EXHIBIT 10.6
[XXXXXXX XXXXX LOGO]
CONFIRMATION OF OTC CONVERTIBLE NOTE HEDGE
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 purposes of the Equity
Definitions and a "Swap Transaction" for the purposes of the Swap 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 1992 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
Effective Date: The fourth Business Day immediately
following the Trade Date.
Seller: ML
Buyer: Counterparty
Shares: The shares of Common stock, par value of USD
0.01, of Counterparty (Security Symbol:
"DKS") or such other securities or property
into which the Reference Notes are
convertible on the date of determination.
Payment Amount Premium: $[amount redacted] mm to be paid on the
Initial Settlement Date.
Exchange: As provided in the Note Indenture in the
definition of "Sale Price"
Related Exchange(s): All Exchanges
Knock-in Event: Not Applicable
Knock-out Event: Not Applicable
Reference Notes: Senior Convertible Notes due 2024 having
$255,085,000 million principal amount at
maturity
Conversion Event: Each conversion on a Conversion Date
(as defined in the Note Indenture) of any
Reference Note into Shares pursuant to the
terms of the Note Indenture (the principal
amount at maturity of Reference Notes so
converted, the "CONVERSION AMOUNT" with
respect to such Conversion Event) occurring
on or before the Termination Date.
If the Conversion Amount for any Conversion
Event is less than the aggregate principal
amount at maturity of Reference Notes then
outstanding, then the terms of this
Transaction shall continue to apply, subject
to the terms and conditions set forth
herein, with respect to the remaining
outstanding principal amount at maturity of
the Reference Notes.
Note Indenture: The Indenture, dated as of closing of the
issuance of the Reference Notes, between
Counterparty and Wachovia Bank, N.A., as
trustee relating to the Reference Notes, as
the same may be amended, modified or
supplemented, subject to the "Additional
Termination Events" provisions of this
Confirmation.
Termination Date: February 11, 2009
VALUATION:
Valuation Date: The last Averaging Date in respect of any
Conversion Event
Averaging Dates: The "Averaging Dates", as defined in the
Note Indenture with respect to a Conversion
Event
Full Exchange Business Day: A "Trading Day", as defined in the Note
Indenture
Averaging Date Disruption: Modified Postponement
Averaging Period Start Date: The first Averaging Date in respect of any
Conversion Event
SETTLEMENT TERMS:
Settlement: Net Share Settlement
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Settlement Currency: USD
Settlement Price: The arithmetic mean of the closing price of
the Shares on the Exchange on each Averaging
Date.
Settlement Date: The third (3rd) Full Exchange Business Day
following the Valuation Date in respect of
any Conversion Event occurring on or before
the Termination Date.
Conversion Notice: Counterparty agrees to provide ML
with notice of any Conversion Event within
two (2) Business Days of the Conversion Date
and in any event no later than one (1)
Business Day following Counterparty's
receipt of notice of such Conversion Event
from the Trustee under the Note Indenture.
Net Share Settlement: On each Settlement Date ML shall deliver to
Counterparty, through the Agent, a number of
Shares equal to the related Final Settlement
Amount.
Final Settlement Amount: For each Conversion Event, the number of
Shares, rounded up to the nearest whole
Share, determined by the Calculation Agent
to be equal to the quotient of (x) the
related Net Settlement Amount divided by (y)
the related Settlement Price.
Net Settlement Amount: For each Conversion Event, the product of
(x) the number of Shares into which the
Reference Notes are to be converted in
connection with the related Conversion Event
multiplied by (y) the Final Price
Differential.
Final Price Differential: For each Conversion Event, an amount equal
to the greater of (x) the excess of the
related Settlement Price over the related
Adjusted Conversion Price and (y) zero.
Adjusted Conversion Price: For each Conversion Event, a quotient, the
numerator of which is the accreted principal
amount of a Reference Note having a
principal amount at maturity of $1000 and
the denominator of which is the Conversion
Rate (as defined in the Note Indenture and
as adjusted from time to time pursuant to
the terms thereof) as in effect on the
related Settlement Date.
SHARE ADJUSTMENTS:
Consequences for Merger Events:
Share-for-Share: Not Applicable, Shares will be adjusted as
provided in the Note Indenture.
Share-for-Other: Not Applicable, Shares will be adjusted as
provided in the Note Indenture.
Share-for-Combined: Not Applicable, Shares will be adjusted as
provided in the Note Indenture.
Tender Offer: Not Applicable
Nationalization, Insolvency or Delisting: Not Applicable
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Additional Disruption Events:
Change in Law: Not Applicable
Failure to Deliver: Applicable. 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 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
ADDITIONAL AGREEMENTS, REPRESENTATIONS AND COVENANTS OF COUNTERPARTY, ETC.:
1. 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:
a. 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
b. Counterparty has publicly disclosed all material information
necessary for Counterparty 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).
