Acknowledgments: Applicable
OTHER PROVISIONS:
Early Termination: Notwithstanding any provision to the
contrary, upon the designation of an Early
Termination Date hereunder, a party's
payment obligation in respect of this
Transaction only as determined in accordance
with Second Method and Market Quotation (the
"TRANSACTION EARLY TERMINATION AMOUNT") may,
at the option of Counterparty, be satisfied
by the party owing such amount by the
delivery of a number of Shares equal to the
Transaction Early Termination Amount divided
by the Termination Price ("EARLY TERMINATION
STOCK SETTLEMENT"); provided, however, that
Counterparty must notify ML of its election
of Early Termination Stock Settlement by the
close of business on the day that the notice
designating the Early Termination Date is
effective.
"TERMINATION PRICE" means the closing price
per Share on the Exchange on the Early
Termination Date.
A number of Shares calculated as being due
in respect of any Early Termination Stock
Settlement will be deliverable on the third
Exchange Business Day following the date
that notice pursuant to Section 6(d)(i) of
the Agreement specifying the number of
Shares deliverable is effective. Section
6(d)(i) of the Agreement is hereby amended
by adding the following words after the word
"paid" in the fifth line thereof: "or any
delivery is to be made, as applicable."
If ML receives Shares in connection with an
Early Termination Stock Settlement, ML shall
sell such Shares in a commercially
reasonable manner until the amount received
by ML for the sale of such Shares (net of
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transaction costs) (the "PROCEEDS AMOUNT")
is equal to the Transaction Early
Termination Amount. Any remaining Shares
shall be returned to Counterparty. If the
Proceeds Amount is less than the Transaction
Early Termination Amount, Counterparty shall
promptly deliver additional Shares to ML
upon request until the dollar amount from
the sale of such additional Shares by ML
(net of transaction costs) equals the
difference between the Transaction Early
Termination Amount and the Proceeds Amount.
In no event shall Counterparty be required
to deliver to ML a number of Shares greater
than the Maximum Deliverable Share Amount.
On or prior to the Early Termination Date
(if Early Termination Stock Settlement is
elected), Counterparty shall enter into a
registration rights agreement with ML in
form and substance reasonably acceptable to
ML and shall satisfy the conditions
contained therein and Counterparty shall
file and diligently pursue to effectiveness
a Registration Statement pursuant to Rule
415 under the Securities Act. If and when
such Registration Statement shall have been
declared effective by the Commission,
Counterparty shall have made available to ML
such Prospectuses as ML may reasonably
request to comply with the applicable
prospectus delivery requirements for the
resale by ML of such number of Shares as ML
shall specify (or, if greater, the number of
Shares that Counterparty shall specify).
Such Registration Statement shall be
effective and Prospectus shall be current
until the earliest of the date on which (A)
all Shares delivered by Counterparty in
connection with an Early Termination Date
and all Shares held by ML for hedging
purposes have been sold by ML or (B) ML has
advised Counterparty that it no longer
requires that such Registration Statement be
effective (the "TERMINATION REGISTRATION
PERIOD"). It is understood that the
Registration Statement and Prospectus will
cover a number of Shares equal to the number
of Shares plus the aggregate number of
Shares (if any) reasonably estimated by ML
to be potentially deliverable by
Counterparty in connection with Early
Termination Stock Settlement hereunder. On
each day during the Registration Period
Counterparty shall represent that each of
its filings under the Securities Act, the
Exchange Act, or other applicable securities
laws that are required to be filed have been
filed and that, as of the respective dates
thereof and as of the date of this
representation, there is no misstatement of
a material fact contained therein or
omission of a material fact required to be
stated therein or necessary to make the
statements therein not misleading.
If Counterparty is unable to deliver Shares
subject to an effective Registration
Statement as set forth above, Counterparty
may deliver unregistered Shares in an amount
determined by ML based upon its commercially
reasonable judgment of the market value of
such Shares. In no event shall Counterparty
be required to deliver to ML a number of
Shares greater than the Maximum Deliverable
Share Amount.
COMPLIANCE WITH SECURITIES LAWS: Each party represents and agrees that it has
complied, and will comply, in connection
with this Transaction and all related or
contemporaneous sales and purchases of
Shares, with the applicable provisions of
the Securities Act, the Exchange Act, and
the rules and regulations thereunder,
including, without limitation, Rule 10b-5
and Regulation M under the Exchange Act,
provided that each party shall be entitled
to rely conclusively on any information
communicated by the other party concerning
such other party's market activities and
provided further that Counterparty shall
have no
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liability as a result of a breach of this
representation due to ML's gross negligence
or willful misconduct.
