-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B/mJJazbAyYAljbAkqyNx8aVs3JmE5/8Lb4J6JE7nxjXwJKnX/TPy1BqxGqsLNyo hXRLNS539P+MMjb4PmvZTg== 0000950152-04-005157.txt : 20040701 0000950152-04-005157.hdr.sgml : 20040701 20040701151601 ACCESSION NUMBER: 0000950152-04-005157 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20040701 GROUP MEMBERS: DIAMONDBACKS ACQUISITION INC. FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DICKS SPORTING GOODS INC CENTRAL INDEX KEY: 0001089063 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 161241537 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 200 INDUSTRY DR CITY: PITTSBURGH STATE: PA ZIP: 15275 BUSINESS PHONE: 4128090100 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GALYANS TRADING CO INC CENTRAL INDEX KEY: 0001137067 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 351529720 STATE OF INCORPORATION: IN FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-62173 FILM NUMBER: 04894986 BUSINESS ADDRESS: STREET 1: ONE GALYANS PARKWAY CITY: PLAINFIELD STATE: IN ZIP: 46168 BUSINESS PHONE: 3175320200 MAIL ADDRESS: STREET 1: ONE GALYANS PARKWAY CITY: PLAINFIELD STATE: IN ZIP: 46168 SC 13D 1 j0833601sc13d.htm DICK'S SPORTING GOODS, INC. DICK'S SPORTING GOODS, INC.
 

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No.   )*

GALYAN’S TRADING COMPANY, INC.

(Name of Issuer)

Common Stock, no par value

(Title of Class of Securities)

36458R101

(Cusip Number)

William R. Newlin, Esq.
Executive Vice President and Chief Administrative Officer
300 Industry Drive
RIDC Park West
Pittsburgh, PA 15275
(724) 273-3400

Copies to:
Lewis U. Davis, Jr., Esq.
Jeremiah G. Garvey, Esq.
Buchanan Ingersoll PC
One Oxford Centre
301 Grant Street, 20th Floor
Pittsburgh, PA 15219
(412) 562-8800

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

June 21, 2004

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

CUSIP No. 36458R101   13D   Page 2 of 10
             
  1. Name of Reporting Person:
Dick’s Sporting Goods, Inc.		 I.R.S. Identification Nos. of above persons (entities only):
16-1241537
  2. Check the Appropriate Box if a Member of a Group (See Instructions):
    (a) o  
    (b) x  
  3. SEC Use Only:
  4. Source of Funds (See Instructions):
BK, WC
  5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e): o
  6. Citizenship or Place of Organization:
Delaware
Number of
Shares
Beneficially
Owned by
Each Reporting
Person With
7. Sole Voting Power:
100
8. Shared Voting Power:
9,595,000*
9. Sole Dispositive Power:
100
10.Shared Dispositive Power:
9,595,000*
  11.Aggregate Amount Beneficially Owned by Each Reporting Person:
9,595,100*
  12.Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions):
o
  13.Percent of Class Represented by Amount in Row (11):
55.0%**
  14.Type of Reporting Person (See Instructions):
CO
*   Represents the aggregate number of shares of common stock of Galyan’s Trading Company, Inc., an Indiana corporation (the “Company”), held by certain shareholders (the “Supporting Shareholders”) of the Company who have entered into a Shareholder Tender Agreement, dated as of June 21, 2004, with Dick’s Sporting Goods, Inc., a Delaware corporation (“Parent”) and Diamondbacks Acquisition Inc., an Indiana corporation and a wholly-owned subsidiary of Parent (“Purchaser”), described herein. Such number does not include any Company Common Shares (as defined in Item 1 herein) issuable upon the exercise of a warrant to purchase up to 1,350,000 Company Common Shares held by Limited Brands, Inc. (the “Warrant Shares”). Neither Parent nor Purchaser would have any rights to vote or to direct the vote and/or dispose or to direct the disposition of the Warrant Shares, unless Limited Brands, Inc. exercises the Warrant. Parent and Purchaser expressly disclaim beneficial ownership as determined under Rule 13d-3 under the Securities Exchange Act of 1934, as amended or otherwise, of any of the Company Common Shares.
 
**   Based on 17,435,368 Company Common Shares outstanding, as represented by the Company in the Merger Agreement (as defined in Item 4 herein). Excludes the Warrant Shares. See footnote*.

2

 

CUSIP No. 36458R101   13D   Page 3 of 10
             
  1. Name of Reporting Person:
Diamondbacks Acquisition Inc.		 I.R.S. Identification Nos. of above persons (entities only):
  2. Check the Appropriate Box if a Member of a Group (See Instructions):
    (a) o  
    (b) x  
  3. SEC Use Only:
  4. Source of Funds (See Instructions):
OO
  5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e): o
  6. Citizenship or Place of Organization:
Indiana
Number of
Shares
Beneficially
Owned by
Each Reporting
Person With
7. Sole Voting Power:
0
8. Shared Voting Power:
9,595,000*
9. Sole Dispositive Power:
0
10.Shared Dispositive Power:
9,595,000*
  11.Aggregate Amount Beneficially Owned by Each Reporting Person:
9,595,000*
  12.Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions):
o
  13.Percent of Class Represented by Amount in Row (11):
55.0%**
  14.Type of Reporting Person (See Instructions):
CO
*   Represents the aggregate number of shares of common stock of the Company held by the Supporting Shareholders of the Company who have entered into a Shareholder Tender Agreement, dated as of June 21, 2004, with Parent and Purchaser. Such number does not include any Company Common Shares (as defined in Item 1 herein) issuable upon the exercise of a warrant to purchase up to 1,350,000 Company Common Shares held by Limited Brands, Inc. (the “Warrant Shares”). Neither Parent nor Purchaser would have any rights to vote or to direct the vote and/or dispose or to direct the disposition of the Warrant Shares, unless Limited Brands, Inc. exercises the Warrant. Parent and Purchaser expressly disclaim beneficial ownership as determined under Rule 13d-3 under the Securities Exchange Act of 1934, as amended or otherwise, of any of the Company Common Shares.
 
**   Based on 17,435,368 Company Common Shares outstanding, as represented by the Company in the Merger Agreement (as defined in Item 4 herein). Excludes the Warrant Shares. See footnote*.

3

 

CUSIP No. 36458R101   13D   Page 4 of 10

Item 1. Security and Issuer

     This statement on Schedule 13D (this “Schedule”) relates to shares of common stock, no par value per share, of Galyan’s Trading Company, Inc., an Indiana corporation (the “Company”), (the “Company Common Shares”). The address and principal office of the Company is One Galyan’s Parkway, Plainfield, Indiana 46168.

Item 2. Identity and Background.

     (a) This Schedule 13D is being filed by Dick’s Sporting Goods, Inc., a Delaware corporation (“Parent”), and Diamondbacks Acquisition Inc., an Indiana corporation and a wholly-owned subsidiary of Parent (“Purchaser”).

     (b) The principal executive offices of each of the Parent and the Purchaser are at 300 Industry Drive, RIDC Park West, Pittsburgh, PA 15275.

     (c), (f) Parent is an authentic full-line sporting goods retailer offering a broad assortment of brand name sporting goods equipment, apparel, and footwear in a specialty store environment. Purchaser is a newly formed Indiana corporation organized in connection with the Offer (as defined in Item 4 herein) and the Merger (as defined in Item 4 herein) and has not conducted any activities other than in connection with the Offer and the Merger. Until immediately prior to the time that Purchaser will purchase Company Common Shares pursuant to the Offer, it is not anticipated that Purchaser will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by the Offer and the Merger. All outstanding shares of capital stock of Purchaser are owned by Parent.

          The name, business address, present principal occupation or employment (including the name, principal business and address of the corporation or other organization in which such employment is conducted) and citizenship of each director and executive officer of Parent and the Purchaser are set forth on Annex A hereto and are incorporated by reference herein.

     (d), (e) During the past five years, neither Parent, Purchaser nor, to the best of their knowledge, any person listed on Annex A attached hereto, has (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was, or is, subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration.

     Neither Parent nor Purchaser has paid any consideration in connection with the execution of the Merger Agreement or the Shareholder Tender Agreement (as defined in Item 4 herein) to the shareholders that are party to the Shareholder Tender Agreement. Neither Parent nor Purchaser expect to acquire any Company Common Shares pursuant to the Shareholder Tender Agreement. Parent and Purchaser expect to acquire all outstanding Company Common Shares pursuant to the Offer and the Merger. A description of the source and amount of funds required to purchase the Company Common Shares in the Offer pursuant to the Merger Agreement is contained in Section of the Offer to Purchase, dated as of June 29, 2004 filed as Exhibit 3 hereto, and which was filed as Exhibit (a)(1)(A) to the Schedule TO filed by Purchaser and Parent on June 29, 2004, and which description is incorporated by reference herein.

Item 4. Purpose of the Transaction

     On June 21, 2004, the Company, Parent and Purchaser entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that Purchaser will offer to purchase all of the issued and outstanding Company Common Shares (the “Offer”) at a purchase price of $16.75 per share, net to the seller, without interest (the “Offer Price”). Following the completion of the Offer and the satisfaction or waiver of the

 

 

CUSIP No. 36458R101   13D   Page 5 of 10

conditions to the Merger set forth in the Merger Agreement, (i) Purchaser will be merged into the Company, under Indiana law (the “Merger”), with the Company being the surviving corporation, (ii) each Company Common Share that is not tendered and accepted pursuant to the Offer (other than Company Common Shares owned by Parent, Purchaser or the Company or any of their respective wholly-owned subsidiaries) will be converted into the right to receive in cash an amount per share equal to the Offer Price, and (iii) each issued and outstanding Company Common Share owned by Parent, Purchaser or the Company immediately prior to the Merger shall automatically be cancelled and cease to exist, and no consideration shall be delivered or deliverable therefore. The Offer, the Merger, and the other transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of certain conditions, including the receipt of regulatory approvals, as set forth in the Merger Agreement. Furthermore, the consummation of the Offer, the Merger and the other transactions contemplated by the Merger Agreement are subject to the termination provisions of the Merger Agreement, which may be terminated by either party in accordance with its terms. A more complete description of the Merger Agreement is contained in Section 11 of the Offer to Purchase dated June 29, 2004 filed as Exhibit 3 hereto, and which was filed as Exhibit (a)(1)(A) to the Schedule TO filed by Purchaser and Parent on June 29, 2004, and which description is incorporated by reference herein. A copy of the Merger Agreement is filed as Exhibit 1 to this Schedule and is incorporated by reference herein.

     Concurrently with the execution and delivery of the Merger Agreement, and as a condition and inducement to the willingness of Parent and Purchaser to enter into the Merger Agreement, certain shareholders of the Company (the “Supporting Shareholders”) entered into a Shareholder Tender Agreement with Parent and Purchaser (the “Shareholder Tender Agreement”). Pursuant to the Shareholder Tender Agreement and as more fully described herein, each Supporting Shareholder, among other things, (i) agreed to tender into the Offer, and to not withdraw, all Company Common Shares of which it is the beneficial owner or has the sole rights to vote and dispose, and any Company Common Shares over which such Supporting Shareholder subsequently acquires beneficial ownership (the “Owned Shares”), (ii) granted to Parent and Purchaser an irrevocable option for 60 days to purchase the Owned Shares at a price of $16.75 per share, exercisable if Purchaser has acquired Company Common Shares pursuant to the Offer and the Supporting Shareholder failed to tender into the Offer or has withdrawn any of such Owned Shares, (iii) agreed to vote any of its Owned Shares (A) in favor of the adoption of the Merger Agreement and approving the transactions contemplated thereby, including the Merger, and (B) against (other than transactions contemplated by the Merger Agreement) any “Takeover Proposal” or any action that would be designed to delay, prevent or frustrate the Offer and the transactions contemplated by the Merger Agreement, (iv) granted Parent an irrevocable proxy to vote all of their Owned Shares as contemplated by clause (iii) of this paragraph, (v) subject the Owned Shares to certain transfer restrictions, and (vi) agreed that they and their representatives would not solicit, initiate or encourage any inquiries or proposals from, discuss or negotiate with, or provide any non-public information to, any person relating to or otherwise facilitate a Takeover Proposal.

     “Takeover Proposal” means, other than the transactions contemplated by the Merger Agreement, (i) any written proposal from a credible third party relating to any direct or indirect acquisition or purchase of 20% or more of the assets of the Company and its subsidiaries, taken as a whole, or 20% or more of any class or series of equity securities of the Company or any of its subsidiaries, (ii) any tender offer or exchange offer that if consummated would result in any Person beneficially owning 20% or more of the combined voting power of Company Common Shares, or (iii) any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries in which the other party thereto or its shareholders will own 20% or more of the combined voting power of the parent entity resulting from any such transaction. The Shareholder Tender Agreement terminates when and if the Merger Agreement is terminated without the consummation of the Merger. A more complete description of the Shareholder Tender Agreement is contained in Section 11 of the Offer to Purchase dated June 29, 2004 filed as Exhibit 3 hereto, and which was filed as Exhibit (a)(1)(A) to the Schedule TO filed by Purchaser and Parent on June 29, 2004, and which description is incorporated by reference herein. A copy of the Shareholder Tender Agreement is filed as Exhibit 2 to this Schedule and is incorporated by reference herein.

     The purpose of the transactions described above is for Parent to acquire control of the Company through the acquisition of all outstanding Company Common Shares. Upon consummation of the transactions contemplated by the Merger Agreement and Shareholder Tender Agreement, the Company will become a wholly-owned subsidiary of Parent, the Company Common Shares will cease to be freely traded or listed on Nasdaq or any national securities market, all Company Common Shares will be de-registered under the Securities Exchange Act of 1934, as amended or otherwise, and Parent will replace the existing directors and management with persons selected by Parent, and will make such other changes in the charter, bylaws, capitalization, management and business of the Company as set forth in the

 

 

CUSIP No. 36458R101   13D   Page 6 of 10

Merger Agreement and as otherwise deemed necessary or appropriate by Parent. Currently, the Company’s policy is to pay no dividends, and Parent does not expect to change that policy in the near future. It is expected that initially, following the Merger, the business and operations of the Company will, except as set forth in the Offer to Purchase dated June 29, 2004 filed as Exhibit 3 hereto, and which was filed as Exhibit (a)(1)(A) to the Schedule TO filed by Purchaser and Parent on June 29, 2004, and which description is incorporated by reference herein, be continued by the Company substantially in the same form as they are currently being conducted.

     Except as set forth or incorporated by reference herein relating to the Offer, the Merger and the transactions contemplated by the Merger Agreement and the Shareholder Tender Agreement, Parent does not have any current plans or proposals that relate to or would result in (i) the acquisition by any person of additional Company Common Shares or the disposition of Company Common Shares, (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries, (iii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (iv) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any vacancies on the board, (v) any material change in the capitalization of the Company, (vi) any other material change in the Company’s corporate structure or business, (vii) any change to the Company’s charter, bylaws, or instruments corresponding thereto, or other actions that may impede the acquisition of control of the Company, (viii) causing a class of securities of the Company to be delisted from a national securities exchange or cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (ix) a class of Company equity securities becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended, or (x) any action similar to any of those enumerated above.

     The preceding summary of certain provisions of the Merger Agreement and the Shareholder Tender Agreement, copies of which are filed as exhibits hereto, is not intended to be complete and is qualified in its entirety by reference to the full text of such agreements.

Item 5. Interest in Securities of the Issuer.

     (a) - (b) Parent owns and has sole voting and sole dispositive power over 100 Company Common Shares which were acquired more than 60 days prior to the date of the event reported on this Schedule. As a result of the Merger Agreement and the Shareholder Tender Agreement, Parent and Purchaser, as a group, may be deemed to be the beneficial owner of and to have the shared voting and shared dispositive power with respect to 9,595,000 Company Common Shares and excludes the Warrant Shares. This number represents approximately 55.0% of the Company Common Shares issued and outstanding as of June 21, 2004 (as represented by the Company in the Merger Agreement). Parent and Purchaser expressly disclaim beneficial ownership of any and all Company Common Shares which are subject to the Shareholder Tender Agreement, and nothing herein shall be deemed an admission by Parent or Purchaser as to the beneficial ownership of such shares for the purposes of Rule 13d-2 under the Securities Exchange Act of 1934, as amended or otherwise. A copy of each of the Merger Agreement and the Shareholder Tender Agreement, filed as Exhibits 1 and 2, respectively, to this Schedule are incorporated by reference herein. The preceding summary of certain provisions of the Merger Agreement and the Shareholder Tender Agreement, copies of which are filed as exhibits hereto, is not intended to be complete and is qualified in its entirety by reference to the full text of such agreements.

     (c) - (d) Except as described herein, neither Parent and Purchaser nor, to the best of their knowledge, any other person referred to in Annex A attached hereto, has acquired or disposed of any Company Common Shares during the past 60 days. Furthermore, Parent and Purchaser know of no other person to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities covered by this Schedule.

     (e) N/A

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.

     The information set forth, or incorporated by reference, in Items 3, 4 and 5 is incorporated by reference to this Item 6. Except as otherwise described in this Schedule, Parent and Purchaser and none of the persons named on Annex A has any contracts, arrangements, understandings or relationships (legal or otherwise) with any persons with respect to any securities of the Company, including but not limited to the transfer or voting of any securities, finder’s

 

 

CUSIP No. 36458R101   13D   Page 7 of 10

fees, joint ventures, loan or option agreements, puts or calls, guarantees of profits, division of profits or losses, or the giving or withholding of proxies.

Item 7. Material to be Filed as Exhibits.