2. 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. If Counterparty would be
obligated to receive cash from ML pursuant to the terms of this
Agreement for any reason without having had the right (other than
pursuant to this paragraph (2)) to elect to receive Shares in
satisfaction of such payment obligation, then Counterparty may elect
that ML deliver to Counterparty a number of Shares having a cash value
equal to the amount of such payment obligation (such number of Shares
to be delivered to be determined by the Calculation Agent acting in a
commercially reasonable manner to determine the number of Shares that
could be purchased over a reasonable period of time with the cash
equivalent of such
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payment obligation). Settlement relating to any delivery of Shares
pursuant to this paragraph (2) shall occur within a reasonable period
of time.
ADDITIONAL TERMINATION EVENTS:
The occurrence of any of the following shall be an Additional Termination Event
with respect to Counterparty (which shall be the sole Affected Party and this
Transaction shall be the sole Affected Transaction):
1. an Amendment Event occurs (in which case the entirety of this
Transaction shall be subject to termination);
2. a Repayment Event occurs (in which case this Transaction shall be
subject to termination only in respect of the principal amount of
Reference Notes that cease to be outstanding in connection with or as a
result of such Repayment Event); or
3. the transactions contemplated by the Purchase Agreement among the
Counterparty and Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
("MLPFS"), UBS Securities LLC and Banc of America Securities LLC as
Initial Purchasers, dated as of February 11, 2004 (the "PURCHASE
AGREEMENT") relating to the purchase of the Reference Notes shall fail
to close as a result of any breach by the Counterparty or any Initial
Purchaser of their respective obligations thereunder or as a result of
any action, or failure to act, by the Counterparty or any Initial
Purchaser thereunder or as a result of a failure or any condition
thereunder, in which case the entirety of this Transaction shall
terminate automatically.
If the transactions contemplated by the Purchase Agreement shall fail to close
for any reason other than a breach of the Purchase Agreement by MLPFS, then the
entirety of this Transaction shall terminate automatically and all payments
previously made hereunder, including the Payment Amount Premium less the amount
of any Closeout Losses, shall be promptly returned to the person making such
payment; provided that in such case, Counterparty hereby indemnifies the
Indemnified Parties from and against (a) any and all losses, claims, damages and
liabilities, joint and several, which such Indemnified Party may incur or to
which such Indemnified Party may become subject as a result of the termination
of this Transaction and (b) except in the case of the exercise by MLPFS of its
"market out" termination rights pursuant to Section 10(a)(ii) of the Purchase
Agreement, the reasonable fees and expenses of counsel for MLPFS incurred in
connection with this Transaction (the "Closeout Losses"), including, without
limitation, any losses incurred by an Indemnified Party in connection with the
initiating or unwinding of any hedging transactions related to this Transaction.
If the transactions contemplated by the Purchase Agreement shall fail to close
because of a breach of the Purchase Agreement by MLPFS, then the entirety of
this Transaction shall terminate automatically, and all payments previously made
hereunder, including the Payment Amount Premium, shall be promptly returned to
the person making such payment. In addition, if an Amendment Event or Repayment
Event occurs, no payments shall be required hereunder in connection with the
Termination Event arising as a result of such Amendment Event or Repayment
Event.
As used in this Section Additional Termination Events:
"AMENDMENT EVENT" means that the Counterparty amends, modifies,
supplements or waives any term of the Note Indenture or the Reference
Notes relating to the principal amount, coupon, maturity, repurchase
obligation of the Counterparty, redemption right of the Counterparty,
any term relating to conversion of the Notes (including changes to the
conversion price, conversion settlement dates or conversion
conditions), or any other term that would require consent of the
holders of not less than 100% of the principal amount of the Reference
Notes to amend.
"REPAYMENT EVENT" means that (a) any Reference Notes are repurchased
(whether in connection with or as a result of a change of control,
howsoever defined, or for any other reason) by the Counterparty, (b)
any Reference Notes are delivered to the Counterparty in exchange for
delivery of any property or assets of the Counterparty or any of its
subsidiaries (howsoever described), other than as a result of and in
connection with a Conversion Event, (c) any principal of any of the
Reference Notes is repaid prior to the Final Maturity Date, as defined
in the Note Indenture (whether following acceleration of the Reference
Notes or otherwise), provided that no payments of cash made in respect
of the conversion a Note shall be deemed a payment of principal under
this clause (c), (d) any Reference Notes are exchanged by or for the
benefit of
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the holders thereof for any other securities of the Counterparty or any
of its affiliates (or any other property, or any combination thereof)
pursuant to any exchange offer or similar transaction or (e) any of the
Notes is surrendered by Counterparty to the trustee for cancellation,
other than registration of a transfer of such Notes or as a result of
and in connection with a Conversion Event.