Each party further represents that if such
party ("X") purchases any Shares from the
other party pursuant to this Transaction,
such purchase(s) will comply in all material
respects with (i) all laws and regulations
applicable to X, and (ii) all contractual
obligations of X.
Counterparty (and in the case of (b) and (c)
below, ML) represents that as of the date
hereof:
(a) each of its filings under the Exchange
Act that are required to be filed from and
including the ending date of Counterparty's
most recent prior fiscal year have been
filed and that, as of the respective dates
thereof and as of the date of this
representation, there is no misstatement of
material fact contained therein or omission
of a material fact required to be stated
therein or necessary to make the statements
therein in light of the circumstances in
which they were made not misleading (when
taken together with Counterparty's previous
filings under the Exchange Act);
(b) Neither ML nor Counterparty, as the case
may be, is entering into this Agreement to
facilitate a distribution of the common
stock or in connection with a future
issuance of securities;
(c) Neither ML nor Counterparty, as the case
may be, is entering into this Agreement to
create actual or apparent trading activity
in the common stock (or any security
convertible into or exchangeable for common
stock) or to manipulate the price of the
common stock (or any security convertible
into or exchangeable for common stock); and
(d) the number of Available Shares on the
date hereof is greater than the Maximum
Deliverable Share Amount.
Account Details:
Account for payments to Counterparty: Not Applicable
Account for payment to ML: Chase Manhattan Bank, New
York
ABA# 000000000
FAO: ML Equity Derivatives
A/C: 066213118
AGREEMENT REGARDING
SHARES: Counterparty agrees that, in respect of any Shares
delivered to ML, such Shares shall be, upon such
delivery, duly and validly authorized, issued and
outstanding, fully paid and nonassessable and subject
to no adverse claims of any other party. The issuance
of such Shares does not and will not require the
consent, approval, authorization, registration or
qualification of any government authority, except
such as shall have been obtained on or before the
delivery date of any Shares or in connection with any
Registration Statement filed with respect to any
Shares.
COVENANT REGARDING
SHARES: Counterparty covenants that it shall not take any
action to decrease the number of Available Shares
below the Maximum Deliverable Share Amount.
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BANKRUPTCY RIGHTS: In the event of Counterparty's bankruptcy, ML's
rights in connections with this Transaction shall not
exceed those rights held by common shareholders. For
the avoidance of doubt, the parties acknowledge and
agree that ML' rights with respect to any other claim
arising from this Transaction prior to Counterparty's
bankruptcy shall remain in full force and effect and
shall not be otherwise abridged or modified in
connection herewith.
SET-OFF: The Set-off provisions in the Agreement shall apply
to this Transaction, except in the event of
Counterparty's bankruptcy, in which case Set-off
shall not apply.
COLLATERAL: None.
TRANSFER: Neither party may transfer its rights or obligations
under this Transaction except in accordance with
Section 7 of the Master Agreement; provided, however,
that ML may assign its rights and delegate its
obligations hereunder, in whole or in part, to any
other person with prior consent of the Counterparty
not to be unreasonably withheld, (an "ASSIGNEE"),
effective (the "TRANSFER EFFECTIVE DATE") upon
delivery to Counterparty of (a) an executed
acceptance and assumption by the Assignee (an
"Assumption") of the transferred obligations of ML
under this Transaction (the "TRANSFERRED
OBLIGATIONS"); (b) and if such Assignee is an
affiliate of Xxxxxxx Xxxxx & Co., Inc. ("ML&CO.") an
executed guarantee (the "GUARANTEE") of ML&Co. of the
Transferred Obligations. On the Transfer Effective
Date, (a) ML shall be released from all obligations
and liabilities arising under the Transferred
Obligations; and (b) the Transferred Obligations
shall cease to be a Transaction(s) under the
Agreement and shall be deemed to be a Transaction(s)
under the ISDA Master Agreement between Assignee and
Counterparty, provided that, if at such time Assignee
and Counterparty have not entered into a ISDA Master
Agreement, Assignee and Counterparty shall be deemed
to have entered into an ISDA form of Master Agreement
(Multicurrency-Cross Border) without any Schedule
attached thereto.
REGULATION: ML is regulated by The Securities and Futures
Authority Limited and has entered into this
Transaction as principal.