     
Exhibit 1:
  Agreement and Plan of Merger, dated as of June 21, 2004, among Dick’s Sporting Goods, Inc., Diamondbacks Acquisition Inc. and Galyan’s Trading Company, Inc.
 
    
Exhibit 2:
  Shareholder Tender Agreement, dated as of June 21, 2004, among Dick’s Sporting Goods, Inc., Diamondbacks Acquisition Inc., FS Equity Partners IV, L.P., Limited Brands, Inc. and G Trademark, Inc.
 
    
Exhibit 3:
  Offer to Purchase dated June 29, 2004 filed as Exhibit (a)(1)(A) to the Schedule TO filed by Purchaser and Parent on June 29, 2004.
 
    
Exhibit 4:
  Consent and Waiver to the Amended and Restated Credit Agreement, dated as of June 14, 2004, among Dick’s Sporting Goods, Inc., the Lenders party thereto and General Electric Capital Corporation, as agent for the Lenders.
 
    
Exhibit 5:
  Amended and Restated Credit Agreement dated as of July 26, 2000 among Dick’s Sporting Goods, Inc., the Lenders Party thereto and General Electric Capital Corporation, as amended by the First Amendment to Amended and Restated Credit Agreement dated as of May 18, 2001, the Second Amendment to Amended and Restated Credit Agreement dated as of July 2001, the Third Amendment to Amended and Restated Credit agreement dated as of August 3, 2001, the Fourth Amendment to Amended and Restated Credit Agreement dated as of September 2001, the Fifth Amendment to Amended and Restated Credit Agreement dated as of February 2002, the Sixth Amendment to Amended and Restated Credit Agreement dated as of April 3, 2002, and the Seventh Amendment to Amended and Restated Credit Agreement dated as of July 15, 2002.
 
    
Exhibit 6:
  Eighth Amendment to Amended and Restated Credit Agreement dated as of September 12, 2002.
 
    
Exhibit 7:
  Ninth Amendment to Amended and Restated Credit Agreement dated as of December 15, 2002.
 
    
Exhibit 8:
  Tenth Amendment and Waiver to Amended and Restated Credit Agreement dated as of August 7, 2003.
 
    
Exhibit 9:
  Eleventh Amendment to Amended and Restated Credit Agreement dated as of January 29, 2004.
 
    
Exhibit 10:
  Twelfth Amendment to the Amended and Restated Credit Agreement dated as of February 18, 2004.
 
    
Exhibit 11:
  Commitment Letter between Merrill Lynch Capital Corporation and Dick’s Sporting Goods, Inc., dated as of June 21, 2004.

 

 

CUSIP No. 36458R101   13D   Page 8 of 10

SIGNATURE

     After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Dated: July 1, 2004

         
    DICK’S SPORTING GOODS, INC.
 
        
  By:   /s/ William R. Newlin
       
  Name:   William R. Newlin
  Title:   Executive Vice President and
      Chief Administrative Officer
         
    DIAMONDBACKS ACQUISITION INC.
 
        
  By:   /s/ William R. Newlin
       
  Name:   William R. Newlin
  Title:   President
     

 

 

CUSIP No. 36458R101   13D   Page 9 of 10

Annex A

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the name and present principal occupation or employment of each director and executive officer of Parent and Purchaser, as well as the name, principal business and address of such employer, as of July 1, 2004. The principal business address of each person listed below is c/o 300 Industry Drive, RIDC Park West, Pittsburgh. Each person listed below is a citizen of the United States.

     
DIRECTORS OF DICK’S SPORTING GOODS, INC.
Name
  Principal Occupation
 
    
Edward W. Stack
  Chairman and Chief Executive Officer of Dick’s Sporting Goods, Inc.
 
    
William J. Colombo
  President and Chief Operating Officer of Dick’s Sporting Goods, Inc.
 
    
Emanuel Chirico
  Executive Vice President and Chief Financial Officer of the Phillips-Van Heusen Corporation
 
    
David I. Fuente
  Director of Office Depot, Inc. and Director of Ryder System, Inc.
 
    
Walter Rossi
  Director of Guitar Center, Inc.
 
    
Lawrence J. Schorr
  Chief Executive Officer of Empire Plastics, Inc. (a privately owned company); Co-managing partner of Levene, Gouldin and Thompson LLP (law firm)
 
    
 
    
EXECUTIVE OFFICERS OF DICK’S SPORTING GOODS, INC.
Name
  Principal Occupation
 
    
Edward W. Stack
  Chairman and Chief Executive Officer
 
    
William J. Colombo
  President and Chief Operating Officer
 
    
William R. Newlin
  Executive Vice President and Chief Administrative Officer
 
    
Michael F. Hines
  Executive Vice President and Chief Financial Officer
 
    
Gary M. Sterling
  Senior Vice President - Merchandising, Planning and Allocation
 
    
 
    
DIRECTORS AND EXECUTIVE OFFICERS OF DIAMONDBACKS ACQUISITION INC.
Name
  Principal Occupation
 
    
William R. Newlin
  Executive Vice President and Chief Administrative Officer of Dick’s Sporting Goods, Inc. and President of Diamondbacks Acquisition Inc.
 
    
Michael F. Hines
  Executive Vice President and Chief Financial Officer of Dick’s Sporting Goods, Inc. and Secretary of Diamondbacks Acquisition Inc.

 

 

CUSIP No. 36458R101   13D   Page 10 of 10

EXHIBIT INDEX

     
Exhibit 1:
  Agreement and Plan of Merger, dated as of June 21, 2004, among Dick’s Sporting Goods, Inc., Diamondbacks Acquisition Inc. and Galyan’s Trading Company, Inc.
 
    
Exhibit 2:
  Shareholder Tender Agreement, dated as of June 21, 2004, among Dick’s Sporting Goods, Inc., Diamondbacks Acquisition Inc., FS Equity Partners IV, L.P., Limited Brands, Inc. and G Trademark, Inc.
 
    
Exhibit 3:
  Offer to Purchase dated June 29, 2004 filed as Exhibit (a)(1)(A) to the Schedule TO filed by Purchaser and Parent on June 29, 2004.
 
    
Exhibit 4:
  Consent and Waiver to the Amended and Restated Credit Agreement, dated as of June 14, 2004, among Dick’s Sporting Goods, Inc., the Lenders party thereto and General Electric Capital Corporation, as agent for the Lenders.
 
    
Exhibit 5:
  Amended and Restated Credit Agreement dated as of July 26, 2000 among Dick’s Sporting Goods, Inc., the Lenders Party thereto and General Electric Capital Corporation, as amended by the First Amendment to Amended and Restated Credit Agreement dated as of May 18, 2001, the Second Amendment to Amended and Restated Credit Agreement dated as of July 2001, the Third Amendment to Amended and Restated Credit agreement dated as of August 3, 2001, the Fourth Amendment to Amended and Restated Credit Agreement dated as of September 2001, the Fifth Amendment to Amended and Restated Credit Agreement dated as of February 2002, the Sixth Amendment to Amended and Restated Credit Agreement dated as of April 3, 2002, and the Seventh Amendment to Amended and Restated Credit Agreement dated as of July 15, 2002.
 
    
Exhibit 6:
  Eighth Amendment to Amended and Restated Credit Agreement dated as of September 12, 2002.
 
    
Exhibit 7:
  Ninth Amendment to Amended and Restated Credit Agreement dated as of December 15, 2002.
 
    
Exhibit 8:
  Tenth Amendment and Waiver to Amended and Restated Credit Agreement dated as of August 7, 2003.
 
    
Exhibit 9:
  Eleventh Amendment to Amended and Restated Credit Agreement dated as of January 29, 2004.
 
    
Exhibit 10:
  Twelfth Amendment to the Amended and Restated Credit Agreement dated as of February 18, 2004.
 
    
Exhibit 11:
  Commitment letter between Merrill Lynch Capital Corporation and Dick’s Sporting Goods, Inc., dated as of June 21, 2004.

  EX-1 2 j0833601exv1.htm EXHIBIT 1 EXHIBIT 1

 

EXHIBIT 1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

GALYAN’S TRADING COMPANY, INC.,

DICK’S SPORTING GOODS, INC.

AND

DIAMONDBACKS ACQUISITION INC.

DATED AS OF JUNE 21, 2004

 

 

TABLE OF CONTENTS

             
1.
   THE MERGER; SURVIVING CORPORATION; CLOSING     1  
 
   1.1 The Merger     1  
 
   1.2 Name of Surviving Corporation     2  
 
   1.3 Articles of Incorporation     2  
 
   1.4 Bylaws; Directors and Officers     2  
 
   1.5 The Company’s Shareholders’ Meeting     2  
 
   1.6 Merger Without Meeting of Shareholders     3  
 
   1.7 Effective Time     3  
 
   1.8 Closing     3  
 
   1.9 Directors and Officers of the Surviving Corporation     3  
2.
   STATUS AND CONVERSION OF SECURITIES     3  
 
   2.1 Company Capital Stock     3  
 
   2.2 Purchaser Common Stock     5  
 
   2.3 Dissenting Shares     5  
 
   2.4 Company Stock Options and Other Stock Plans and Warrant     6  
3.
   THE OFFER     7  
 
   3.1 The Offer to Purchase     7  
 
   3.2 Offer Documents     8  
 
   3.3 Company Actions     9  
 
   3.4 Shareholder List     10  
 
   3.5 Directors     10  
4.
   REPRESENTATIONS, WARRANTIES AND AGREEMENTS     12  
 
   4.1 Representations, Warranties and Agreements of the Company     12  
 
   4.2 Representations, Warranties and Agreements of Parent     22  
5.
   COVENANTS     24  
 
   5.1 Covenants of the Company     24  
 
   5.2 Covenants of Parent     30  
 
   5.3 Covenants of Purchaser     31  
 
   5.4 Mutual Covenants     32  

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6.
   CONDITIONS TO CLOSING; ABANDONMENT AND TERMINATION     34  
 
   6.1 Conditions to the Company’s Closing and Its Right to Abandon     34  
 
   6.2 Conditions to Parent’s and Purchaser’s Closing and Right of Parent and Purchaser to Abandon     35  
7.
   TERMINATION     35  
 
   7.1 Terms     35  
 
   7.2 Effect of Termination     38  
8.
   TERMINATION FEE AND EXPENSES     38  
 
   8.1 Termination Fee     38  
 
   8.2 Costs and Expenses     38  
9.
   MISCELLANEOUS     39  
 
   9.1 Termination of Covenants, Representations and Warranties     39  
 
   9.2 Execution in Counterparts     39  
 
   9.3 Waivers and Amendments     39  
 
   9.4 Confidentiality     39  
 
   9.5 Indemnification by the Company     40  
 
   9.6 Indemnification by Parent     40  
 
   9.7 Procedure     41  
 
   9.8 Notices     41  
 
   9.9 Entire Agreement; No Third Party Beneficiaries     42  
 
   9.10 Governing Law     42  
 
   9.11 Waiver of Jury Trial     43  
 
   9.12 Severability     43  
 
   9.13 Publicity     43  
 
   9.14 Interpretation     44  
 
   9.15 Non-Recourse     44  

Schedules and Exhibits

Schedule of Definitions
Exhibit A - Shareholder Tender Agreement
Exhibit B - Offer Conditions

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AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is dated as of June 21, 2004, by and among GALYAN’S TRADING COMPANY, INC., an Indiana corporation (the “Company”), DICK’S SPORTING GOODS, INC., a Delaware corporation (the “Parent”), and DIAMONDBACKS ACQUISITION INC., an Indiana corporation and a wholly-owned subsidiary of Parent (the “Purchaser”).

RECITALS:

     The Board of Directors of the Company has determined that each of the Offer and the Merger (each as defined below) is in the best interests of the Company and has approved and adopted this Agreement and the transactions contemplated hereby, including the Offer and the Merger;

     The Boards of Directors of each of Parent and Purchaser have approved the Offer and the Merger upon the terms and conditions hereinafter set forth and have approved and adopted this Agreement;

     The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock, no par value per share (the “Company Common Shares”), of which 17,435,368 shares are issued and outstanding and no shares are held in the treasury of the Company and 5,000,000 shares of Preferred Stock, no par value per share (the “Company Preferred Stock”), of which no shares have been issued;

     The authorized capital stock of Purchaser consists of 1,000 shares of Common Stock, par value $.01 per share (“Purchaser Common Stock”), 100 of which shares are issued and outstanding and owned by Parent; and

     Immediately prior to the execution of this Agreement and as a condition and inducement to Parent’s and Purchaser’s willingness to enter into this Agreement, Parent is simultaneously entering into a shareholder tender agreement substantially in the form set forth in Exhibit A (the “Shareholder Tender Agreement”) with certain holders of the Company Common Shares and/or rights to acquire Company Common Shares, pursuant to which (i) such shareholders are, among other things, agreeing to tender, and not withdraw, all of such shareholders’ Company Common Shares in the Offer upon the terms and conditions specified therein, and (ii) such shareholders are agreeing to certain restrictive covenants.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows:

1. THE MERGER; SURVIVING CORPORATION; CLOSING

     1.1 The Merger.

     Subject to the terms and conditions of this Agreement, the Company and Purchaser shall be, at the Effective Time (as hereinafter defined), merged in accordance with the Indiana

 

 

Business Corporation Law (hereinafter called the “Merger”) into a single corporation existing under the laws of the State of Indiana, whereby the Company shall be the surviving corporation (the Company, in its capacity as the surviving corporation, is sometimes referred to herein as the “Surviving Corporation”). The Merger shall have the effects set forth in Section 23-1-40-6 of the Indiana Business Corporation Law.

     1.2 Name of Surviving Corporation.

     The name of the Surviving Corporation from and after the Effective Time shall be “Galyan’s Trading Company, Inc.”

     1.3 Articles of Incorporation.

     The Articles of Incorporation of Purchaser as in effect on the date hereof shall from and after the Effective Time be and continue to be the Articles of Incorporation of the Surviving Corporation until changed or amended as provided by law.

     1.4 Bylaws; Directors and Officers.

     Without any further action by the Company and Purchaser, the Bylaws of Purchaser, as in effect immediately prior to the Effective Time, shall from and after the Effective Time be and continue to be the Bylaws of the Surviving Corporation until amended as provided therein. The directors of Purchaser and the officers of Purchaser at the Effective Time shall, from and after the effectiveness of the Merger, be the initial directors and officers, respectively, of the Surviving Corporation until in each case their successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Articles of Incorporation and Bylaws.

     1.5 The Company’s Shareholders’ Meeting.

     Unless the Merger is consummated in accordance with Section 23-1-40-4 of the Indiana Business Corporation Law as contemplated by Section 1.6 below, the Company, acting through its Board of Directors, shall duly call a special meeting of its shareholders (the “Special Shareholders Meeting”) to be held in accordance with the Indiana Business Corporation Law at the earliest practicable date, upon due notice thereof to its shareholders, to consider and vote upon, among other matters, the adoption and approval of this Agreement and the Merger. Subject to Section 5.1.3 below, the Company’s Board of Directors will recommend the approval of the Merger and will use its reasonable best efforts, consistent with its fiduciary duties and assuming the recommendation of the approval of the Merger has not been withdrawn, to solicit the requisite vote of the Company’s shareholders to approve this Agreement and the Merger pursuant to proxy solicitation materials. Each of Parent and Purchaser agrees that it will execute a written consent or vote, or cause to be voted, all of the Company Common Shares acquired by it pursuant to the Offer and otherwise then owned by it and its subsidiaries in favor of the approval of the Merger and the adoption of this Agreement. In addition, each of Parent and Purchaser agrees that from (and including) the date on which Parent or any of its subsidiaries purchases at least a majority of the issued and outstanding Company Common Shares (the “Share Purchase Date”) through the Effective Time, it will not sell, transfer, assign, pledge,

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exchange or otherwise dispose of the Company Common Shares (including those purchased in the Offer) or rights therein (whether acquired pursuant to the Offer or otherwise).

     1.6 Merger Without Meeting of Shareholders.

     If Purchaser shall own at least 90 percent of the outstanding shares of each class of capital stock of the Company pursuant to the Offer or otherwise, each of Parent, Purchaser and the Company shall take all necessary and appropriate action to cause the Merger to become effective, as soon as practicable after the consummation of the Offer, without a meeting of shareholders of the Company, in accordance with Section 23-1-40-4 of the Indiana Business Corporation Law.

     1.7 Effective Time.

     Subject to the provisions of this Agreement, Parent, Purchaser and the Company shall cause the Merger to be consummated by filing articles of merger in accordance with Section 23-1-40-5 of the Indiana Business Corporation Law on the Closing Date (as defined below). The Merger shall become effective immediately upon such filing with the Secretary of State of the State of Indiana, which date and time is herein referred to as the “Effective Time.”

     1.8 Closing.

     The closing on the Merger (the “Closing”) shall occur at the offices of Buchanan Ingersoll PC, Pittsburgh, Pennsylvania. The Closing shall occur at a time and date (the “Closing Date”) to be specified by Parent, which shall be no later than the third business day following satisfaction or waiver of the conditions set forth in Article 6, unless another time or date is agreed to in writing by the parties hereto.

     1.9 Directors and Officers of the Surviving Corporation.

     The directors of Purchaser immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation and the officers of Purchaser immediately prior to the Effective Time shall, from and after the Effective Time, be officers of the Surviving Corporation, in each case until their respective successors shall have been duly elected, designated or qualified, or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Articles of Incorporation and Bylaws.