STAGGERED SETTLEMENT:
If ML determines reasonably and in good faith that the number of Shares required
to be delivered to Counterparty hereunder on any Settlement Date would exceed
8.0% of all outstanding Shares, then ML may, by notice to Counterparty on or
prior to such Settlement Date (a "NOMINAL SETTLEMENT DATE"), elect to deliver
the Shares comprising the related the Final Settlement Amount on two or more
dates (each, a "STAGGERED SETTLEMENT DATE") as follows:
1. in such notice, ML will specify to Counterparty the related Staggered
Settlement Dates (the first of which will be such Nominal Settlement
Date and the last of which will be no later than the twentieth (20th)
Exchange Business Day following such Nominal Settlement Date) and the
number of Shares that it will deliver on each Staggered Settlement
Date;
2. the aggregate number of Shares that ML will deliver to Counterparty
hereunder on all such Staggered Settlement Dates will equal the number
of Shares that ML would otherwise be required to deliver on such
Nominal Settlement Date; and
3. the Net Share Settlement terms will apply on each Staggered Settlement
Date, except that the Shares comprising the Final Settlement Amount
will be allocated among such Staggered Settlement Dates as specified by
ML in the notice referred to in clause (1) above.
Notwithstanding anything herein to the contrary, ML shall be entitled to deliver
Shares to Counterparty from time to time prior to the date on which ML would be
obligated to deliver them to Counterparty pursuant to Net Share Settlement terms
set forth above, and Counterparty agrees to credit all such early deliveries
against ML's obligations hereunder in the direct order in which such obligations
arise. No such early delivery of Shares will accelerate or otherwise affect any
of Counterparty's obligations to ML hereunder. In addition, within 30 days of
the Termination Date or any Settlement Date, Counterparty shall use its
reasonable efforts to refrain from activities which could reasonably be expected
to result in ML's ownership of Shares exceeding 10% of all issued and
outstanding Shares.
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 of 1933, as amended, and
the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), and the rules
and regulations each thereunder, including,
without limitation, Rules 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 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 ML in the case of
paragraphs (c) and (d) below) represents
that as of the date hereof:
(a) each of its filings under the Exchange
Act that are required to be filed
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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 hereof, 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;
(b) if Counterparty were to have purchased a
number of Shares equal to the Number of
Shares using MLPFS as broker, such
purchase(s) would have complied in all
material respects with all contractual
obligations of Counterparty;
(c) 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; and
(d) 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).
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
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's 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 Agreement; provided however that ML
may assign its rights and delegate its obligations
hereunder, in whole or in part, to any affiliate (an
"ASSIGNEE") of Xxxxxxx Xxxxx & Co., Inc. ("ML&CO."),
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 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
7
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 the untruth of any
representation by Counterparty or a breach by
Counterparty of any 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.
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:
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 the
Agreement.
The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) of the Agreement
will not 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:
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(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:
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 delivery of this
Confirmation Confirmation
Counterparty Certified copy of the resolution of Upon or before Yes
the Board of Directors or equivalent execution and
document authorizing the execution and delivery of this
delivery of this Confirmation Confirmation
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ML Guarantee of its Credit Support Upon or before Yes
Provider, substantially in the form of execution and
Exhibit A attached hereto, together delivery of this
with evidence of the authority and Confirmation
true signatures of the signatories, if
applicable
ADDITIONAL NOTICE REQUIREMENTS: The Counterparty hereby agrees to promptly
deliver to ML a copy of all notices and other communications required or
permitted to be given to the holders of any Reference Notes pursuant to the
terms of the Note Indenture on the dates so required or permitted in the Note
Indenture and all other notices given and other communications made by
Counterparty in respect of the Referenced Notes to holders of any Referenced
Notes . The Counterparty further covenants to ML that it shall promptly notify
ML of each Conversion Event (identifying in such notice (a "CONVERSION NOTICE")
the principal amount at maturity of Reference Notes being converted), Amendment
Event (including in such notice a detailed description of any such amendment)
and Repayment Event (identifying in such notice the nature of such Repayment
Event and the principal amount at maturity of Reference Notes being paid). The
Counterparty shall deliver each Conversion Notice to ML within two Business Days
following the occurrence of the related Conversion Event and in any event no
later than one Business Day following Counterparty's receipt of notice of such
Conversion Event from the Trustee under the Note Indenture. The Counterparty
hereby acknowledges and agrees that its obligations under this Section shall
continue as obligations of the Counterparty notwithstanding any transfer by it
of any of its rights or obligations to any other person or entity in accordance
with the Section titled Staggered Settlement above.
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:
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
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[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, whose judgments, determinations
and calculations in this Transaction and any related hedging transaction between
the parties shall be made in good faith and in a commercially reasonable manner.
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 Shares,
such that neither party shall be required to deliver any fractional 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.
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,"
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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.
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."
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.
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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.
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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.
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
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Amended and Restated
15
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
Convertible Note Hedge 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
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[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 Transactions 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.
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[XXXXXXX XXXXX LOGO]
A. 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,
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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.
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