INDEMNITY: Counterparty agrees to indemnify ML and its
Affiliates and their respective directors, officers,
agents and controlling parties (ML and each such
person being an "INDEMNIFIED PARTY") from and against
any and all losses, claims, damages and liabilities,
joint and several, to which such Indemnified Party
may become subject because of a breach by
Counterparty of any representation or covenant
hereunder, in the Agreement or any other Agreement
relating to the Agreement or Transaction and will
reimburse any Indemnified Party for all reasonable
expenses (including reasonable legal fees and
expenses) as they are incurred in connection with the
investigation of, preparation for, or defense of, any
pending or threatened claim or any action or
proceeding arising therefrom, whether or not such
Indemnified Party is a party thereto.
ADDITIONAL AGREEMENTS, REPRESENTATIONS AND COVENANTS OF COUNTERPARTY, ETC.:
(a) Counterparty hereby represents and warrants to ML, on each day
from the Trade Date to and including the date by which ML is
able to initially complete a hedge of its position created by
this Transaction, that:
(1) it will not, and will not permit any person or entity
subject to its control to, bid for or purchase Shares
during such period except as disclosed in the
Offering Memorandum relating to the Reference Notes;
and
9
(2) it has publicly disclosed all material information
necessary for it to be able to purchase or sell
Shares in compliance with applicable federal
securities laws and that it has publicly disclosed
all material information with respect to its
condition (financial or otherwise).
(b) The parties hereby agree that all documentation with respect
to this Transaction is intended to qualify this Transaction as
an equity instrument for purposes of EITF 00-19.
(c) No collateral shall be required by either party for any reason
in connection with this Transaction.
(d) ML may elect to defer exercise of any Warrant hereunder as
provided below, and Automatic Exercise shall not apply with
respect to any Warrant, to the extent the exercise of such
Warrant would cause ML to become, directly or indirectly, the
beneficial owner of more than 8.0 percent of the class of the
Counterparty's equity securities that is comprised of the
Shares for purposes of Section 13 of the Securities Exchange
Act of 1934, as amended (in such case, an "EXCESS SHARE
OWNER").
ML shall provide prior notice to Counterparty, through the
Agent, if the exercise of any Warrant hereunder would cause ML
to become directly or indirectly, an Excess Share Owner;
provided that the failure of ML to provide such notice shall
not alter the effectiveness of the provisions set forth in the
preceding sentence and any purported exercise in violation of
such provisions shall be void and have no effect.
If ML elects not to exercise any Warrant because such exercise
would cause ML to become, directly or indirectly, an Excess
Share Owner and ML thereafter disposes of Shares owned by it
or any action is taken that would then permit ML to exercise
such Warrant without such exercise causing it to become,
directly or indirectly, an Excess Share Owner, then ML shall
provide notice of the taking of such action to Counterparty,
through the Agent, and such Warrant shall then become
exercisable by ML to the extent such Warrant is otherwise or
had otherwise become exercisable hereunder. In such event, the
Expiration Date with respect to such Warrant shall be the date
on which Counterparty receives such notice from ML, and the
related Settlement Date shall be as soon as reasonably
practicable after receipt of such notice but no more than
three (3) Business Days thereafter (but in no event shall the
Settlement Date occur prior to the date on which it would have
otherwise occurred but for the provisions of this paragraph
(d)); provided that the related Net Physical Settlement Amount
shall be the same as the Net Physical Settlement Amount but
for the provisions of this paragraph (d). In addition, within
30 days of the maturity date of the Settlement Date,
Counterparty shall use its reasonable efforts to refrain from
activities which could reasonable be expected to result in
ML's ownership of Shares exceeding 10% of all issued and
outstanding Shares.
(e) ML hereby agrees that from the Trade Date through to and
including each Settlement Date, it will:
(1) use its reasonable efforts to not become an
"affiliate" of Counterparty as such term is defined
in Regulation 144(a)(1) under the Securities Act;
(2) not vote any Shares, as to which it has the right to
exercise a vote; and
(3) not permit any director, officer, employee, agent or
affiliate of ML to serve as a member of the board of
directors of Counterparty.
ISDA MASTER AGREEMENT
With respect to the Agreement, ML and Counterparty each agree as follows:
SPECIFIED ENTITIES:
(i) in relation to ML, for the purposes of:
10
Section 5(a)(v): not applicable
Section 5(a)(vi): not applicable
Section 5(a)(vii): not applicable
Section 5(b)(iv): not applicable
and (ii) in relation to Counterparty, for the purposes of:
Section 5(a)(v): not applicable
Section 5(a)(vi): not applicable
Section 5(a)(vii): not applicable
Section 5(b)(iv): not applicable
"SPECIFIED TRANSACTION" will have the meaning specified in Section 14 of this
Agreement.