2. STATUS AND CONVERSION OF SECURITIES

     The manner and basis of converting the shares of the capital stock of the Company and Purchaser (and rights to acquire common stock) and the amount of consideration which the holders of the Company Common Shares (or holders of options or warrants to acquire company common shares) are to receive in exchange for such securities are as follows:

     2.1 Company Capital Stock.

            2.1.1. Conversion of Company Common Shares Into Cash. On the Effective Time, each Company Common Share issued and outstanding immediately prior to the Effective

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Time, other than Company Common Shares (if any) owned by the Company, Parent or Purchaser, shall, by virtue of the Merger and without any action on the part of the holder thereof, automatically be cancelled and be converted into a right to receive the price per share actually paid in the Offer in cash (the “Merger Consideration”). Each Company Common Share (if any) issued and outstanding immediately prior to the Effective Time that is owned by the Company, Parent or Purchaser shall automatically be cancelled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.

            2.1.2. Surrender and Exchange of Company Common Shares Certificates. After the Effective Time, each holder of an outstanding certificate or certificates theretofore representing Company Common Shares, except those to be cancelled in accordance with the last sentence of Section 2.1.1, shall surrender such certificate or certificates to such bank or trust company designated by Parent (the “Paying Agent”), duly endorsed in blank or otherwise in proper form for transfer, and shall receive in exchange therefor the Merger Consideration for each Company Common Share. Until so surrendered and exchanged, each certificate theretofore representing outstanding Company Common Shares shall be deemed to represent the right to receive for each Company Common Share the Merger Consideration without interest thereon, upon surrender of the certificate formerly representing such Company Common Shares.

            2.1.3. Withholding Rights. Parent, Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Shares such amounts as Parent, Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “Code”), or any provision of state, local or foreign Tax law; provided, however, that, pursuant to the exception provided under Section 1445(b)(6) of the Code, none of Parent, Surviving Corporation nor the Paying Agent shall withhold any amount under Section 1445 of the Code. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Parent, Surviving Corporation or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Common Shares in respect of which such deduction and withholding was made by Parent, Purchaser or the Paying Agent. For purposes of this Agreement, “Tax” (and, with correlative meaning, “Taxes”) means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, premium, withholding, alternative or added minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty or addition thereto, whether disputed or not, imposed by any Governmental Entity.

            2.1.4. Unclaimed Funds; Transfers. Promptly following the date which is 180 days after the Effective Time, the Paying Agent shall deliver to the Surviving Corporation all cash and other documents in its possession relating to the transactions described in this Agreement, and the Paying Agent’s duties shall terminate. Thereafter, each holder of a certificate formerly representing a Company Common Share may surrender such certificate to the Surviving Corporation and (subject to applicable abandoned property, escheat and similar laws) receive in consideration therefor the aggregate price relating thereto pursuant to Section 2.1.1, without any interest or dividends thereon. After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any Company Common

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Share which were outstanding immediately prior to the Effective Time. If, after the Effective Time, certificates formerly representing Company Common Shares are presented to the Surviving Corporation or the Paying Agent, they shall be surrendered and cancelled in return for the payment of the aggregate price relating thereto, as provided in Section 2.1.1.

            2.1.5. Lost Certificates. If any certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such amount as Parent may reasonably direct as indemnity against any claim that may be made against it with respect to such certificate, the Paying Agent shall pay in exchange for such lost, stolen or destroyed certificate the applicable Merger consideration with respect thereto.

            2.1.6. Transfer Taxes. If payment of the Offer Price payable to a holder of Shares pursuant to the Offer or the Merger is to be made to a person other than the person in whose name the surrendered certificate is registered, it shall be a condition of payment that the certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid all transfer and other Taxes required by reason of the issuance to a person other than the registered holder of the certificate surrendered or shall have established to the satisfaction of Parent that such Tax either has been paid or is not applicable.

     2.2 Purchaser Common Stock.

     Each share of Purchaser Common Stock outstanding on the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and be one share of the common stock, no par value, of the Surviving Corporation.

     2.3 Dissenting Shares.

            2.3.1. Notwithstanding anything in this Agreement to the contrary, each outstanding Company Common Share that is held of record by a holder who has properly exercised dissenters’ rights with respect thereto under Section 23-1-44 of the Indiana Business Corporation Law shall not be converted into or represent the right to receive the Merger Consideration pursuant to Section 2.1.1, but the holder thereof shall be entitled to receive such payment of the fair value of such Company Common Share from the Surviving Corporation as shall be determined pursuant to Section 23-1-44 of the Indiana Business Corporation Law; provided, however, that if any such holder shall have failed to perfect or shall withdraw or lose such holder’s rights under Section 23-1-44 of the Indiana Business Corporation Law, each such holders’ Company Common Shares shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the Merger Consideration, without any interest thereon, pursuant to Section 2.1.1.

            2.3.2. The Company shall give Parent (x) prompt notice of any written demands for payment of the fair value of shares, withdrawals of such demands and any other instruments delivered pursuant to Section 23-1-44 of the Indiana Business Corporation Law and (y) the opportunity jointly to participate with the Company in all negotiations and proceedings with respect to demands for payment under Section 23-1-44 of the Indiana Business Corporation Law.

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The Company will not voluntarily make any payment with respect to any demands delivered to the Company pursuant to Section 23-1-44 of the Indiana Business Corporation Law and will not, except with the prior written consent of Parent, settle or offer to settle any such demands or waive any failure to comply with Section 23-1-44 of the Indiana Business Corporation Law by any holder of Company Common Shares.

     2.4 Company Stock Options and Other Stock Plans and Warrants.

            2.4.1. Each warrant or other right to acquire Company Common Shares, and each option granted under the Company’s 1999 Stock Option Plan or under any other plan or agreement of the Company that is outstanding and unexpired immediately prior to the Effective Time, whether or not then vested or exercisable, with respect to which the Merger Consideration exceeds the exercise price per share shall, effective as of immediately prior to the Effective Time, be cancelled in exchange for a single lump sum cash payment equal to the product of (1) the number of Company Common Shares subject to such warrant or option and (2) the excess of the Merger Consideration over the exercise price of such option or warrant (subject to any applicable withholding taxes). Each warrant to acquire Company Common Shares, and each option granted under the Company’s 1999 Stock Option Plan or under any other plan or agreement of the Company that is outstanding immediately prior to the Effective Time, whether or not then vested or exerciseable, with respect to which the Merger Consideration does not exceed the exercise price per share shall, effective as of immediately prior to the Effective Time, be cancelled and no payments shall be made with respect thereto.

            2.4.2. As soon as practicable following the date of this Agreement, the Company’s Board of Directors (or, if appropriate, any committee administering Company stock plans) shall adopt such resolutions or take such other actions as are required to give effect to this Section 2.4 as it relates to options granted under the Company’s 1999 Stock Option Plan, as amended. All amounts payable pursuant to this Section 2.4 shall be subject to any required withholding of Taxes or proof of eligibility of exemption therefrom and shall be paid without interest by the Surviving Corporation as soon as practicable following the Effective Time. The Company shall use its reasonable best efforts to obtain all consents of the holders of Company stock options as shall be necessary, if any, to effectuate the foregoing. Notwithstanding anything to the contrary contained in this Agreement, payment shall, at Parent’s request, be withheld in respect of any Company stock option until all necessary consents with respect to such Company stock option are obtained.

            2.4.3. The Company Employee Stock Purchase Plan (the “Company ESPP”) shall be treated in accordance with its provisions (including Sections 5.4(c) and 10.5 thereof). As soon as practicable following the date of this Agreement, the Company’s Board of Directors (or, if appropriate, any committee administering the Company ESPP) shall take all action necessary to set the Purchase Date (as defined in the Company ESPP) for the Calendar Half (as defined in the Company ESPP) now in progress, which Purchase Date shall be the earlier to occur of June 30, 2004 and the business day which immediately precedes the Effective Time (the “New Purchase Date”). The Company shall give any required notice to participants in the Company ESPP and the accumulated payroll deductions credited to each participant’s account through the New Purchase Date shall be used to acquire Company Common Shares under the ESPP. From and after the New Purchase Date, no new payroll contributions shall be accepted

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by, or made to, the Company ESPP. The Company agrees that, from the date of this Agreement through the New Purchase Date, the Company ESPP shall be operated only in the ordinary course and in a manner consistent with the previous operation of the Company ESPP.

            2.4.4. All of the Company’s stock option plans and agreements (including any warrants) and the Company ESPP shall terminate as of the Effective Time, and the provisions in any other the Company Benefit Plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be deleted as of the Effective Time, and the Company shall use its reasonable best efforts to cause, following the Effective Time, no holder of a Company stock option or any participant in any Company stock plan, the Company ESPP or other Company benefit plan to have any right thereunder to acquire any capital stock of the Company or the Surviving Corporation.

3. THE OFFER

     3.1 The Offer to Purchase.

            3.1.1. The Offer to Purchase. Provided that this Agreement shall not have been terminated in accordance with Article 7 and the Company shall have filed, or shall be prepared to file upon commencement of the Offer (as defined below), the Schedule 14D-9 (as defined below) as contemplated by Section 3.3 below, Purchaser shall as promptly as practicable (but in no event later than six business days following the public announcement of the terms of this Agreement) commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) an offer (the “Offer”) to purchase for cash all of the outstanding Company Common Shares at a price per share equal to $16.75 (such price, or any other price per share as may be paid in the Offer, the “Offer Price”), net to the seller in cash, subject to the conditions set forth in Exhibit B hereto. Purchaser shall, on the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, accept for payment and pay for Company Common Shares tendered as soon as practicable after the later of the satisfaction of the conditions to the Offer and the expiration of the Offer. The obligations of Purchaser to commence the Offer and to accept for payment and to pay for any Company Common Shares validly tendered shall be subject only to the conditions set forth in Exhibit B hereto. The Offer shall be made by means of an offer to purchase (the “Offer to Purchase”) containing the terms set forth in this Agreement and the conditions set forth in Exhibit B hereto. Unless extended in accordance with Section 3.1.2 and/or Section 3.1.3 below, the Offer shall expire 20 business days after the date of its commencement (such date, as may be extended in accordance with Section 3.1.2 and/or Section 3.1.3 below, the “Expiration Date”).

            3.1.2. Purchaser reserves the right to modify the terms of the Offer, except that, without the written consent of the Company, Purchaser shall not (i) decrease the Offer Price, (ii) decrease the aggregate number of Company Common Shares sought, (iii) change the form of consideration to be paid pursuant to the Offer, (iv) modify any of the conditions to the Offer set forth in Exhibit B hereto, (v) impose conditions to the Offer in addition to those set forth in Exhibit B hereto, (vi) except as provided in the proviso set forth below in this paragraph, extend the Offer, or (vii) amend any other term or condition of the Offer in any manner which is adverse to the holders of Company Common Shares, it being agreed that a waiver by Purchaser of any condition in its discretion shall not be deemed to be adverse to the holders of Company Common

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Shares; provided that, if on any scheduled expiration date of the Offer (as it may be extended in accordance with the terms hereof), all conditions to the Offer shall not have been satisfied or waived, Purchaser may, without the consent of the Company, but shall, at the request of the Company, (x) from time to time, extend the Offer in increments of not more than ten business days each if any of the conditions set forth in clauses (i), (ii)(a), (d) and (e) of the conditions set forth in Exhibit B hereto have not been satisfied or waived, until such time as the conditions are satisfied or waived and (y) extend the Offer for any period required by any regulation, interpretation or position of the Securities and Exchange Commission (the “SEC”) or the staff thereof applicable to the Offer; provided, however, that the Expiration Date may not be so extended beyond December 31, 2004. Notwithstanding the foregoing, if on any scheduled expiration date of the Offer (as it may be extended in accordance with the terms hereof), all conditions to the Offer shall not have been satisfied or waived, Purchaser may, without the consent of the Company, from time to time, extend the Offer in increments of not more than ten business days each if any of the conditions set forth in clauses (ii)(b), (c) and (g) of the conditions set forth in Exhibit B hereto have not been satisfied or waived, until such time as the conditions are satisfied or waived provided, however, that the Expiration Date may not be so extended beyond December 31, 2004.

            3.1.3. If, on the Expiration Date, the Minimum Condition has been satisfied or, with the consent of the Company, waived, and all other conditions to the Offer have been satisfied or waived but less than 90% of the Company Common Shares then issued and outstanding on a Fully-Diluted Basis, together with Company Common Shares beneficially owned by Parent, Purchaser and their subsidiaries, have been validly tendered and not withdrawn, Purchaser may extend the Offer for a further period of time, after it has accepted and paid for (in accordance with the first sentence of this Section) all of the Company Common Shares tendered in the initial offer period, by means of a subsequent offering period (a “Subsequent Offering Period”) of at least 3 but no more than 20 business days in accordance with Rule 14d-11 under the Exchange Act to meet the objective (which is not a condition to the Offer) that there be tendered prior to the Expiration Date (as so extended) and not withdrawn a number of Company Common Shares which, together with Company Common Shares beneficially owned by Parent, Purchaser and their subsidiaries, represents at least 90% of the then issued and outstanding Company Common Shares on a Fully-Diluted Basis. During the Subsequent Offering Period, Purchaser shall immediately accept for payment and promptly pay for all Company Common Shares as they are tendered pursuant to the Offer in accordance with Rule 14d-11 under the Exchange Act.

            3.1.4. If, before the Expiration Date, this Agreement has been terminated pursuant to Article 7, Purchaser shall, and Parent shall cause Purchaser to, promptly terminate the Offer without accepting for payment any Company Common Shares (including any Company Common Shares subject to the Shareholder Tender Agreement).

     3.2 Offer Documents.

     Parent and Purchaser shall file with the SEC as soon as practicable on the date the Offer is commenced, a Tender Offer Statement on Schedule TO with respect to the Offer (together with all amendments and supplements thereto and including the exhibits thereto, the “Schedule TO”) which shall include, as exhibits, the Offer to Purchase and a form of letter of transmittal

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and summary advertisement (the Schedule TO and such documents, collectively, together with any amendments and supplements thereto, the “Offer Documents”). Parent and Purchaser further agree to take all steps necessary to cause the Offer Documents to be filed with the SEC and to be disseminated to holders of Company Common Shares. Each of Parent and Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it or on its behalf for use in the Offer Documents if and to the extent that it shall have become false and misleading in any material respect, and Parent and Purchaser further agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to the Company’s shareholders, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given the opportunity to review the Offer Documents before they are filed with the SEC. In addition, Parent and Purchaser agree to provide the Company and its counsel in writing with any comments Parent, Purchaser or their counsel may receive from time to time from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments.

     3.3 Company Actions.

            3.3.1. The Company hereby represents that (i) its Board of Directors, at a meeting or meetings duly called and held, has (A) determined that the Offer and the Merger are advisable and in the best interests of the Company, (B) approved and adopted the plan of merger (as such term is used in Section 23-1-40-1 of the Indiana Business Corporation Law) contained in this Agreement, (C) subject to Section 5.1.3, resolved to recommend acceptance of the Offer and approval of the plan of merger contained in this Agreement by the shareholders of the Company, (D) irrevocably taken all necessary steps to cause Chapter 42 of the Indiana Business Corporation Law to be inapplicable to the Merger, the Shareholder Tender Agreement and the acquisition of Shares pursuant to the Offer and the Shareholder Tender Agreement, (E) irrevocably taken all necessary steps to approve Parent and Purchaser becoming, pursuant to the Merger, Shareholder Tender Agreement and/or the acquisition of Company Stock pursuant to the Offer, and the Shareholder Tender Agreement, “interested shareholders” within the meaning of Section 23-1-43-10 of the Indiana Business Corporation Law and causing any other requirements of Sections 23-1-43-18 and 19 of the Indiana Business Corporation Law to be inapplicable to the Merger, the Shareholder Tender Agreement and the acquisition of Shares pursuant to the Offer and the Shareholder Tender Agreement and (F) irrevocably resolved to elect, to the extent of the Company’s Board of Directors’ power and authority and to the extent permitted by law, not to be subject to any other “moratorium”, “control share acquisition”, “business combination”, “fair price” or other form of anti-takeover laws and regulations (collectively, “Takeover Laws”) of any jurisdiction that may purport to be applicable to this Agreement or the Shareholder Tender Agreement, and (ii) Goldman Sachs & Co. (the “Company Financial Advisor”), the Company’s independent financial advisor, has advised the Company’s Board of Directors that, in its opinion, the consideration to be paid in the Offer and the Merger to the Company’s shareholders is fair, from a financial point of view, to such shareholders. Subject to Section 5.1.3, the Company consents to the above recommendations being included in the Offer Documents. The Company has delivered to Parent a true and complete copy of the engagement agreement between the Company and the Company Financial Advisor.

            3.3.2. Concurrently with the commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all

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amendments and supplements thereto and including the exhibits thereto, the “Schedule 14D-9”). Each of Parent and Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it or on its behalf for use in the Schedule 14D-9 if and to the extent that it shall have become false and misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the Company’s shareholders, in each case as and to the extent required by applicable federal securities laws. Parent and Purchaser and their counsel shall be given the opportunity to review the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to provide Parent and Purchaser and their counsel in writing with any comments the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments.

     3.4 Shareholder List.

     In connection with the Offer, the Company shall, or shall cause its transfer agent to, promptly furnish Parent and Purchaser with mailing labels, security position listings and any available listing or computer file containing the names and addresses of the record holders of the Company Common Shares as of the latest practicable date and shall furnish Parent and Purchaser with such information and assistance (including periodic updates of such information) as Parent or Purchaser or their agents may reasonably request in communicating the Offer to the record and beneficial holders of such shares.

     3.5 Directors.

            3.5.1. Promptly upon the purchase of and payment for Company Common Shares by Parent on the Share Purchase Date and prior to the Effective Time, (i) the size of the Board of Directors of the Company shall be decreased to seven, (ii) all current directors shall resign, other than three of the current directors who are not employees of the Company or shareholders, affiliates, associates or employees of Parent or Purchaser (as shall be designated by the board of directors of the Company prior to the Share Purchase Date), and (iii) a number of persons equal to the aggregate vacancies so created shall be designated by Parent and shall be elected to fill the vacancies so created. Any person designated by Parent to serve on the Board of Directors of the Company between the Share Purchase Date and the Effective Time shall be responsible, qualified and knowledgeable about the retail industry and/or the sporting goods industry, and the persons designated by Parent to serve shall, collectively, satisfy all applicable NASD listing standards for composition of the board. The Company shall, upon request of Parent, use its reasonable best efforts promptly to secure the resignations of such number of its incumbent directors as is necessary to enable Parent’s designees to be so elected or appointed to the Board of Directors (and to the extent the Company is not successful in securing all of such resignations, increase the size of the Board of Directors to enable Parent to designate a majority of the total number of directors of the Company), and shall use its reasonable best efforts to cause Parent’s designees to be so elected or appointed at such time. The Company’s obligations under this Section 3.5.1 shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions required pursuant to such Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 3.5.1 (subject to Parent’s timely notification to the Company of such information as is necessary to fulfill such obligations), including mailing to shareholders (together with the Schedule 14D-9 if Parent has

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then provided the necessary information) the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable the parent’s designees to be elected or appointed to the Company’s board of directors. Parent or Purchaser will supply the Company in writing and be solely responsible for any information with respect to either of them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1. The provisions of this Section 3.5.1 are in addition to and shall not limit any rights which Purchaser, Parent or any of their affiliates may have as a holder or beneficial owner of Company Common Shares as a matter of law with respect to the election of directors of the Company or otherwise.

            3.5.2. As provided in Section 3.5.1, following the Share Purchase Date and prior to the Effective Time, the Company shall cause its Board of Directors to have at least three directors who are directors on the date hereof and who are not employed by the Company and who are not affiliates, associates, shareholders or employees of Parent or Purchaser (the “Independent Directors”); provided, however, that if any Independent Directors cease to be directors for any reason whatsoever, the remaining Independent Directors (or Independent Director, if there is only one remaining) shall be entitled to designate any other person(s) who shall not be shareholders, affiliates, associates or employees of Parent or any of its subsidiaries to fill such vacancies and such person(s) shall be deemed to be Independent Director(s) for purposes of this Agreement (provided that the remaining Independent Directors shall fill such vacancies as soon as practicable, but in any event within five business days, and provided further that if no Independent Director then remains, the other directors shall designate three persons who shall not be shareholders, affiliates, associates or employees of Parent or any of its subsidiaries to fill such vacancies and such persons shall be deemed to be Independent Directors for purposes of this Agreement). Following the Share Purchase Date and prior to the Effective Time, neither Parent nor Purchaser will take any action to cause any Independent Director to be removed other than for cause. Notwithstanding anything in this Agreement to the contrary, after the Share Purchase Date and prior to the Effective Time, any approval by the Board of Directors or any other Company action must be made at a time when there are at least three Independent Directors serving on the board of directors of the Company and with the approval of at least six of the seven directors of the Company (in each case, or such other number of directors that ensures that at least a majority of the Independent Directors has granted such approval) in order to (i) amend or terminate this Agreement by the Company, (ii) exercise or waive any of the Company’s rights, benefits or remedies hereunder, or (iii) take any other action of the Board of Directors under or in connection with this Agreement in any manner that adversely affects the holders of Company Common Shares, as determined by a majority of the Independent Directors. The Independent Directors shall have the authority to retain such counsel and other advisors at the expense of the Company as determined appropriate by any of the Independent Directors. In addition, the Independent Directors shall have the authority to institute any action, on behalf of the Company, to enforce performance of this Agreement. For purposes of this Agreement, an “affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person.

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4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS

     4.1 Representations, Warranties and Agreements of the Company.

     Except as set forth in a disclosure letter dated the date hereof and delivered by the Company to Parent and Purchaser concurrently with the execution and delivery of this Agreement (the “Company Disclosure Letter”) (provided that any fact or item disclosed in any section of the Company Disclosure Letter shall be deemed to be disclosed with respect to other sections thereof), the Company represents and warrants to each of Parent and Purchaser as follows:

            4.1.1. Organization, Good Standing, Capitalization.

                  (i) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana with all requisite corporate power and authority to own, operate and lease its properties, to carry on its business as now being conducted, to enter into this Agreement and, subject to the approval of the Company’s shareholders in accordance with the Indiana Business Corporation Law, to perform its obligations hereunder, except where the failure to be so duly organized, validly existing and in good standing or to have such corporate power and authority would not reasonably be expected to have a Material Adverse Effect on the Company. The authorized and issued capital stock of the Company as of the date hereof is as set forth in the recitals of this Agreement; all capital stock of the Company listed therein as authorized has been duly authorized, and all capital stock of the Company listed therein as issued and outstanding has been validly issued and is fully paid and non-assessable, with no personal liability attaching to the ownership thereof. There are no outstanding rights, options, warrants, conversion rights or agreements for the purchase or acquisition from, or the sale or issuance by, the Company of any shares of its capital stock of any class other than options to purchase (1) 2,853,667 shares of the Company’s Common Stock under the Company’s stock option plans and stand-alone option agreements and (2) a stock warrant to purchase 1,350,000 shares (as adjusted for any stock split, reverse stock split or similar event) of common stock at an exercise price of not less than $44.82 per share (as adjusted for any stock split, reverse stock split or similar event). The Disclosure Letter sets forth the exercise price of all outstanding rights, options, warrants, conversion rights or other agreements for the purchase of shares of capital stock of the Company.

                  (ii) Each of the Company’s subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its respective state of incorporation with all corporate power and authority to own, operate and lease its properties and to carry on its business as now being conducted, except where the failures so to be duly organized, validly existing and in good standing or to have such corporate power and authority, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. All of the issued and outstanding shares of common stock of each subsidiary of the Company are held (directly or indirectly) by the Company, and all such shares have been validly issued and are fully paid and non-assessable, with no personal liability attaching to the ownership thereof. There are no outstanding rights, options, warrants, conversion rights or agreements for the purchase or acquisition from, or the sale or issuance by, any subsidiary of the Company of any of its capital stock.

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            4.1.2. SEC Filings; Financial Statements. The Company has filed timely all SEC reports and documents required to be filed by it or its subsidiaries with the SEC since January 31, 2004 (collectively, the “Company SEC Reports”), each of which has complied in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, and the rules and regulations of the SEC promulgated thereunder applicable to the Company SEC Reports, each as in effect on the date so filed. The Company’s consolidated statements of operations for the three fiscal years ended January 31, 2004, February 1, 2003 and February 2, 2002 and the Company’s consolidated balance sheets as of January 31, 2004 and February 1, 2003 and the related notes to all of said financial statements, all of which have been heretofore included in an Annual Report on Form 10-K filed with the SEC with respect to the applicable fiscal year, present fairly, in accordance with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods covered except as specifically referred to in such financial statements, the consolidated financial position of the Company and its subsidiaries and the consolidated results of their operations as of, and for the periods ended on, the dates specified.

            4.1.3. No Undisclosed Liabilities. There are no material liabilities of the Company or any of its subsidiaries of any kind whatsoever, whether or not accrued and whether or not contingent or absolute, other than (i) liabilities disclosed in the Company’s consolidated balance sheet as of January 31, 2004, (ii) liabilities disclosed in the Company’s Periodic Report on Form 10-K for the fiscal year ended January 31, 2004 and/or in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 1, 2004, (iii) liabilities incurred on behalf of the Company in connection with this Agreement and the contemplated Merger, (iv) liabilities incurred in the ordinary course of business consistent with past practice since January 31, 2004, (v) other liabilities disclosed to Parent in the Company Disclosure Letter, (vi) performance obligations under contracts filed as exhibits to the Company SEC Reports or entered into in the ordinary course of business consistent with past practice required in accordance with their terms or performance obligations required under any applicable law, ordinance or regulation of any Governmental Entity, in each case arising after January 31, 2004, and (vii) liabilities or obligations that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. “Material Adverse Effect” means any effect that with respect to the Company or Parent (1) is both material and adverse to the financial condition, results of operations, assets or business of the Company and its subsidiaries taken as a whole or Parent and its subsidiaries taken as a whole, respectively, excluding any such effect resulting from or arising in connection with (A) changes or conditions generally affecting the retail industry and/or the sporting goods industry, (B) changes or conditions generally affecting the U.S. economy or financial markets, (C) increase or decrease in trading price or trading volume of the Company Common Shares, (D) reduction in revenues, cash flow or earnings, (E) changes or conditions arising by reason of this Agreement, the Merger and the other transactions contemplated by this Agreement, including the announcement of any of the foregoing, (F) commencement of a new war or material escalation of current wars, armed hostilities or terrorism directly or indirectly involving the United States or (G) the departure of employees of the Company; or (2) would materially impair the ability of the Company, with respect to any effect on the Company, or Parent or Purchaser, with respect to any effect on Parent, to consummate the transactions under this Agreement. “Aggregate MAE” means a Material Adverse Effect with respect to both the Company and Parent (including their respective subsidiaries), taken as a whole.

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            4.1.4. Operation in Ordinary Course. Except as disclosed in any of the Company’s SEC reports and documents filed or furnished prior to the date hereof, each of the Company and its subsidiaries has conducted its business in the ordinary course consistent with past practice between January 31, 2004 and the date of this Agreement.

            4.1.5. Authority Relative to this Agreement, etc. The Company has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, except in the case of the Merger for any requisite approval of the Merger by its shareholders. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid, legal and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles.

            4.1.6. Vote Required. Unless the Merger is consummated pursuant to Section 23-1-40-4 of the Indiana Business Corporation Law as contemplated by Section 1.6 above, the affirmative vote of the holders of a majority of the outstanding Company Common Shares are the only votes of the holders of any class or series of the Company’s capital stock necessary to approve this Agreement and the transactions contemplated hereby. No bonds, debenture notes or other indebtedness of the Company or its subsidiaries has the right to vote on any matters on which the holders of the Company’s capital stock may vote.

            4.1.7. Compliance with Other Instruments, etc. Subject to requisite shareholder approval and except for the consents referred to in Section 4.1.8, neither the execution nor delivery of this Agreement by the Company nor the Company’s consummation of the transactions contemplated hereby will conflict with, result in any violation of, or constitute a default under, (i) the Articles of Incorporation or Bylaws of the Company, (ii) any contract required to be filed with the SEC under Item 601 of Regulation S-K (“Material Contract”) or any other contract, agreement, mortgage, indenture, license, permit, lease or other instrument that, in any case, is material to the Company and its subsidiaries taken as a whole or (iii) any judgment, decree, order or material law or regulation of any governmental agency or authority in the United States by which the Company or any of its subsidiaries is bound, except, with respect to clauses (i) through (iii) above, where the conflict, violation or default, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company.

            4.1.8. Governmental and other Consents, etc. Subject to any requisite shareholder approval and any required filings with the United States Department of Justice or the Federal Trade Commission, and except for those consents, approvals, authorizations or filings, which individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company, no consent, approval or authorization of, or filing with, any court, tribunal, administrative agency or commission, legislative body or other governmental or regulatory agency, authority, board, bureau or instrumentality or other public persons or entities in the United States (a “Governmental Entity”) on the part of the Company or any of its subsidiaries is required in connection with the execution or delivery by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby other than (i) filings in the State of Indiana in accordance with the Indiana Business Corporation Law,

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(ii) filings with the SEC, the National Association of Securities Dealers, Inc. and any applicable national securities exchange or quotation system and (iii) filings or consents required in relation to firearms licenses in connection with a change in control or a change in management.

            4.1.9. No Misleading Statements. None of the Company SEC Reports (including, but not limited to, any financial statements or schedules included or incorporated by reference therein) contained when filed any untrue statement of a material fact or omitted or omits to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

            4.1.10. Compliance with Applicable Law. The Company and its subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses as currently conducted (the “Company Permits”), except for failures to hold such permits, licenses, variances, exemptions, orders and approvals which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. The Company and its subsidiaries are in compliance with the terms of the Company Permits, except where the failure so to comply, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. Except as disclosed in the Company’s SEC reports and documents filed or furnished prior to the date hereof, the businesses of the Company and its subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, except for possible violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. No investigation or review by any Governmental Entity with respect to the Company or its subsidiaries is pending or, to the knowledge of the Company, threatened, in each case as of the date of this Agreement, other than those the outcome of which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company.

            4.1.11. No Broker. No broker, finder, investment banker or other person is entitled to any brokerage, finder’s or similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company other than the Company Financial Advisor.

            4.1.12. Litigation. There is not now pending, and to the knowledge of the Company there is neither threatened nor any basis for, any litigation, action, suit or proceeding to which the Company or any of its subsidiaries is or will be a party in or before or by any Governmental Entity, except for (A) any litigation, action, suit or proceeding (whether instituted, pending or threatened) involving claims with respect to the Offer, the Merger or the other transactions contemplated by this Agreement or (B) any other litigation, action, suit or proceeding (whether instituted, pending or threatened) involving claims which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. In addition, there is no judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against the Company or any of its subsidiaries having or which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company.

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            4.1.13. ERISA Matters.

                  (i) The Company has made available to Purchaser copies of all deferred compensation, pension, profit-sharing and retirement plans, and all bonus, welfare, severance plans, policies and agreements and other “employee benefit plans” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), fringe benefit or stock option, stock ownership, stock appreciation, phantom stock or equity (or equity-based) plans, separation and change in control programs, participated in or maintained by the Company or with respect to which contributions are made or obligations assumed by the Company in respect of the Company (including health, life insurance and other benefit plans maintained for former employees or retirees). Such plans or other arrangements are collectively referred to herein as “Company Benefit Plans.”

                  (ii) Except as indicated in the Company’s SEC reports and documents, and except as would not reasonably be expected to have a Material Adverse Effect on the Company, (A) neither the Company nor any affiliate maintains, nor has contributed since January 1, 2000, to any multiemployer plan within the meaning of Sections 3(37) or 4001(a)(3) of ERISA, (B) for each funded employee pension benefit plan (within the meaning of Section 3(2) of ERISA) that (x) is subject to the provisions of Section 401(a) of the Code and (y) is maintained by the Company or any of its subsidiaries for any of its employees, the Company or such subsidiary has obtained a favorable determination letter from the Internal Revenue Service, (C) to the knowledge of the Company, none of said determination letters has been revoked by the Internal Revenue Service, nor has the Internal Revenue Service given any indication to the Company or such subsidiary that it intends to revoke any such determination letter, (D) neither the Company nor any affiliate currently maintains, contributes to or has any liability with respect to any employee benefit plan that is subject to Title IV of ERISA and (E) the Company, its subsidiaries and the Company Benefit Plans have not committed any violation of ERISA or any agreement relating to the administration of such plans.

            4.1.14. Parachute Payments.

            Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event, such as termination of employment) (A) result in any material payment (including severance, unemployment compensation, parachute or otherwise) becoming due to any director or any employee of the Company or any of its subsidiaries or affiliates from the Company or any of its subsidiaries or affiliates under any Company Benefit Plan or otherwise, (B) materially increase any benefits otherwise payable under any Company Benefit Plan or (C) result in any acceleration of the time of payment or vesting of any material benefits, except with respect to any event or condition referred to in any of clauses (A) through (C) above that arises from any employee agreement disclosed in the Company Disclosure Letter (the “Employee Agreements”). As of the date of this Agreement, no individual who is a party to an Employee Agreement has terminated employment or been terminated, in either case under circumstances that have given rise to a severance obligation on the part of the Company under such Employee Agreements.

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            4.1.15. Real Estate.

                  (i) The Company Disclosure Letter includes a list, which is true and correct in all material respects, of all the real property (“Owned Real Property”) which is owned in fee by the Company or its subsidiaries. The Company or its subsidiaries, as the case may be, has good, marketable and insurable title to the Owned Real Property, except for failures to have good, marketable and insurable title that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company.