The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) of the Agreement
will apply to ML and Counterparty.
The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) of the Agreement
will not apply to ML or to Counterparty.
PAYMENTS ON EARLY TERMINATION for the purpose of Section 6(e) of the Agreement:
(i) Market Quotation shall apply; and (ii) the Second Method shall apply.
"TERMINATION CURRENCY" means USD.
TAX REPRESENTATIONS:
(I) For the purpose of Section 3(e) of the Agreement, each party
represents to the other party that it is not required by any
applicable law, as modified by the practice of any relevant
governmental revenue authority, of any Relevant Jurisdiction
to make any deduction or withholding for or on account of any
Tax from any payment (other than interest under Section 2(e),
6(d)(ii), or 6(e) of the Agreement) to be made by it to the
other party under the Agreement. In making this
representation, each party may rely on (i) the accuracy of any
representations made by the other party pursuant to Section
3(f) of the Agreement, (ii) the satisfaction of the agreement
contained in Section 4(a)(i) or 4(a)(iii) of the Agreement,
and the accuracy and effectiveness of any document provided by
the other party pursuant to Section 4(a)(i) or 4(a)(iii) of
the Agreement, and (iii) the satisfaction of the agreement of
the other party contained in Section 4(d) of the Agreement;
provided that it will not be a breach of this representation
where reliance is placed on clause (ii) above and the other
party does not deliver a form or document under Section
4(a)(iii) of the Agreement by reason of material prejudice to
its legal or commercial position.
(II) For the purpose of Section 3(f) of the Agreement, each party
makes the following representations to the other party:
(i) ML represents that it is a corporation organized
under the laws of England and Wales.
(ii) Counterparty represents that it is a corporation
incorporated under the laws of the State of Delaware.
DELIVERY REQUIREMENTS: For the purpose of Sections 3(d), 4(a)(i) and (ii) of the
Agreement, each party agrees to deliver the following documents:
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Tax forms, documents or certificates to be delivered are:
Each party agrees to complete (accurately and in a manner
reasonably satisfactory to the other party), execute, and
deliver to the other party, United States Internal Revenue
Service Form W-9 or W-8 BEN, or any successor of such form(s):
(i) before the first payment date under this agreement; (ii)
promptly upon reasonable demand by the other party; and (iii)
promptly upon learning that any such form(s) previously
provided by the other party has become obsolete or incorrect.
Other documents to be delivered:-
COVERED BY
PARTY REQUIRED TO SECTION 3(d)
DELIVER DOCUMENT DOCUMENT REQUIRED TO BE DELIVERED WHEN REQUIRED REPRESENTATION
----------------------------------------------------------------------------------------------------------
Counterparty Evidence of the authority and true Upon or before Yes
signatures of each official or execution and
representative signing this Confirmation delivery of this
Confirmation
----------------------------------------------------------------------------------------------------------
Counterparty Certified copy of the resolution of the Upon or before Yes
Board of Directors or equivalent document execution and
authorizing the execution and delivery of delivery of this
this Confirmation Confirmation
----------------------------------------------------------------------------------------------------------
ML Guarantee of its Credit Support Provider, Upon or before Yes
substantially in the form of Exhibit A execution and
attached hereto, together with evidence delivery of this
of the authority and true signatures of Confirmation
the signatories, if applicable
----------------------------------------------------------------------------------------------------------
ADDRESSES FOR NOTICES: For the purpose of Section 12(a) of the Agreement:
ADDRESS FOR NOTICES OR COMMUNICATIONS TO ML:
Address: Xxxxxxx Xxxxx International
Xxxxxxx Xxxxx Financial Centre
0 Xxxx Xxxxxx Xxxxxx, Xxxxxx XX0X 0XX
Attention: Manager, Fixed Income Settlements
Facsimile No.: 00 000 000 0000 Telephone No.: 00 000 000 0000
(FOR ALL PURPOSES)
Additionally, a copy of all notices pursuant to Sections 5, 6, and 7 as well as
any changes to Counterparty's address, telephone number or facsimile number
should be sent to:
GMI Counsel
Xxxxxxx Xxxxx World Headquarters
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 10080
Attention: Global Equity Derivatives
Facsimile No.: 000 000-0000 Telephone No.: 000 000-0000
ADDRESS FOR NOTICES OR COMMUNICATIONS TO COUNTERPARTY FOR ALL PURPOSES:
12
PROCESS AGENT: For the purpose of Section 13(c) of the Agreement, ML appoints as
its process agent:
Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx & Xxxxx Incorporated
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Litigation Department
[COUNTERPARTY DOES NOT APPOINT A PROCESS AGENT.]