                  (ii) The Company Disclosure Letter includes a list, which is true and correct in all material respects, of all of the leases and subleases and any amendments thereto of the Company and its subsidiaries and each leased and subleased parcel of real property in which the Company or any of its subsidiaries is a tenant, subtenant, landlord or sublandlord (“Real Property Leases”). The Company Disclosure Letter includes a summary (on a per lease basis), which, to the knowledge of the Company, is not incorrect in any material respect, of the following information as and to the extent it is set forth in any Real Property Lease, reciprocal easement agreement or similar instrument or memorandum of lease specifically identified in the Disclosure Letter: (A) any material consent or notice required to be delivered as the result of the consummation of the Offer or the Merger; (B) each Real Property Lease’s term and any options to extend the term; (C) the rent payable and occupancy costs on a per lease basis (including CAM (common area maintenance or other similar charges), utilities, maintenance expenses and taxes) for each of the Company’s currently operating retail stores and the depreciation for each such store on a per store basis; and (D) any material operating, use or other restrictions or covenants that restrict or prohibit the use or operation of the store as a sporting goods retailer (including any restrictions relating to the use or operation of the lease space as a store of Parent, operating under the “Dick’s Sporting Goods, Inc.” name) or the current operation of the store. The Company Disclosure Letter lists those reciprocal easement agreements, subordination and non-disturbance agreements, utility leases, title insurance policies and documents referenced therein, assignments of leases and rents, mortgages, indentures, tax indemnities and other instruments that the Company has reviewed in connection with entering into this Merger Agreement, if any (the “Reviewed Documents”), and discloses whether any of those reviewed agreements and other reviewed documents contain any material operating, use or other restrictions or covenants that restrict or prohibit the use or operation of the store as a sporting goods retailer (including any restrictions relating to the use or operation of the lease space as a store of Parent, operating under the “Dick’s Sporting Goods, Inc.” name) or the current operation of the store. Other than the Reviewed Documents, to the knowledge of the Company, the Company has not reviewed any reciprocal easement agreements, subordination and non-disturbance agreements, utility leases, title insurance policies and documents referenced therein, assignments of leases and rents, mortgages, indentures, tax indemnities or other instruments in connection with entering into this Agreement (all of the foregoing, collectively, the “Unreviewed Documents”). To the knowledge of the Company, the Company has not received written notice nor is it aware that the Company’s current use or operation of a leased property as a retail sporting goods store violates any material obligation in the Unreviewed Documents. In the ordinary course of the Company’s due diligence for entering into Real Property Leases relating to unopened stores for which the Company has entered into lease agreements or stores which have opened since July 1, 2003 (collectively, “New Stores”) the Company or its agents conducted a review of title exception documents that would materially restrict or prohibit the use

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or operation of any New Store and based upon such review, to the knowledge of the Company, the Company has not received written notice nor is it aware that such title exception documents materially prohibit or restrict the use or operation of any New Store as a prototypical Company store.

                  (iii) With respect to each Real Property Lease, as of the date of this Agreement: (A) each is a legal, valid, binding and enforceable agreement, in full force and effect, (B) to the knowledge of the Company, neither the Company nor its subsidiaries have received written notice that (i) it is in breach or default in any material respect or (ii) any event has occurred that would constitute or permit termination, modification or acceleration of the Real Property Lease or trigger liquidated damages, (C) to the knowledge of the Company, neither the Company nor its subsidiaries have received written notice or is aware of any dispute or claim and (D) no interest in the Real Property Lease or the demised premises has been assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered, except with respect to any event or condition referred to in Section 4.1.15(iii)(A) through (D) that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company and/or would not reasonably be expected to reduce by more than 18% the aggregate four-wall operating income, calculated in accordance with the Company’s four-wall contribution analysis, of the top nine performing stores of the Company, based on operating income for the fiscal year ended January 31, 2004; provided, however, that for purposes of determining the amount of any such reduction, the reduction in the four-wall operating income of any one store shall be deemed not to be more than 8% of the aggregate four-wall operating income of the top nine performing stores of the Company (a “Significant Store MAE”).

                  (iv) The Company Owned Real Property and the Real Property Leases are referred to collectively herein as the “Company Real Property.” With respect to the Company Real Property, as of the date hereof:

                        (A) to the knowledge of the Company, neither the Company nor its subsidiaries have received written notice nor are they aware that (1) any parcel is not in material compliance with all federal, state or local laws in effect as of the date hereof relating to use, occupancy and operation of the related retail store or (2) any condition currently or previously existing on any Company Real Property that would reasonably be expected to give rise to any violation of, or require any remediation under, any existing federal, state or local laws applicable to the Company Real Property, except with respect to any condition referred to in Section 4.1.15(iv)(A)(1) and (2) that have arisen in the ordinary course of business that individually or in the aggregate, would not reasonably be expected to have (x) a Material Adverse Effect on the Company or (y) a Significant Store MAE;

                        (B) to the knowledge of the Company, neither the Company nor its subsidiaries have received written notice of, and to the knowledge of the Company, there is not currently threatened, any pending condemnation or other similar proceeding that, after taking into account insurance coverage, among other things, would reasonably be expected to have a Material Adverse Effect on the Company;

                        (C) to the knowledge of the Company, neither the Company nor its subsidiaries have received written notice that current use of the Company Real Property

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violates in any material respect any agreement other than those violations that, individually or in the aggregate, would not reasonably be expected to have (1) a Material Adverse Effect on the Company or (2) a Significant Store MAE;

                        (D) to the knowledge of the Company, no damage or destruction has occurred, nor are there any defects, with respect to any of the Company Real Property that, individually or in the aggregate, would reasonably be expected to have (1) a Material Adverse Effect on the Company or (2) a Significant Store MAE;

                        (E) to the knowledge of the Company, neither the Company nor its subsidiaries have received written notice, nor is the Company aware, of any required certificate of occupancy, permit, license, franchise, approval or authorization of any Governmental Entity having jurisdiction over the Company Real Property which the Company has not obtained or maintained in effect, the absence of which would reasonably be expected to have (1) a Material Adverse Effect on the Company or (2) a Significant Store MAE;

                        (F) neither the Company nor any subsidiary is obligated under any option, right of first refusal or other contractual right to purchase, acquire, sell or dispose of the Company Real Property or any portion thereof or interest therein other than any option, right of first refusal or other contractual right which, individually or in the aggregate, would not reasonably be expected to have (1) a Material Adverse Effect on the Company or (2) a Significant Store MAE; and

                        (G) the Company has property and casualty insurance policies that are commercially reasonable and consistent with past practices of the Company.

            4.1.16. Environmental. The business of the Company and its subsidiaries is being conducted in material compliance with all current applicable federal and state laws and regulations relating to the protection of the environment, except for violations of such laws and regulations that would not reasonably be expected to have a Material Adverse Effect on the Company. There is not now pending, and to the knowledge of the Company there is neither threatened nor any basis for, any action against the Company or its subsidiaries under any applicable federal and state law or regulations relating to the protection of the environment that would reasonably be expected to have a Material Adverse Effect on the Company.

            4.1.17. Intellectual Property.

                  (i) The Company and its subsidiaries own or have the right to use all Company Intellectual Property necessary to carry on their respective businesses as currently conducted, except where, individually or in the aggregate, such failure would not reasonably be expected to have Material Adverse Effect on the Company. As used in this Agreement, “Company Intellectual Property” means all trademarks, service marks, trade names, Internet domain names, designs, logos, slogans and general intangibles of like nature, together with goodwill, registrations and applications relating to the foregoing; patents, copyrights, (including registrations and applications for any of the foregoing); computer programs, including any and all databases and compilations, including any and all data and collections of data; trade secrets; and any other know-how, methods, concepts, or other proprietary rights owned by the Company

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and its subsidiaries or held for use or used in the business of the Company and its subsidiaries as conducted as of the date hereof, or as presently contemplated to be conducted and any licenses to use any of the foregoing.

                  (ii) (A) Neither the Company nor its subsidiaries have received written notice from any third party regarding any actual or potential infringement or misappropriation, or other violations, by the Company or any of its subsidiaries of any intellectual property of such third party, (B) neither the Company nor its subsidiaries have received written notice from any third party regarding any assertion or claim challenging the validity of any Company Intellectual Property, (C) to the knowledge of the Company no third party is misappropriating, infringing, diluting or violating any Company Intellectual Property that is owned by the Company and that is material to the Company’s operations and (D) to the knowledge of the Company, all of the issued or registered Company Intellectual Property owned by the Company or any of its subsidiaries held of record in the name of the Company or the applicable subsidiary (x) is free and clear of all mortgages, liens, pledges, encumbrances and restrictions, and (y) is not the subject of any cancellation or reexamination proceeding or any other proceeding challenging their extent or validity, except with respect to any event or condition referred to in clauses (A) through (D) above that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company.

            4.1.18. Insurance. To the knowledge of the Company, neither the Company nor any Purchaser of the Company has received notice of any pending or threatened cancellation (retroactive or otherwise) with respect to any of the insurance policies in force naming the Company, any of its subsidiaries or employees thereof as an insured or beneficiary or as a loss payable payee.

            4.1.19. Labor and Employment Matters.

                  (i) Neither the Company nor any Subsidiary is party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any subsidiary, nor, to the knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees. As of the date hereof, to the knowledge of the Company, there are no unfair labor practice complaints pending against the Company or any subsidiary before the National Labor Relations Board or any other Governmental Authority or any current union representation questions involving employees of the Company or any subsidiary. There is not now pending, and to the knowledge of the Company there is neither threatened nor any basis for, (A) any employment dispute or claim against the Company or its subsidiaries, (B) claims of employment discrimination against the Company or its subsidiaries or (C) federal or state labor citations, investigations, proceedings or complaints, which in each case would reasonably be expected to have a Material Adverse Effect on the Company.

                  (ii) From and after the date of this Agreement, the Company will not enter into or establish (or amended or altered) any Company Benefit Plan or Employee Agreements in which any director or executive officer of the Company participates or any employment agreement to which any director or executive officer is party without the written consent of Parent or Purchaser.

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            4.1.20. Offer Documents; Schedule 14D-9; and Proxy Statement.

                  (i) None of the information supplied or to be supplied by or on behalf of the Company or any affiliate of the Company for inclusion in the Offer Documents will, at the times such documents are filed with the SEC and are mailed to shareholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. The Schedule 14D-9 will not, at the time the Schedule 14D-9 is filed with the SEC and at all times prior to the purchase of the Company Common Shares by Purchaser pursuant to the Offer, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Company with respect to information supplied in writing by Parent, Purchaser or an affiliate of Parent or Purchaser expressly for inclusion in the Offer Documents. The Schedule 14D-9 will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations of the SEC thereunder.

                  (ii) The letter to shareholders, notice of meeting, proxy statement and form of proxy, or the information statement, as the case may be, that may be provided to shareholders of the Company in connection with the Merger (including any amendments or supplements) and any schedules required to be filed with the SEC in connection therewith (collectively, the “Proxy Statement”) will not, at the time the Proxy Statement is first mailed and at the time of the Special Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Company with respect to information supplied in writing by Parent, Purchaser or any affiliate of Parent or Purchaser expressly for inclusion in the Proxy Statement. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations of the SEC promulgated thereunder.

            4.1.21. Taxes. The Company and each of its subsidiaries have timely filed all material Tax Returns required to be filed by any of them. All such Tax Returns are correct and complete in all material respects and were prepared in substantial compliance with all applicable laws and regulations, except for any matter which would not reasonably be expected to have a Material Adverse Effect on the Company. The Company and each subsidiary has withheld and paid over to the relevant taxing authority all Taxes required to have been withheld and paid in connection with payments to employees, officers, directors, independent contractors, creditors, shareholders or other third parties, except for such Taxes which individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect on the Company. For purposes of this Agreement, “Tax Return” means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including any information return, claim for refund, amended return or declaration of estimated Tax.

            4.1.22. Related Party Transactions. Since February 1, 2003 the Company has not entered into any transaction of the type described in Item 404(a) of Regulation S-K promulgated by the SEC that is not described in the Proxy Statement of the Company dated April 30, 2004 or

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in the other SEC reports and documents filed or furnished with the SEC by the Company. Since April 15, 2004 the Company has not entered into any employment, consulting or other compensatory agreement.

     4.2 Representations, Warranties and Agreements of Parent.

     Parent represents and warrants to the Company as follows:

                  4.2.1. Organization, Good Standing, Capitalization. Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with all requisite corporate power and authority to own, operate and lease its properties, to carry on its business as now being conducted, and to enter into this Agreement and perform its obligations hereunder.

                  4.2.2. Purchaser. Parent owns all of the issued and outstanding shares of Purchaser. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana with all requisite corporate power to enter into this Agreement and perform its obligations hereunder. All of the issued and outstanding shares of Purchaser have been validly issued and are fully paid and non-assessable with no personal liability attaching to the ownership thereof. There are no outstanding rights, options, warrants, conversion rights or agreements for the purchase or acquisition from, or the sale or issuance by, Purchaser of any shares of its capital stock, other than this Agreement. Since its organization, Purchaser has conducted no business activities, except such as are related to this Agreement and the performance of its obligations hereunder.

            4.2.3. Authority Relative to this Agreement, etc. Each of Parent and Purchaser has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of Parent and Purchaser and constitutes a valid, legal and binding agreement of each of Parent and Purchaser, respectively, enforceable against each of Parent and Purchaser in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles.

            4.2.4. Compliance with other Instruments, etc. Subject to the consents referred to in Section 4.2.5, neither the execution nor delivery of this Agreement by Parent or Purchaser nor Parent’s or Purchaser’s consummation of the transactions contemplated hereby will conflict with, result in any violation of, or constitute a default under, (i) the Articles or Certificate of Incorporation or Bylaws of Parent or Purchaser, (ii) any Material Contract or any other contract, agreement, mortgage, indenture, license, permit, lease or other instrument material to Parent and its subsidiaries taken as a whole or (iii) any judgment, decree, order, or any material law or regulation of any governmental agency or authority in the United States by which Parent or any of its subsidiaries is bound.

            4.2.5. Governmental and other Consents, etc. Subject to any required filing with the U.S. Department of Justice or the Federal Trade Commission, no material consent, approval or authorization of or filing with any Governmental Entity on the part of Parent, Purchaser or any

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of their subsidiaries is required in connection with the execution or delivery by Parent and Purchaser of this Agreement or the consummation of the transactions by Parent and Purchaser contemplated hereby other than filings with the SEC and any applicable national securities exchange or quotation system.

            4.2.6. No Broker. No broker, finder, investment banker or other person is entitled to any brokerage, finder’s or similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Purchaser other than Peter J. Solomon Company, L.P.

            4.2.7. Litigation. There is not now pending, and to the knowledge of Parent and Purchaser there is neither threatened nor is there any basis for, any litigation, action, suit or proceeding to which Parent or Purchaser or any of their respective subsidiaries is or will be a party in or before or by any Governmental Entity, except for (A) any litigation, action, suit or proceeding (whether instituted, pending or threatened) involving claims with respect to the Offer, the Merger or the other transactions contemplated by this Agreement or (B) any other litigation, action, suit or proceeding (whether instituted, pending or threatened) involving claims which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Parent and Purchaser or the Merger. In addition, there is no judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Parent or Purchaser or any of their respective subsidiaries having or which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Parent and Purchaser or the Merger.

            4.2.8. Offer Documents; Proxy Statement.

                  (i) None of the Offer Documents will, at the times such documents are filed with the SEC and are mailed to the shareholders of the Company, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by Parent or Purchaser with respect to information supplied in writing by the Company or an affiliate of the Company expressly for inclusion therein. The Offer Documents will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations of the SEC thereunder.

                  (ii) None of the information supplied by Parent, Purchaser or any affiliate of Parent or Purchaser for inclusion in the Proxy Statement or the Schedule 14D-9 will, at the date of filing with the SEC, and, in the case of the Proxy Statement, at the time the Proxy Statement is mailed and at the time of the Special Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

            4.2.9. Sufficient Funds. Parent has (or will cause Purchaser to have) the funds necessary to consummate the Offer and the Merger and pay the Offer Price for each share tendered in the Offer, the Merger Consideration and the payments required to be made by the

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Surviving Corporation pursuant to Section 2.3 and 2.4 and the fees and expenses associated with this Agreement and the transactions contemplated by this Agreement. As of the Share Purchase Date, Parent will have (or will cause Purchaser to have) the funds necessary to refinance all the Company’s debt for borrowed money that is or could be required to be repurchased or becomes, or could be declared, due and payable as a result of the consummation of the Offer. Prior to the Share Purchase Date, Parent will provide to the Company or its representatives on a confidential basis any information required to be supplied under Section 5.2.3. Parent shall give the Company prompt notice of any material adverse change with respect to the status of the availability of such necessary funds.

5. COVENANTS

     5.1 Covenants of the Company.

            5.1.1. Conduct of Business. The Company agrees that during the period from the date of this Agreement to the Effective Time (unless the other parties shall otherwise agree in writing, which approval shall not be unreasonably withheld, conditioned or delayed and except as otherwise contemplated by this Agreement), except as would not reasonably be expected to have a Material Adverse Effect on the Company, the Company will, and will cause each of its subsidiaries to, conduct its operations according to its ordinary course of business consistent with past practice and use all commercially reasonable efforts to preserve intact its current business organization, keep available the service of its current employees and preserve its relationship with customers, suppliers and others having significant dealings with it. Without limiting the generality of the foregoing, and except as otherwise permitted in this Agreement or as disclosed to Parent by the Company in the Company Disclosure Letter, prior to the Effective Time, neither the Company nor any of its subsidiaries will, without the prior written consent of Parent:

                  (i) except for shares to be issued or delivered pursuant to the Company’s stock plans and agreements for options outstanding and unexpired on the date of this Agreement and the stock warrant to purchase 1,350,000 shares (as adjusted for any stock split, reverse stock split or similar event) of common stock at an exercise price of at least $44.82 per share, issue, deliver, sell, dispose of, pledge or otherwise encumber, or authorize or propose the issuance, sale, disposition or pledge or other encumbrance of (A) any additional shares of capital stock of any class (including Company Common Shares), or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any shares of capital stock, or any rights, warrants, options, calls, commitments or any other agreements of any character to purchase or acquire any shares of capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of capital stock other than grants at fair market value on the date of grant made to newly-hired employees of the Company, or (B) any other securities in respect of, in lieu of, or in substitution for, of Company Common Shares outstanding on the date hereof;

                  (ii) redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any of its outstanding capital stock, including Company Common Shares, or any rights, warrants or options to acquire any such shares or other securities (except for shares of restricted stock forfeitable under the terms of any of the Company’s stock plans and except in connection with option exercises);

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                  (iii) split, combine, subdivide or reclassify any Company Common Shares or declare, set aside for payment or pay any dividend, or make any other actual, constructive or deemed distribution in respect of any capital stock, including Company Common Shares or otherwise make any payments to shareholders in their capacity as such, other than the declaration and payment of any regular quarterly cash dividend on Company Common Shares and except for dividends by a wholly-owned subsidiary of the Company;

                  (iv) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries (other than the Merger);

                  (v) adopt any amendments to its Articles or Certificate of Incorporation or By-Laws or alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of any subsidiary of the Company;

                  (vi) except in each case in the ordinary course of business consistent with past practice, make any acquisition, by means of merger, consolidation or otherwise, or disposition, of assets or securities, or mortgage or otherwise encumber or subject to lien any of its properties or assets;

                  (vii) other than in accordance with leases or other contractual obligations in existence on the date hereof and otherwise in the ordinary course of business consistent with past practice, (A) incur any indebtedness for borrowed money or sell any debt securities or guarantee any such indebtedness, (B) make any loans, advances or capital contributions to, or investments in, any other person, other than to the Company or any wholly-owned subsidiary of the Company, or (C) make any commitments for capital expenditures in excess of $500,000.00 individually, or $2,000,000.00 in the aggregate;

                  (viii) except in the ordinary course of business consistent with past practice, grant any material increases in the compensation of any of its directors, officers or key employees;

                  (ix) pay or agree to pay any pension, retirement allowance or other employee benefit not required or contemplated by any of the existing benefit, severance, termination, pension or employment plans, agreements or arrangements as in effect on the date hereof to any employee, consultant, director or officer, whether past or present, except that the Company (i) may pay or commit to pay bonuses in an amount not to exceed $750,000 in the aggregate to employees of the Company that are not executive officers or directors who agree to remain employed through the Effective Date and (ii) may pay or commit to pay bonuses in an amount not to exceed $750,000 in the aggregate to employees that are not executive officers or directors of the Company who (A) agree to remain employed through the Effective Date and (B) with respect to whom Parent has provided the Company prior written consent, which consent shall not be unreasonably withheld or delayed; and provided that immediately following the date of this Agreement the Company shall afford Parent (in accordance with the protocols set forth below) the opportunity to interview such employees of Company as the Parent selects in an effort to decide whether or not to offer them a position with Purchaser in the event the transaction is closed and to offer such future employment terms as Parent deems appropriate.

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The protocols for this procedure shall be (a) such interviews shall not be conducted on the premises of the Company, (b) a person selected by the Company and agreed to by Parent shall be given the opportunity to sit in on any such interviews (and Parent agrees to the selection of the Company’s Executive Vice President and General Counsel, Senior Vice President, Human Resources and Vice President, Human Resources), and (c) the individuals of Parent who may conduct such interviews shall include only the Chief Executive Officer, the President, the Chief Administrative Officer, the Chief Financial Officer, the Senior Vice Presidents of Allocations and Replenishments, Human Resources, Information Technologies and Merchandising and any person approved by David Zoba.

                  (x) enter into any new or materially amend any existing employment or severance, termination or similar agreement with any director or officer;

                  (xi) except as may be required to comply with applicable law or regulation, become obligated under any new pension plan, welfare plan, multiemployer plan, employee benefit plan, severance plan, benefit arrangement, or similar plan or arrangement, which was not in existence on the date hereof, or amend any such plan or arrangement in existence on the date hereof if such amendment would have the effect of materially enhancing any benefits thereunder;

                  (xii) (A) settle or compromise any material claims or litigation (i) with the result that it would materially and adversely affect a material relationship with a landlord, vendor or other person with whom the Company has a significant relationship or (ii) which would reasonably be expected to have a Material Adverse Effect on the Company; or (B) enter into, modify, amend or terminate any Material Contract or waive, release or assign any material rights or claims thereunder; for the avoidance of doubt, nothing in this Section 5.1.1(xii)(B) shall limit the ability of the Company to enter into Real Property Leases under Section 5.1.1(xvi);

                  (xiii) make any material change in accounting policies or procedures applied by the Company (including Tax accounting policies and procedures), other than (A) in the ordinary course of business consistent with past practice, (B) as required by applicable law, regulation or change in generally accepted accounting principles, or (C) based on the advice of its independent auditors, as the Company determines in good faith is advisable to conform to best accounting practices;

                  (xiv) except in the ordinary course of business or as otherwise required by applicable law or regulation, make any Tax election or permit any insurance policy naming it as a beneficiary or a loss payable payee to be canceled or terminated, except in the ordinary course of business;

                  (xv) authorize, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing;

                  (xvi) enter into more than two Real Property Leases relating in each case to a retail store of the Company or its subsidiaries; or

                  (xvii) enter into or become obligated under any option, right of first refusal or other contractual right to purchase, acquire, sell or dispose of the Company Real

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Property or any portion thereof or interest therein other than any option, right of first refusal or other contractual right existing as of the date hereof;

provided that nothing in this Section 5.1.1 shall give Parent or Purchaser the right to control or direct the operations, assets, liabilities or business of the Company and its subsidiaries until the Effective Time.

            5.1.2. Access to Information. Until the Effective Time or until the abandonment of the Merger as permitted by this Agreement, the Company will allow Parent and its representatives reasonable access, during normal business hours and upon reasonable prior notice specifying in reasonable detail the information to which access is sought, to the properties, operations, books and records of the Company and its subsidiaries that Parent in good faith determines is necessary (i) from and after the date hereof, (A) to verify the accuracy of the representations made by the Company in this Agreement, (B) to verify the performance of covenants made by the Company in this Agreement or (C) to verify the satisfaction of closing conditions and (ii) from and after the Share Purchase Date, for the purposes stated in clause (i) above and any other purpose reasonably related to the Merger, the Offer or the transactions contemplated thereby; provided, however, that, to the extent not already otherwise provided to Parent and its representatives, the Company will allow Parent and its representatives reasonable access to information that may be furnished to other persons pursuant to Section 5.1.3(i).

            5.1.3. No Solicitations.

                  (i) The Company shall not, nor shall it permit any of its subsidiaries to, nor shall it authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its subsidiaries (A) to solicit, initiate or encourage, or take any other action to facilitate (including by way of furnishing information), any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Takeover Proposal (as hereinafter defined) (other than disclosures permitted under Section 5.1.3(v) and the issuance of press releases and the filing or furnishing of documents with the SEC, in each case as permitted under Section 9.13), or (B) to participate in any discussions or negotiations regarding any Takeover Proposal; provided, however, that (1) the Company may in response to a Takeover Proposal, request clarifications from (but not, in reliance on this subsection (1), enter into negotiations with) any third party which makes such Takeover Proposal if such action is taken solely for the purpose of obtaining information reasonably necessary for the Company to ascertain whether such Takeover Proposal is a Favorable Third Party Proposal (as defined below) and (2) the Company may, in response to any proposal which constitutes a Favorable Third Party Proposal (as defined below), (A) furnish information with respect to it and its subsidiaries to any person pursuant to a customary confidentiality agreement, the benefits of the terms of which, if more favorable than the confidentiality agreement in place with Parent, shall be extended to Parent, and (B) negotiate or otherwise engage in substantive discussions with, the party making such proposal, if the Board or Directors of the Company determines in good faith by a majority vote, based on the advice of its outside legal counsel, there is a reasonable basis to conclude that such action is required for it to comply with its fiduciary duties.

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                  (ii) Immediately after the execution and delivery of this Agreement, the Company will, and will cause its subsidiaries and affiliates, and their respective officers, directors, employees, investment bankers, attorneys, accountants and other agents to, cease and terminate any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any possible Takeover Proposal.

                  (iii) Subject to this Section 5.1.3, neither the Board of Directors of the Company nor any committee thereof shall (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent, the approval or recommendation by such Board of Directors or such committee of the Offer or the adoption and approval of the matters to be considered at the Special Shareholders Meeting, (B) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal, or (C) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an “Acquisition Agreement”) related to any Takeover Proposal; provided that (x) actions taken by the Board of Directors of the Company in accordance with the proviso to Section 5.1.3(i) shall not be deemed to be a withdrawal or modification of its approval or recommendation of the Offer or the Merger or the matters to be considered at the Special Shareholders Meeting and (y) a “stop-look-and-listen” communication of the nature contemplated in Rules 14d-9(f) under the Exchange Act with respect to an unsolicited tender offer or exchange offer that constitutes a Takeover Proposal, without more, shall not be deemed to be any such withdrawal or modification if, within the period contemplated by Rule 14e-2 under the Exchange Act, the Board of Directors of the Company shall publicly confirm such approval and recommendation and recommends against the acceptance of such tender offer or exchange offer by the shareholders of the Company. Notwithstanding the foregoing, in the event that the Board of Directors determines in good faith by a majority vote, based on the advice of its outside legal counsel, that there is a reasonable basis for its determination that such action is required for it to comply with its fiduciary duties with respect to a Favorable Third Party Proposal, then the Board of Directors of the Company may (1) withdraw or modify its approval or recommendation of the Offer, the Merger or the adoption and approval of the matters to be considered at the Special Shareholders Meeting, (2) approve or recommend the Favorable Third Party Proposal and/or (3) after the third business day following the Company’s written notice to Parent that specifies the material terms and conditions of the Favorable Third Party Proposal, terminate this Agreement (and concurrently with such termination, if it so chooses, cause the Company to enter into any Acquisition Agreement with respect to the Favorable Third Party Proposal).

                  (iv) As used in this Agreement, “Takeover Proposal” means any written proposal from a credible third party relating to any direct or indirect acquisition or purchase of 20% or more of the assets of the Company and its subsidiaries, taken as a whole, or 20% or more of any class or series of equity securities of the Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any Person beneficially owning 20% or more of the combined voting power of Company Common Shares, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries in which the other party thereto or its shareholders will own 20% or more of the combined voting power of the parent entity resulting from any such transaction, other than the transactions contemplated by this Agreement. As used in this Agreement, “Favorable Third Party Proposal” means a written proposal from a

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credible third party relating to any direct or indirect acquisition or purchase of 50% or more of the assets of the Company and its subsidiaries, taken as a whole, or 50% or more of any class or series of equity securities of the Company or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any Person beneficially owning 50% or more of the combined voting power of Company Common Shares, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries in which the other party thereto or its shareholders will own 50% or more of the combined voting power of the parent entity resulting from any such transaction, and otherwise on terms which the Board of Directors of the Company determines in its good faith judgment (based on the advice of the Company Financial Advisor or another financial advisor of nationally recognized reputation and considering any modifications to this Agreement proposed by Parent), taking into account legal, financial, regulatory and other aspects of the proposal deemed appropriate by the Board of Directors of the Company, to be at a higher price or financial value per Company Common Share, than the Merger (taking into account any amendments to this Agreement proposed by Parent in response to the receipt by Parent of the proposal) to the Company’s shareholders.

                  (v) Nothing contained in this Section 5.1.3 shall prohibit the Company from taking and disclosing to its shareholders a position contemplated by Rule 14d-9 or 14e-2 promulgated under the Exchange Act or from making any disclosure to the Company’s shareholders if the Board of Directors determines in good faith by a majority vote, based on the advice of its outside legal counsel, that there is a reasonable basis for its determination that such action is required for it to comply with fiduciary duties or applicable law.

            5.1.4. Takeover Laws. The Company shall not take any action that would cause the transactions contemplated by this Agreement to be subject to requirements imposed by any Takeover Law and if any Takeover Law is or may become applicable to the Offer or the Merger, the Company shall use its reasonable best efforts to ensure that the transactions contemplated by this Agreement and the Shareholder Tender Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise use its reasonable best efforts to eliminate or minimize the effects of any Takeover Law on the Offer or the Merger.

            5.1.5. Proxy Statement. Unless the Merger is consummated in accordance with Section 23-1-40-4 of the Indiana Business Corporation Law as contemplated by Section 1.6 above and subject to Section 5.1.3, the Company shall prepare and file with the SEC, subject to the prior review and approval of Parent and Purchaser (which approval shall not be unreasonably withheld), as soon as practicable after the consummation of the Offer, a preliminary Proxy Statement (the “Preliminary Proxy Statement”) relating to the Merger as required by the Exchange Act and the rules and regulations thereunder. The Company shall obtain and furnish the information required to be included in the Preliminary Proxy Statement, shall provide Parent and Purchaser with, and consult with Parent and Purchaser regarding, any comments that may be received from the SEC or its staff with respect thereto, shall, subject to the prior review and approval of Parent and Purchaser (which approval shall not be unreasonably withheld), respond promptly to any such comments made by the SEC or its staff with respect to the Preliminary Proxy Statement, shall cause the Proxy Statement to be mailed to the Company’s shareholders at the earliest practicable date and shall use its best efforts to obtain the necessary approval of the Merger by its shareholders.

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     5.2 Covenants of Parent.

            5.2.1. Indemnification.

                  (i) For a period of six years after the Effective Time, Parent shall cause the Surviving Corporation to fulfill and honor in all respects the obligations of the Company pursuant to any indemnification agreements, dated prior to the date hereof, between the Company and its present and former directors and officers (the “Indemnified Parties”) and any indemnification provisions under the Company’s Articles of Incorporation or Bylaws as in effect on the date hereof, and will indemnify the Indemnified Parties with respect to all such obligations of the Company. The Articles of Incorporation and Bylaws of the Surviving Corporation shall contain provisions with respect to exculpation and indemnification that are at least as favorable to the Indemnified Parties as those contained in the Articles of Incorporation and Bylaws of the Company as in effect on the date hereof, which provisions will not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of the Indemnified Parties.

                  (ii) For a period of six years after the Effective Time, Parent shall, at its election, either (A) cause the Surviving Corporation to use its commercially reasonable efforts to maintain in effect, if available, directors’ and officers’ liability insurance covering those persons who are currently covered by the Company’s directors’ and officers’ liability insurance policy on terms no less favorable to those currently applicable to the directors and officers of the Company or (B) obtain, or permit the Company to obtain, a six year “tail” insurance policy that provides coverage no less favorable than the coverage currently provided under the Company’s directors’ and officers’ liability insurance covering those persons who are currently covered by the Company’s directors’ and officers’ liability insurance policy on terms no less favorable to those applicable to the directors and officers of the Company.

                  (iii) This Section 5.2.1 shall survive the consummation of the Merger, is intended to benefit the Company, the Surviving Corporation and each Indemnified Party, shall be binding on all successors and assigns of the Surviving Corporation and Parent, and shall be enforceable by the Indemnified Parties.

            5.2.2. Employee Benefit Plans.

                  (i) For a period of one year after the Closing, Parent shall either (A) cause the Surviving Corporation to continue to sponsor and maintain the Company Benefit Plans, or (B) provide benefits to the employees of the Company who continue to be employed by the Surviving Corporation (the “Company Employees”) and their eligible dependents under employee benefit plans, programs, policies or arrangements that in the aggregate are no less favorable than those benefits provided to the Company Employees and their eligible dependents by the Company immediately prior to the Closing Date. Except to the extent necessary to avoid duplication of benefits, Parent shall recognize (or cause to be recognized) service with the Company and any predecessor entities (and any other service credited by the Company under similar benefit plans) for purposes of vesting, eligibility to participate, severance and vacation accrual under employee benefit plans or arrangements maintained by Parent, the Surviving Corporation or any subsidiary of Parent, if any, in which the Company employees are eligible to

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participate following the Closing. If Parent offers health benefits to the Company Employees or their eligible dependents under a group health plan that is not a Company Benefit Plan that was in effect on the Closing Date, Parent shall (x) waive any pre-existing condition exclusion under such group health plan to the extent coverage existed for such condition under the corresponding Company Benefit Plan covering such Company Employee or eligible dependent on the Closing Date and (y) credit each Company Employee and eligible dependent with all deductible payments and co-payments paid by such Company Employee or eligible dependent during the current plan year under any Company health plan covering such Company Employee or eligible dependent prior to the Closing Date for purposes of determining the extent to which any such Company Employee or eligible dependent has satisfied his or her deductible and whether he or she has reached the out-of-pocket maximum under any health plan for such plan year.

                  (ii) For a period of one year after the Closing Date, Parent shall cause the Company to maintain any severance pay plan, policy or agreement of the Company in effect as of the Closing Date on terms no less favorable to any person employed by the Company on the Closing Date than the terms of such plan on the date of this Agreement. Parent shall cause the Company to pay to any person employed by the Company on the Closing Date who becomes eligible to receive a severance payment under such severance pay plan or policy of the Company at any time after the Closing Date and prior to the first anniversary thereof an amount equal to the greater of (A) the severance amount payable to such employee under such severance pay plan or policy of the Company and (B) the severance amount that would be payable to a comparable employee of Parent under Parent’s severance program then in effect.

                  (iii) After the Closing Date, Parent shall cause the Surviving Corporation to honor all obligations under all of the employment, severance, consulting and similar agreements of the Company existing on the date hereof.

                  (iv) Nothing herein shall be construed as giving any employee of the Company any right to continued employment after the Closing Date.

            5.2.3. Access. Until the Effective Time or until the abandonment of the Merger as permitted by this Agreement, Parent will provide the Company and its representatives with the names of the lenders, copies of commitment letters and any other documentation or agreements relating to the terms, conditions or contingencies for the financing described in Section 4.2.9 reasonably requested by the Company.

     5.3 Covenants of Purchaser.

     Purchaser agrees that prior to the Effective Time:

            5.3.1. No Business. Prior to the Effective Time, Purchaser shall not conduct any business or make any investments other than as specifically contemplated by this Agreement and will not have any assets (other than a de minimis amount of cash paid to Purchaser for the issuance of its stock to parent) or any liabilities or obligations, except those incident to its formation and pursuant to this Agreement and the other transactions contemplated by this Agreement. Parent will take all action necessary to cause Purchase to perform its obligations

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under this Agreement and to consummate the Offer and the Merger on the terms and conditions set forth in this Agreement.