MULTIBRANCH PARTY. For the purpose of Section 10(c) of the Agreement: Neither ML
nor Counterparty is a Multibranch Party.
CALCULATION AGENT. The Calculation Agent is ML.
CREDIT SUPPORT DOCUMENT.
ML: Guarantee of ML&Co. in the form attached hereto as Exhibit A.
Counterparty: Not Applicable
CREDIT SUPPORT PROVIDER.
With respect to ML: Xxxxxxx Xxxxx and Co. and with respect to Counterparty, Not
Applicable.
GOVERNING LAW. This Confirmation will be governed by, and construed in
accordance with, the substantive laws of the State of New York.
NETTING OF PAYMENTS. The provisions of Section 2(c) of the Agreement shall not
be applicable to this Transaction; provided, however, that with respect to this
Agreement or any other ISDA Master Agreement between the parties, any Share
delivery obligations on any day of Counterparty, on the one hand, and ML, on the
other hand, shall be netted. The resulting Share delivery obligation of a party
upon such netting shall be rounded down to the nearest number of whole Common
Shares, such that neither party shall be required to deliver any fractional
Common Shares.
ACCURACY OF SPECIFIED INFORMATION. Section 3(d) of the Agreement is hereby
amended by adding in the third line thereof after the word "respect" and before
the period the words "or, in the case of audited or unaudited financial
statements or balance sheets, a fair presentation of the financial condition of
the relevant person."
BASIC REPRESENTATIONS. Section 3(a) of the Agreement is hereby amended by the
deletion of "and" at the end of Section 3(a)(iv); the substitution of a
semicolon for the period at the end of Section 3(a)(v) and the addition of
Sections 3(a)(vi), as follows:
ELIGIBLE CONTRACT PARTICIPANT; LINE OF BUSINESS. It is an "eligible
contract participant" as defined in the Commodity Futures Modernization
Act of 2000 and it has entered into this Confirmation and this
Transaction in connection with its business or a line of business
(including financial intermediation), or the financing of its business.
AMENDMENT OF SECTION 3(a)(iii). Section 3(a)(iii) of the Agreement is modified
to read as follows:
NO VIOLATION OR CONFLICT. Such execution, delivery and performance do
not materially violate or conflict with any law known by it to be
applicable to it, any provision of its constitutional documents, any
order or judgment of any court or agency of government applicable to it
or any of its assets or any material contractual restriction relating
to Specified Indebtedness binding on or affecting it or any of its
assets.
13
AMENDMENT OF SECTION 3(a)(iv). Section 3(a)(iv) of the Agreement is modified by
inserting the following at the beginning thereof:
"To such party's best knowledge,"
ADDITIONAL REPRESENTATIONS:
COUNTERPARTY REPRESENTATIONS. Counterparty (i) has such knowledge and experience
in financial and business affairs as to be capable of evaluating the merits and
risks of entering into this Transaction; (ii) has consulted with its own legal,
financial, accounting and tax advisors in connection with this Transaction; and
(iii) is entering into this Transaction for a bona fide business purpose to
hedge the Reference Notes.
Counterparty is not and has not been the subject of any civil proceeding of a
judicial or administrative body of competent jurisdiction that could reasonably
be expected to impair materially Counterparty's ability to perform its
obligations hereunder.
Counterparty will by the next succeeding Business Day notify ML upon obtaining
knowledge of the occurrence of any event that would constitute an Event of
Default, a Potential Event of Default or a Potential Adjustment Event.
As of the date hereof, Counterparty is not insolvent.
ACKNOWLEDGEMENTS:
(1) The parties acknowledge and agree that there are no other
representations, agreements or other undertakings of the parties in relation to
this Transaction, except as set forth in this Confirmation.
(2) The parties hereto intend for:
(a) this Transaction to be a "securities contract" as defined in
Section 741(7) of Title 11 of the United States Code (the "BANKRUPTCY
CODE"), qualifying for the protections under Section 555 of the
Bankruptcy Code;
(b) a party's right to liquidate this Transaction and to exercise
any other remedies upon the occurrence of any Event of Default under
the Agreement with respect to the other party to constitute a
"contractual right" as defined in the Bankruptcy Code;
(c) any cash, securities or other property provided as performance
assurance, credit, support or collateral with respect to this
Transaction to constitute "margin payments" as defined in the
Bankruptcy Code; and
(d) all payments for, under or in connection with this
Transaction, all payments for the Shares and the transfer of such
Shares to constitute "settlement payments" as defined in the Bankruptcy
Code.