            5.3.2. Access. Until the Effective Time or until the abandonment of the Merger as permitted by this Agreement, Purchaser will allow the Company and its representatives reasonable access, during normal business hours and upon reasonable prior notice specifying in reasonable detail the information to which access is sought, to the properties, operations, books and records of Purchaser and its subsidiaries to verify the accuracy in all material respects of (i) the representations made by Purchaser in this Agreement and (ii) the performance of covenants made by Purchaser in this Agreement.

     5.4 Mutual Covenants.

            5.4.1. Reasonable Best Efforts; Consents and Approvals.

                  (i) The Company, Parent and Purchaser shall each use their reasonable best efforts to (A) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary and proper under applicable law to consummate and make effective the transactions contemplated hereby as promptly as practicable, (B) obtain from any Governmental Entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained or made by the Company or Parent or any of their subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby including the Offer and the Merger, and (C) as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement, the Offer and the Merger required under (1) the Securities Act and the Exchange Act, and any other applicable federal or state securities laws, (2) the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the “HSR Act”), and any related governmental request thereunder and (3) any other applicable law. The Company, Parent and Purchaser shall cooperate with each other in connection with the making of all such filings, including providing copies of all such documents to the non-filing party and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. The Company, Parent and Purchaser shall each use its reasonable best efforts to furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable law (including all information required to be included in the Offer Documents and the Proxy Statement) in connection with the transactions contemplated by this Agreement. The Company, Parent and Purchaser shall each use its reasonable best efforts to oppose, contest, resolve, appeal, defend against or lift, as applicable, any action, injunction, proceeding, decree, statute, legislation, rule, regulation or other order (whether temporary, preliminary or permanent) (“Order”) of any Governmental Entity if this Agreement provides that, as a result thereof, a party would not be obligated to perform any of its obligations with respect to the Offer, the Merger or any other transaction contemplated by this Agreement.

                  (ii) The Company and Parent agree, and shall cause each of their respective subsidiaries, to cooperate and to use their respective reasonable best efforts to obtain any government clearances required for Closing (including through compliance with the HSR Act and any applicable foreign government reporting requirements), to respond to any

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government requests for information, and to contest and resist any Order or other action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any Order that restricts, prevents or prohibits the consummation of the Merger or any other transactions contemplated by this Agreement, including by vigorously pursuing all available avenues of administrative and judicial appeal and all available legislative action. The Company and Parent also agree to take any and all of the following actions to the extent necessary to obtain the approval of any Governmental Entity with jurisdiction over the enforcement of any applicable laws regarding the Merger: entering into negotiations; providing information; substantially complying with any second request for information pursuant to the HSR Act; making proposals; entering into and performing agreements or submitting to judicial or administrative orders; selling or otherwise disposing of, or holding separate (through the establishment of a trust or otherwise) particular assets or categories of assets, or businesses of the Company, Parent or any of their affiliates; and withdrawing from doing business in a particular jurisdiction. The parties hereto will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act or any other federal, state or foreign antitrust or fair trade law. Parent shall be entitled to direct any proceedings or negotiations with any Governmental Entity relating to any of the foregoing, provided that it shall afford the Company a reasonable opportunity to participate therein.

                  (iii) Each of the Company and Parent shall give (or shall cause their respective subsidiaries to give) any notices to third parties, and use, and cause their respective subsidiaries to use, their reasonable best efforts to obtain any third party consents related to or required in connection with the Merger that are (A) necessary to consummate the transactions contemplated hereby, or (B) required to prevent an Aggregate MAE from occurring prior to or after the Effective Time.

                  (iv) Notwithstanding anything to the contrary in this Section 5.4.1, (A) neither the Company nor Parent nor any of their respective subsidiaries shall be required by this Section 5.4.1 to take any action that, individually or in the aggregate, would reasonably be expected to have an Aggregate MAE and (B) the Company, Parent and their respective subsidiaries shall be required by this Section 5.4.1 to take any actions, including selling, closing or otherwise disposing of stores, so long as such actions, individually or in the aggregate, would not reasonably be expected to have an Aggregate MAE.

            5.4.2. Notification of Certain Matters. The Company shall give prompt notice to Parent and Purchaser, and Parent and Purchaser shall give prompt notice to the Company, of (i) the occurrence, or nonoccurrence, of any event the occurrence, or non-occurrence, of which would reasonably be expected to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to comply in all material respects with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. Each of the Company, Parent and Purchaser shall give prompt notice to the other parties of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement.

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            5.4.3. Delisting. Each of the parties agrees to cooperate with each other in taking, or causing to be taken, all actions necessary to delist the Company Common Shares from Nasdaq and terminate registration under the Exchange Act; provided that such delisting and termination shall not be effective until after the expiration of the Offer or the Effective Time, as appropriate.

            5.4.4. Existing Credit Facilities. Each party agrees to use its reasonable best efforts to obtain any extensions or waivers under the Company’s existing credit and other financing facilities that may be required so that such facilities would not become due and payable until the Effective Time. In the event such extensions or waivers are not obtained, from and after the Share Purchase Date, Parent will make available to the Company sufficient funds to repay all amounts that may become due and owning as of the Share Purchase Date under such facilities.

6. CONDITIONS TO CLOSING; ABANDONMENT AND TERMINATION

     6.1 Conditions to the Company’s Closing and Its Right to Abandon.

     The Company shall not be required to close the Merger if any of the following shall not be true or shall not have occurred or shall not have been waived in writing by the Company at the Closing:

            6.1.1. Injunction. No Order (whether temporary, preliminary or permanent) shall have been issued, enacted, promulgated, enforced or entered by any Governmental Entity to enjoin, restrain or prohibit the consummation of the Merger; provided, however, that notwithstanding the foregoing, the Company may not invoke the condition in this Section 6.1.1 if (A) the Company shall have failed in any material respect to use its reasonable best efforts to oppose, contest, resolve, appeal, defend against or lift, as applicable, such Order, (B) compliance with such Order would not reasonably be expect to have an Aggregate MAE or (C) violation of such Order would expose the Company to a maximum monetary fine or penalty which is less than $15,000,000.00 and would not in the reasonable judgment of the Company (i) expose the Company or any officer, director, agent or attorney of the Company to violating any criminal law or to any criminal sanction (ii) expose any officer, director, agent or attorney of the Company to any contempt proceeding which could result in a fine or imprisonment (iii) constitute a matter which an officer or director would have to disclose in a proxy statement or Annual Report on Form 10-K under Item 401(f) of Regulation S-K or (iv) constitute a “material violation” as such term is defined in 17 C.F.R. Section 205.2.

            6.1.2. HSR Act. Any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated.

            6.1.3. Shareholder Approval. Unless the Merger is consummated in accordance with Section 23-1-40-4 of the Indiana Business Corporation Law as contemplated by Section 1.6 above, the plan of merger contained within this Agreement (within the meaning of Section 23-1-40-1 of the Indiana Business Corporation Law) shall have been approved by the affirmative vote of the shareholders of the Company required by and in accordance with applicable law.

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     6.2 Conditions to Parent’s and Purchaser’s Closing and Right of Parent and Purchaser to Abandon.

     Parent and Purchaser shall not be required to close the Merger if any of the following shall not be true or shall not have occurred or shall not have been waived in writing by Parent and Purchaser at the Closing:

            6.2.1. Injunction. No Order (whether temporary, preliminary or permanent) shall have been issued, enacted, promulgated, enforced or entered by any Governmental Entity to enjoin, restrain or prohibit the consummation of the Merger; provided, however, that notwithstanding the foregoing, Parent and Purchaser may not invoke the condition in this Section 6.2.1 if (A) Parent or Purchaser shall have failed in any material respect to use its reasonable best efforts to oppose, contest, resolve, appeal, defend against or lift, as applicable, such Order, (B) compliance with such Order would not reasonably be expect to have an Aggregate MAE or (C) violation of such Order would expose Parent or Purchaser to a maximum monetary fine or penalty which is less than $15,000,000.00 and would not in the reasonable judgment of Parent or Purchaser (i) expose Parent or Purchaser or any officer, director, agent or attorney of Parent or Purchaser to violating any criminal law or to any criminal sanction (ii) expose any officer, director, agent or attorney of Parent or Purchaser to any contempt proceeding which could result in a fine or imprisonment (iii) constitute a matter which an officer or director would have to disclose in a proxy statement or Annual Report on Form 10-K under Item 401(f) of Regulation S-K or (iv) constitute a “material violation” as such term is defined in 17 C.F.R. Section 205.2.

            6.2.2. HSR Act. Any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated.

            6.2.3. Shareholder Approval. Unless the Merger is consummated in accordance with Section 23-1-40-4 of the Indiana Business Corporation Law as contemplated by Section 1.6 above, the plan of merger contained within this Agreement (within the meaning of Section 23-1-40-1 of the Indiana Business Corporation Law) shall have been approved by the affirmative vote of the shareholders of the Company required by and in accordance with applicable law.

7. TERMINATION

     7.1 Terms.

     This Agreement may be terminated at any time prior to the Effective Time, whether or not the shareholders of the Company have approved the Merger, only as provided below:

                  (i) if the Merger shall not have occurred on or before 5:00 p.m., local Pittsburgh, Pennsylvania time, on December 31, 2004, by either the Company or Parent; provided, however, that (A) the Company may not invoke this condition in this clause (i) if it is then in Company Material Breach or the existence of a Company Material Breach resulted in the failure of the Merger to be consummated on or before such date and (B) Parent may not invoke the condition of this clause (i) if Parent or Purchaser is then in Parent Material Breach or the existence of a Parent Material Breach resulted in the failure of the Merger to be consummated on or before such date;

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                  (ii) by the mutual agreement of Parent, Purchaser and the Company (acting in accordance with Section 3.5, if applicable);

                  (iii) by either Parent or Purchaser on the one hand, or the Company, on the other, if consummation of the Merger would violate any final, non-appealable order, decree or judgment of any United States court or other tribunal of competent jurisdiction, provided no party may invoke the condition in clause (iii) if (A) it or any of its affiliates shall have failed in any material respect to use its reasonable best efforts to oppose, contest, resolve, appeal, defend against or lift, as applicable, such Order, (B) compliance with such Order would not reasonably be expected to have an Aggregate MAE or (C) (1) in the case of Parent or Purchaser, violation of such Order would expose Parent or Purchaser to a maximum monetary fine or penalty which is less than $15,000,000.00 and would not in the reasonable judgment of Parent or Purchaser (i) expose Parent or Purchaser or any officer, director, agent or attorney of Parent or Purchaser to violating any criminal law or to any criminal sanction, (ii) expose any officer, director, agent or attorney of Parent or Purchaser to any contempt proceeding which could result in a fine or imprisonment, (iii) constitute a matter which an officer or director would have to disclose in a proxy statement or Annual Report on Form 10-K under Item 401(f) of Regulation S-K or (iv) constitute a “material violation” as such term is defined in 17 C.F.R. Section 205.2 and (2) in the case of the Company, violation of such Order would expose the Company to a maximum monetary fine or penalty which is less than $15,000,000.00 and would not in the reasonable judgment of the Company (i) expose the Company or any officer, director, agent or attorney of the Company to violating any criminal law or to any criminal sanction, (ii) expose any officer, director, agent or attorney of the Company to any contempt proceeding which could result in a fine or imprisonment, (iii) constitute a matter which an officer or director would have to disclose in a proxy statement or Annual Report on Form 10-K under Item 401(f) of Regulation S-K or (iv) constitute a “material violation” as such term is defined in 17 C.F.R. Section 205.2;

                  (iv) by either Parent or Purchaser on the one hand, or the Company, on the other, if, at the Company’s Special Shareholders Meeting duly convened to approve the Merger or at any adjournment or postponement thereof, the Company’s shareholders shall not have approved the Merger;

                  (v) prior to the Share Purchase Date, by Parent or Purchaser, if (A) (x) any representation and warranty of the Company set forth in Section 4.1 (which for purposes of this Section 7.1(v) shall be read as though none of them contained any qualifiers such as “Material Adverse Effect,” “Aggregate MAE,” “in all material respects” or other materiality qualifiers) shall not have been true and correct as of the date of this Agreement and as of the then scheduled expiration date of the Offer (as it may be extended in accordance with the terms hereof) with the same force and effect as though made as of such date of termination pursuant to this clause (or as of the date when made in the case of any representation and warranty which specifically relates to an earlier date), except where the failure of such representations and warranties in the aggregate to be true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company, or (y) the Company shall have breached or failed in any material respect to perform and comply with any of its material obligations, covenants or agreements contained in this Agreement and then required to be performed or complied by it (a condition referred to in clauses (x) and (y) above being a “Company Material Breach”) and (B) such Company Material Breach cannot be or has not been

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cured in all material respects within 30 days after the giving of written notice to the Company of such Company Material Breach; provided, however, that Parent and Purchaser may not invoke the condition in this clause (v) if (1) Parent or Purchaser is then in Parent Material Breach or (2) such Company Material Breach is curable through the exercise of the Company’s reasonable best efforts and the Company is so using its reasonable best efforts to cure such breach or failure;

                  (vi) by the Company (A) in accordance with Section 5.1.3(iii), provided that it has complied in all material respects with all provisions contained in Section 5.1.3, including the notice provisions therein, and that it complies in all material respects with the requirement to pay the Termination Fee pursuant to Section 8.1 or (B) if Parent or Purchaser fails to commence the Offer, amends the Offer or fails to consummate the Offer, in any case in violation of Section 3.1;

                  (vii) prior to the Share Purchase Date by the Company, if (A) (x) any representation and warranty of Parent or Purchaser set forth in Section 4.2 (which for purposes of this Section 7.1(vii) shall be read as though none of them contained any qualifiers such as “Material Adverse Effect,” “Aggregate MAE,” “in all material respects” or other materiality qualifiers) shall not have been true and correct as of the date of this Agreement and as of the then scheduled expiration date of the Offer (as it may be extended in accordance with the terms hereof) with the same force and effect as though made as of such date of termination pursuant to this clause (or as of the date when made in the case of any representation and warranty which specifically relates to an earlier date), except where the failure of such representations and warranties in the aggregate to be true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Parent, or (y) Parent or Purchaser shall have breached or failed in any material respect to perform and comply with any of their material obligations, covenants or agreements contained in this Agreement (other than those expressly referenced in Section 7.1(vi)(B) and then required to be performed or complied by either or both of them (a condition referred to in clauses (x) and (y) above being a “Parent Material Breach”) and (B) such Parent Material Breach cannot be or has not been cured in all material respects within 30 days after the giving of written notice to Parent of such Parent Material Breach; provided, however, that the Company may not invoke the condition in this clause (vii) if (1) the Company is then in Company Material Breach or (2) such Parent Material Breach is curable through the exercise of Parent’s or Purchaser’s reasonable best efforts and Parent and Purchaser are using their reasonable best efforts to cure such breach or failure;

                  (viii) prior to the Share Purchase Date by Parent or Purchaser if (A) the Board of Directors of the Company (or, if applicable, any committee thereof) shall have withdrawn or modified in a manner adverse to Parent its approval or recommendation of the Offer or the Merger or the matters to be considered at the Special Shareholders Meeting or failed to reconfirm its recommendation within 15 business days after receiving a written request from Parent to do so, or approved or recommended any Takeover Proposal in respect of the Company or (B) the Board of Directors of the Company or any committee thereof shall have resolved to take any of the foregoing actions; provided that (x) actions taken by the Board of Directors of the Company in accordance with the proviso to Section 5.1.3(i) shall not be deemed to be a withdrawal or modification of its approval or recommendation of the Offer or the Merger or the matters to be considered at the Special Shareholders Meeting and (y) a “stop-look-and-listen” communication of the nature contemplated in Rules 14d-9(f) under the Exchange Act with

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respect to an unsolicited tender offer or exchange offer, without more, shall not be deemed to be any such withdrawal or modification if, within the period contemplated by Rule 14e-2 under the Exchange Act, the Board of Directors of the Company shall publicly confirm such approval and recommendation and recommends against the acceptance of such tender offer or exchange offer by the shareholders of the Company.

     7.2 Effect of Termination.

     If the Merger is abandoned and this Agreement is terminated as provided in Section 7.1, this Agreement (except this Section 7.2, Article 8 and Sections 9.4 through 9.12) shall forthwith become wholly void and of no effect, and neither Parent, the Company or Purchaser shall have any liability to any other party hereunder other than for (i) the payment of all amounts due pursuant to Article 8 and Sections 9.5 and 9.6 and (ii) all damages and other amounts due in connection with fraud or the breach or failure to perform in any material respect any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform would permit any party to terminate this Agreement pursuant to Section 7.1(v) (with respect to a right to terminate of Parent or Purchaser) or pursuant to Section 7.1(vii) (with respect to a right to terminate of the Company), in each case disregarding any cure or ability or inability to cure and further disregarding whether or not this Agreement was terminated as a result of the exercise of any such right under Section 7.1(v) or Section 7.1(vii).