(3) The parties acknowledge and agree that in the event of an Early
Termination Date as a result of an Event of Default, the amount payable under
the Agreement will be a cash amount calculated as described therein and that any
delivery specified in this Transaction will no longer be required.
AMENDMENT OF SECTION 6(d)(ii). Section 6(d)(ii) of the Agreement is modified by
deleting the words "on the day" in the second line thereof and substituting
therefor "on the day that is three Local Business Days after the day". Section
6(d)(ii) is further modified by deleting the words "two Local Business Days" in
the fourth line thereof and substituting therefor "three Local Business Days."
AMENDMENT OF DEFINITION OF REFERENCE MARKET-MAKERS. The definition of "Reference
Market-Makers" in Section 14 is hereby amended by adding in clause (a) after the
word "credit" and before the word "and" the words "or to enter into transactions
similar in nature to Transactions."
14
CONSENT TO RECORDING. Each party consents to the recording of the telephone
conversations of trading and marketing personnel of the parties and their
Affiliates in connection with this Confirmation. To the extent that one party
records telephone conversations (the "Recording Party") and the other party does
not (the Non-Recording Party"), the Recording Party shall in the event of any
dispute, make a complete and unedited copy of such party's tape of the entire
day's conversations with the Non-Recording Party's personnel available to the
Non-Recording Party. The Recording Party's tapes may be used by either party in
any forum in which a dispute is sought to be resolved and the Recording Party
will retain tapes for a consistent period of time in accordance with the
Recording Party's policy unless one party notifies the other that a particular
transaction is under review and warrants further retention.
DISCLOSURE. Each party hereby acknowledges and agrees that ML has authorized
Counterparty to disclose this Transaction and any related hedging transaction
between the parties if and to the extent that Counterparty reasonably determines
(after consultation with ML) that such disclosure is required by law or by the
rules of Nasdaq or any securities exchange.
SEVERABILITY. If any term, provision, covenant or condition of this
Confirmation, or the application thereof to any party or circumstance, shall be
held to be invalid or unenforceable in whole or in part for any reason, the
remaining terms, provisions, covenants, and conditions hereof shall continue in
full force and effect as if this Confirmation had been executed with the invalid
or unenforceable provision eliminated, so long as this Confirmation as so
modified continues to express, without material change, the original intentions
of the parties as to the subject matter of this Confirmation and the deletion of
such portion of this Confirmation will not substantially impair the respective
benefits or expectations of parties to this Agreement; provided, however, that
this severability provision shall not be applicable if any provision of Section
2, 5, 6 or 13 of the Agreement (or any definition or provision in Section 14 to
the extent that it relates to, or is used in or in connection with any such
Section) shall be so held to be invalid or unenforceable.
AFFECTED PARTIES. For purposes of Section 6(e) of the Agreement, each party
shall be deemed to be an Affected Party in connection with Illegality and any
Tax Event.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us.
15
Very truly yours,
XXXXXXX XXXXX INTERNATIONAL
By: /s/ Xxxxxxxx Xxxxx
--------------------------------
Name: Xxxxxxxx Xxxxx
Title: Authorized Signatory
Confirmed as of the date first above written:
DICK'S SPORTING GOODS, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President, Chief
Financial Officer and Secretary
Acknowledged and agreed as to matters relating to the Agent:
XXXXXXX XXXXX, XXXXXX, XXXXXX & XXXXX INCORPORATED,
solely in its capacity as Agent hereunder
By: /s/ Xxxxxxxx Xxxxx
--------------------------------
Name: Xxxxxxxx Xxxxx
Title: Vice President
Amended and Restated
16
EXHIBIT A
GUARANTEE OF XXXXXXX XXXXX & CO., INC.
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, XXXXXXX
XXXXX & CO., INC., a corporation duly organized and existing under the laws of
the State of Delaware ("ML & Co."), hereby unconditionally guarantees to Dick's
Sporting Goods, Inc. (the "Company"), the due and punctual payment of any and
all amounts payable by Xxxxxxx Xxxxx International, a company organized under
the laws of England and Wales ("ML"), under the terms of the Confirmation of OTC
Warrant Transaction between the Company and ML, dated as of February 11, 2004
and amended and restated as of February 13, 2004 (the "Confirmation"),
including, in case of default, interest on any amount due, when and as the same
shall become due and payable, whether on the scheduled payment dates, at
maturity, upon declaration of termination or otherwise, according to the terms
thereof. In case of the failure of ML punctually to make any such payment, ML &
Co. hereby agrees to make such payment, or cause such payment to be made,
promptly upon demand made by the Company to ML & Co.; provided, however that
delay by the Company in giving such demand shall in no event affect ML & Co.'s
obligations under this Guarantee. This Guarantee shall remain in full force and
effect or shall be reinstated (as the case may be) if at any time any payment
guaranteed hereunder, in whole or in part, is rescinded or must otherwise be
returned by the Company upon the insolvency, bankruptcy or reorganization of ML
or otherwise, all as though such payment had not been made.
ML & Co. hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Confirmation;
the absence of any action to enforce the same; any waiver or consent by the
Company concerning any provisions thereof; the rendering of any judgment against
ML or any action to enforce the same; or any other circumstances that might
otherwise constitute a legal or equitable discharge of a guarantor or a defense
of a guarantor. ML & Co. covenants that this guarantee will not be discharged
except by complete payment of the amounts payable under the Confirmation. This
Guarantee shall continue to be effective if XX xxxxxx or consolidates with or
into another entity, loses its separate legal identity or ceases to exist.
ML & Co. hereby waives diligence; presentment; protest; notice of
protest, acceleration, and dishonor; filing of claims with a court in the event
of insolvency or bankruptcy of ML; all demands whatsoever, except as noted in
the first paragraph hereof; and any right to require a proceeding first against
ML.
ML & Co. hereby certifies and warrants that this Guarantee constitutes
the valid obligation of ML & Co. and complies with all applicable laws.
This Guarantee shall be governed by, and construed in accordance with,
the laws of the State of New York.
This Guarantee may be terminated at any time by notice by ML & Co. to
the Company given in accordance with the notice provisions of the Confirmation,
effective upon receipt of such notice by the Company or such later date as may
be specified in such notice; provided, however, that this Guarantee shall
continue in full force and effect with respect to any obligation of ML under the
Confirmation entered into prior to the effectiveness of such notice of
termination.
This Guarantee becomes effective concurrent with the effectiveness of the
Confirmation, according to its terms.
IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed
in its corporate name by its duly authorized representative.
XXXXXXX XXXXX & CO., INC.
By: /s/ Xxxxxxxx Xxxxxxxxxxxx
-------------------------------
Name: Xxxxxxxx Xxxxxxxxxxxx
Title: Designated Signatory
Date: February 13, 2004
Amended and Restated
18
[XXXXXXX XXXXX LOGO]
COVER STATEMENT
CLIENT/COUNTERPARTY RELATIONSHIP
Dear Client/Counterparty:
Xxxxxxx Xxxxx is pleased to provide the attached
statement of Generic Risks Associated with Over-the-Counter Derivative
Transactions under this Cover Statement that concerns, among other things, the
nature of our relationship with you in the context of such transactions. This
statement was developed for our new and our ongoing client/counterparties in
response to suggestions that OTC derivative dealers consider taking steps to
ensure that market participants utilizing OTC derivatives understand their risk
exposures and the nature of their relationships with dealers before they enter
into OTC derivative transactions.
Xxxxxxx Xxxxx ("we") are providing to you and your organization ("you")
the attached statement of Generic Risks Associated with Over-the-Counter
Derivative in order to identify, in general terms, certain of the principal
risks associated with individually negotiated over-the-counter ("OTC")
derivative transactions. The attached statement does not purport to identify the
nature of the specific market or other risks associated with a particular
transaction.
Before entering into an OTC derivative transaction, you should ensure
that you fully understand the terms of the transaction, relevant risk factors,
the nature and extent of your risk of loss and the nature of the contractual
relationship into which you are entering. You should also carefully evaluate
whether the transaction is appropriate for you in light of your experience,
objectives, financial resources, and other relevant circumstances and whether
you have the operational resources in place to monitor the associated risks and
contractual obligations over the term of the transaction. If you are acting as a
financial adviser or agent, you should evaluate these considerations in light of
the circumstances applicable to your principal and the scope of your authority.
If you believe you need assistance in evaluating and understanding the
terms or risks of a particular OTC derivative transaction, you should consult
appropriate advisers before entering into the transaction.
Unless we have expressly agreed in writing to act as your adviser with
respect to a particular OTC derivative transaction pursuant to terms and
conditions specifying the nature and scope of our advisory relationship, we are
acting in the capacity of an arm's length contractual counterparty to you in
connection with the transaction and not as your financial adviser or fiduciary.
Accordingly, unless we have so agreed to act as your adviser, you should not
regard transaction proposals, suggestions or other written or oral
communications from us as recommendations or advice or as expressing our view as
to whether a particular transaction is appropriate for you or meets your
financial objectives.
Finally, we and/or our affiliates may from time to time take
proprietary positions and/or make a market in instruments identical or
economically related to OTC derivative transactions entered into with you, or
may have an investment banking or other commercial relationship with and access
to information from the issuer(s) of securities, financial instruments, or other
interests underlying OTC derivative transactions entered into with you. We may
also undertake proprietary activities, including hedging transactions related to
the initiation or termination of an OTC derivative transaction with you, that
may adversely affect the market price, rate index or other market factor(s)
underlying an OTC derivative transaction entered into with you and consequently
the value of the transaction.
[XXXXXXX XXXXX LOGO]
GENERIC RISKS ASSOCIATED WITH
OVER-THE-COUNTER DERIVATIVE TRANSACTIONS
OTC derivative transactions, like other financial transactions, involve a
variety of significant risks. The specific risks presented by a particular OTC
derivative transaction necessarily depend upon the terms of the transaction and
your circumstances. In general, however, all OTC derivative transactions involve
some combination of market risk, credit risk, funding risk and operational risk.
MARKET RISK is the risk that the value of a transaction will be
adversely affected by fluctuations in the level or volatility of or
correlation or relationship between one or more market prices, rates or
indices or other market factors or by illiquidity in the market for the
relevant transaction or in a related market.
CREDIT RISK is the risk that a counterparty will fail to perform its
obligations to you when due.
FUNDING RISK is the risk that, as a result of mismatches or delays in
the timing of cash flows due from or to your counterparties in OTC
derivative transactions or related hedging, trading, collateral or
other transactions, you or your counterparty will not have adequate
cash available to fund current obligations.
OPERATIONAL RISK is the risk of loss to you arising from inadequacies
in or failures of your internal systems and controls for monitoring and
quantifying the risks and contractual obligations associated with OTC
derivative transactions, for recording and valuing OTC derivative and
related transactions, or for detecting human error, systems failure or
management failure.
There may be other significant risks that you should consider based on the terms
of a specific transaction. Highly customized OTC derivative transactions in
particular may increase liquidity risk and introduce other significant risk
factors of a complex character. Highly leveraged transactions may experience
substantial gains or losses in value as a result of relatively small changes in
the value or level of an underlying or related market factor.
Because the price and other terms on which you may enter into or terminate an
OTC derivative transaction are individually negotiated, these may not represent
the best price or terms available to you from other sources.
In evaluating the risks and contractual obligations associated with a particular
OTC derivative transaction, you should also consider that an OTC derivative
transaction may be modified or terminated only by mutual consent of the original
parties and subject to agreement on individually negotiated terms. Accordingly,
it may not be possible for you to modify, terminate or offset your obligations
or your exposure to the risks associated with a transaction prior to its
scheduled termination date.
Similarly, while market makers and dealers generally quote prices or terms for
entering into or terminating OTC derivative transactions and provide indicative
or mid-market quotations with respect to outstanding OTC derivative
transactions, they are generally not contractually obligated to do so. In
addition, it may not be possible to obtain indicative or mid-market quotations
for an OTC derivative transaction from a market maker or dealer that is not a
counterparty to the transaction. Consequently, it may also be difficult for you
to establish an independent value for an outstanding OTC derivative transaction.
You should not regard your counterparty's provision of a valuation or indicative
price at your request as an offer to enter into or terminate the relevant
transaction at that value or price, unless the value or price is identified by
the counterparty as firm or binding.
THIS BRIEF STATEMENT DOES NOT PURPORT TO DISCLOSE ALL OF THE RISKS AND OTHER
MATERIAL CONSIDERATIONS ASSOCIATED WITH OTC DERIVATIVE TRANSACTIONS. YOU SHOULD
NOT CONSTRUE THIS GENERIC DISCLOSURE STATEMENT AS BUSINESS, LEGAL, TAX OR
ACCOUNTING ADVICE OR AS MODIFYING APPLICABLE LAW. YOU SHOULD CONSULT YOUR OWN
BUSINESS, LEGAL,
TAX AND ACCOUNTING ADVISERS WITH RESPECT TO PROPOSED OTC DERIVATIVE TRANSACTIONS
AND YOU SHOULD REFRAIN FROM ENTERING INTO ANY OTC DERIVATIVE TRANSACTION UNLESS
YOU HAVE FULLY UNDERSTOOD THE TERMS AND RISKS OF THE TRANSACTION, INCLUDING THE
EXTENT OF YOUR POTENTIAL RISK OF LOSS.