8. TERMINATION FEE AND EXPENSES

     8.1 Termination Fee.

     In the event that a Takeover Proposal shall have been made known to the Company or any of its subsidiaries or has been made directly to the Company’s shareholders generally or any person shall have publicly announced an intention (whether or not conditional) to make such a Takeover Proposal and thereafter this Agreement is terminated by either the Company pursuant to Section 7.1(vi)(A) or Parent or Purchaser pursuant to Section 7.1(viii), then the Company shall promptly, but in no event later than two days after the date of such termination, pay Parent a fee equal to $13,000,000.00 by wire transfer of same day funds (the “Termination Fee”). For purposes of this Section 8.1, all references to 20% in the definition of Takeover Proposal shall be deemed to be references to 50%. The Company acknowledges that the agreements contained in this Section 8.1 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Parent would not enter into this Agreement; accordingly, if the Company fails promptly to pay the amount due pursuant to this Section 8.1, and, in order to obtain such payment, Parent commences a suit which results in a judgment against the Company for the fee set forth in this Section 8.1, the Company shall pay to Parent its costs and expenses (including reasonably fees and expenses of outside legal counsel for Parent) in connection with such suit, together with interest on the amount of the fee at the prime rate of PNC Bank, National Association in effect on the date such payment was required to be made.

     8.2 Costs and Expenses.

            8.2.1. Generally. Except as otherwise set forth in this Agreement, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement

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and the transactions contemplated hereby shall be paid by the party incurring such expense (including the filing fee in connection with the filings required under the HSR Act to be incurred by Purchaser and Parent).

            8.2.2. Termination in Connection with Takeover Proposals. If this Agreement is terminated pursuant to Section 7.1(vi)(A) or to Section 7.1(viii), the Company will reimburse upon demand therefor Parent for all of the out-of-pocket expenses incurred by Parent or Purchaser (including reasonable fees and expenses of outside legal counsel for Parent).

9. MISCELLANEOUS

     9.1 Termination of Covenants, Representations and Warranties.

     The respective covenants, representations and warranties of the parties hereto contained in Articles 4 and 5 hereof, shall expire and be terminated and extinguished upon the Effective Time, and none of the parties hereto shall thereafter be under any liability whatsoever with respect to such covenants, representations, and warranties. This Section 9.1 shall have no effect upon any other obligations hereunder of any of the parties hereto whether to be performed before or after the Effective Time.

     9.2 Execution in Counterparts.

     For the convenience of the parties, this Agreement and any amendments, supplements, waivers and modifications may be executed in two or more counterparts, which may be delivered by facsimile, each of which shall be deemed an original, but all of which together shall constitute one and the same document.

     9.3 Waivers and Amendments.

     Prior to the Effective Time, this Agreement may be amended, modified and supplemented in writing by the parties hereto and any failure of any of the parties hereto to comply with any of its obligations, agreements or conditions as set forth herein may be expressly waived in writing by the other parties hereto.

     9.4 Confidentiality; Amendment to Confidentiality Agreement.

     The Company and Parent will abide by the terms of that certain Confidentiality Agreement dated June 27, 2003 between the Company and Parent (the “Confidentiality Agreement”). In addition, the Company and Parent hereby amend the Confidentiality Agreement by replacing (i) the reference in fifth line of Section 8 (the non-solicitation provision) thereof from “one year” to “two years” and (ii) the reference in fifth line of in Section 5 (the no-hire provision) thereof from “one year” to “two years;” provided, however, that notwithstanding the foregoing or otherwise, Section 8 of the Confidentiality Agreement shall not act in any way or manner to prohibit or limit the Parent or its affiliates from responding to any Takeover Proposal or from making an offer to the Board of Directors to improve the terms and conditions of the Offer and/or this Agreement in response to the Company’s provision of notice of approval or recommendation of a Favorable Third Party Proposal and provided, further, however, that Section 5 (the no-hire provision) shall terminate and be of no force and effect if the Company

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terminates this Agreement pursuant to Section 7.1(vi)(A) or if Parent or Purchaser terminates this Agreement pursuant to Section 7.1(viii) and a third party acquires a majority of the Company’s equity or it’s a majority of the assets of the Company and its subsidiaries. Accordingly, except as expressly set forth in the Confidentiality Agreement, as amended or modified hereby, each provision of the Confidentiality Agreement shall survive and continue to be binding on the parties thereto in accordance with the terms thereof until June 27, 2005.

     9.5 Indemnification by the Company.

     If, for any reason, the Merger is not consummated pursuant to the terms of this Agreement, as it may be amended, modified or supplemented, the Company agrees to indemnify and hold harmless Parent and Purchaser, each person, if any, who controls Parent or Purchaser, each officer and director of Parent and Purchaser, and each and all of them, against any and all losses, claims, damages, or liabilities, joint or several (and to reimburse each such indemnified person for any legal or other expenses reasonably incurred by such indemnified persons in connection with investigating or defending any such loss, claim, damage or liability, or action in respect thereof) to which they, or any of them may become subject under the Exchange Act or other statutory law or common law, caused by, or arising out of, any of the information relating to the Company, its subsidiary, affiliates, officers or directors included in the Offer Documents or the Proxy Statement being false or misleading in any material respect, failing to state any facts necessary to make the statements therein not false or misleading in any material respect, or omitting to state any material fact required to be stated therein with respect to the Company, its subsidiaries, affiliates, officers or directors.

     9.6 Indemnification by Parent.

     If, for any reason, the Merger is not consummated pursuant to the terms of this Agreement, as it may be amended, modified or supplemented, Parent agrees to indemnify and hold harmless the Company, each person, if any, who controls the Company, each officer and director of the Company, and each and all of them, against any and all losses, claims, damages or liabilities, joint or several (and to reimburse each such indemnified person for any legal or other expenses reasonably incurred by such indemnified person in connection with investigating or defending any such loss, claim, damage or liability, or action in respect thereof) to which they, or any of them may become subject under the Exchange Act or other statutory law or common law, caused by, or arising out of, any of the information relating to Parent, its subsidiaries, affiliates, officers or directors included in the Offer Documents and the Proxy Statement being false or misleading in any material respect, failing to state any facts necessary to make the statements therein not false or misleading in any material respect, or omitting to state any material fact required to be stated therein with respect to Parent, its subsidiaries, affiliates, officers or directors.

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     9.7 Procedure.

     If a claim with respect to which indemnification pursuant hereto is intended to be sought is made against any person entitled to indemnification against such claim hereunder, such indemnified person shall notify the indemnifying party of the assertion thereof by the claimant or of any action commenced against such indemnified person within a reasonable time after such person shall have learned of such assertion or been served with the summons or other first legal process or given information as to the nature and basis of the claim. The indemnifying party shall assume the defense of any suit brought to enforce any such claim and shall be entitled to use counsel selected by it, at its own expense. The indemnified person shall be entitled to join in the defense of any such claim with counsel of its own choice, at its own expense. The indemnifying party shall not be entitled to settle any such claim, without the prior written consent of the indemnified party, unless, as part of such settlement, the indemnified party shall receive a general release with respect to such claim from the claimant.

     9.8 Notices.

     All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given (a) on the date of delivery, if personally delivered or facsimiled (with confirmation), (b) on the first business day following the date of dispatch, if delivered by a recognized next-day courier service, or (c) on the third business day following the date of mailing, if mailed by registered or certified mail (return receipt requested), in each case to such party at its address or telecopy number set forth below or such other address or numbers as such party may specify by notice to the other parties:

            To the Company:

     
  Galyan’s Trading Company, Inc.
  One Galyans Parkway
  Plainfield, IN 46168
  Facsimile: (317) 532-0269
  Attention: C. David Zoba, Executive Vice President, General
  Counsel and Secretary

            with a copy to:

     
  Drake S. Tempest, Esq.
  O’Melveny & Myers LLP
  Times Square Tower
  7 Times Square
  New York, NY 10036
  Facsimile: (212) 326-2061

41

 

            To Parent or Purchaser:

     
  Dick’s Sporting Goods, Inc.
  300 Industry Drive
  RIDC Park West
  Pittsburgh, PA 15275
  Facsimile: (412) 490-1394
  Attention: William R. Newlin, Executive Vice President and
  Chief Administrative Officer
 
    
  with copies to:
 
    
  Lewis U. Davis, Jr., Esq.
  Jeremiah G. Garvey, Esq.
  Buchanan Ingersoll PC
  20th Floor
  301 Grant Street, One Oxford Centre
  Pittsburgh, Pennsylvania 15219
  Facsimile: (412) 562-1041

            or to such other address as specified in a notice given in like manner.

     9.9 Entire Agreement; No Third Party Beneficiaries.

     This Agreement (including the documents and the instruments referred to herein) (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof and (b) except as provided in Section 5.2, is not intended to confer upon any person other than the parties hereto or thereto any rights or remedies hereunder or thereunder.

     9.10 Governing Law.

     This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana without regard to any applicable conflicts of law. Each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any federal court located in the Northern District of Indiana or any Indiana state court located in a county within the area comprising the Federal District Court for the Northern District of Indiana in the event any dispute arises out of this Agreement or the transactions contemplated by the Merger Agreement, (ii) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iii) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated hereby in any court other than a federal or state court sitting in the Federal District Court for the Northern District of Indiana or located in a county within the area comprising the Federal District Court for the Northern District of Indiana.

42

 

     9.11 Waiver of Jury Trial.

     EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

     9.12 Severability.

     If any term or other provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced under any rule of law in any particular respect or under any particular circumstances, such term or provision shall nevertheless remain in full force and effect in all other respects and under all other circumstances, and all other terms, conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.

     9.13 Publicity.

     The initial press release concerning the Offer and the Merger shall be a joint press release and, thereafter, except for disclosures to shareholders in accordance with Section 5.1.3 and except as otherwise required by law or the rules of the SEC, the NYSE (with respect to Parent) or NASDAQ (with respect to the Company), for so long as this Agreement is in effect, neither Parent nor the Company shall, or shall permit any of their respective subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by this Agreement without the consent of the other party, which consent shall not be unreasonably withheld; provided, however, that either the Company or Parent or both may file a copy of this Agreement and the related agreements with the SEC. The parties have agreed to the text of the joint press release announcing the execution of this Agreement.

43

 

     9.14 Interpretation.

     When a reference is made in this Agreement to Sections or Exhibits, such reference shall be to a Section of, or Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement or Exhibits, they shall be deemed to be followed by the words “without limitation.” No rule of construction against the draftsperson shall be applied in connection with the interpretation or enforcement of this Agreement. References to “knowledge” of a person mean actual present knowledge without inquiry, and references to “knowledge of the Company” or “the Company’s knowledge” mean the actual present knowledge without inquiry of Edwin Holman, David Zoba and Edward Wozniak. References to “SEC reports and documents” mean all forms, reports, statements and documents, including exhibits thereto, filed or furnished to the SEC.

     9.15 Non-Recourse.

     No recourse under this Agreement shall be had against any “controlling person” (within the meaning of Section 20 of the Exchange Act) of any party or the partners, shareholders, directors, officers, employees, agents and affiliates of the party or such controlling persons, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by such controlling person, partner, shareholder, director, officer, employee, agent or affiliate, as such, for any obligations of the party under this Agreement or for any claim based on, in respect of or by reason of such obligations or their creation.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

44

 

 

     IN WITNESS WHEREOF, this Agreement has been executed by each of the undersigned, all on the date first above written.

         
    GALYAN’S TRADING COMPANY, INC.
 
        
  By:   /s/ C. David Zoba
      Name: C. David Zoba
      Title: Executive Vice President &
     
General Counsel
 
        
    DICK’S SPORTING GOODS, INC.
 
        
  By:   /s/ William R. Newlin
      Name: William R. Newlin
      Title: Executive Vice President &
     
Chief Administrative Officer
 
        
    DIAMONDBACKS ACQUISITION INC.
 
        
  By:   /s/ William R. Newlin
      Name: William R. Newlin
      Title: President

S-1

 

SCHEDULE OF DEFINITIONS

         
Acquisition Agreement
  5.1.3(iii)  
Aggregate MAE
    4.1.3  
Agreement
    1  
Closing
    1.8  
Closing Date
    1.8  
Code
    2.1.3  
Company
    1  
Company Benefit Plans
  4.1.13(i)  
Company Common Shares
    1  
Company Disclosure Letter
    4.1  
Company Employees
  5.2.2(i)  
Company ESPP
    2.4.3  
Company Financial Advisor
    3.3.1  
Company Intellectual Property
  4.1.17(i)  
Company Permits
    4.1.10  
Company Preferred Stock
    1  
Company Real Property
  4.1.15(iv)  
Company SEC Reports
    4.1.2  
Confidentiality Agreement
    9.4  
Effective Time
    1.7  
Employee Agreements
    4.1.14  
ERISA
  4.1.13(i)  
Exchange Act
    3.1.1  
Expiration Date
    3.1.1  
Favorable Third Party Proposal
  5.1.3(iv)  
GAAP
    4.1.2  
Governmental Entity
    4.1.8  
HSR Act
  5.4.1(i)  
Indemnified Parties
  5.2.1(i)  
Independent Directors
    3.5.2  
Material Adverse Effect
    4.1.3  
Material Contract
    4.1.7  
Merger
    1.1  
Merger Consideration
    2.1.1  
New Purchase Date
    2.4.3  
New Stores
  4.1.15(ii)  
Offer
    3.1.1  
Offer Documents
    3.2  
Offer Price
    3.1.1  
Offer to Purchase
    3.1.1  
Order
  5.4.1(i)  
Owned Real Property
  4.1.15(i)  
Parent
    1  
Parent Material Breach
  7.1(vii)  

 

 

         
Paying Agent
    2.1.2  
Preliminary Proxy Statement
    5.1.5  
Proxy Statement
  4.1.20(ii)  
Purchaser
    1  
Purchaser Common Stock
    1  
Real Property Leases
  4.1.15(ii)  
Reviewed Documents
  4.1.15(ii)  
Schedule 14D-9
    3.3.2  
Schedule TO
    3.2  
SEC
    3.1.2  
Securities Act
    4.1.2  
Share Purchase Date
    1.5  
Shareholder Tender Agreement
    1  
Significant Store MAE
  4.1.15(iii)  
Special Shareholders Meeting
    1.5  
Subsequent Offering Period
    3.1.3  
Surviving Corporation
    1.1  
Takeover Laws
    3.3.1  
Takeover Proposal
  5.1.3(iv)  
Tax
    2.1.3  
Tax Return
    4.1.21  
Taxes
    2.1.3  
Termination Fee
    8.1  
Unreviewed Documents
  4.1.15(ii)  

2

 

EXHIBIT B

CONDITIONS OF THE OFFER

     Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement and Plan of Merger (the “Agreement”) of which this Exhibit B is a part. For purposes of this Exhibit B:

     “Minimum Condition” means that there shall be validly tendered and not withdrawn a number of Company Common Shares that (including the shares tendered under the Shareholder Tender Agreement) immediately prior to the acceptance for payment of Company Common Shares pursuant to the Offer represents at least a majority of the Fully Diluted Number of Company Shares.

     “Fully Diluted Number of Company Shares” means the sum of (i) the aggregate number of Company Common Shares outstanding immediately prior to the acceptance of Company Common Shares pursuant to the Offer, plus (ii) the aggregate number of Company Common Shares issuable upon the exercise of any option, warrant, other right to acquire capital stock of the Company or other security exercisable or convertible for Company Common Shares or other capital stock of the Company outstanding immediately prior to the acceptance of Company Common Shares pursuant to the Offer.

     A “Triggering Event” shall be deemed to have occurred if (A) the Board of Directors of the Company (or, if applicable, any committee thereof) shall have withdrawn or modified in a manner adverse to Parent its approval or recommendation of the Offer or the Merger or the matters to be considered at the Special Shareholders Meeting or failed to reconfirm its recommendation within 15 business days after receiving a written request from Parent to do so, or approved or recommended any Takeover Proposal in respect of the Company or (B) the Board of Directors of the Company or any committee thereof shall have resolved to take any of the foregoing actions; provided that (x) actions taken by the Board of Directors of the Company in accordance with the proviso to Section 5.1.3(i) of the Agreement shall not be deemed to be a withdrawal or modification of its approval or recommendation of the Offer or the Merger or the matters to be considered at the Special Shareholders Meeting and (y) a “stop-look-and-listen” communication of the nature contemplated in Rules 14d-9(f) under the Exchange Act with respect to an unsolicited tender offer or exchange offer, without more, shall not be deemed to be any such withdrawal or modification if, within the period contemplated by Rule 14e-2 under the Exchange Act, the Board of Directors or the Company shall publicly confirm such approval and recommendation and recommends against the acceptance of such tender offer or exchange offer by the shareholders of the Company.

     Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser’s obligation to pay for or return tendered Company Common Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to any applicable rules and regulations of the SEC, the payment for, any tendered Company Common Shares, and may amend the Offer consistent with the terms of the Agreement or terminate the Offer and not accept for payment any tendered Company Common Shares, if:

 

 

     (i) the Minimum Condition shall not have been satisfied at the time of expiration of the Offer, as it may be extended; or

     (ii) on any scheduled expiration date as the same may be extended of the Offer any of the following events or circumstances shall occur or exist or shall be reasonably determined by Parent or Purchaser to have occurred or exist:

            (a) any waiting period (and any extension thereof) applicable to the consummation of the Offer and the Merger under the HSR Act shall not have expired or been terminated;

            (b) (A) with the exception of the representations and warranties set forth in Section 4.1.15, any representation and warranty of the Company set forth in Section 4.1 of the Agreement (which representations and warranties for purposes of this paragraph (ii)(b)(A) shall be read as though none of them contained any qualifiers such as “Material Adverse Effect,” “Aggregate MAE,” “in all material respects” or other materiality qualifiers) shall not have been true and correct as of the date of this Agreement and as of then scheduled expiration date of the Offer with the same force and effect as though made as of the then scheduled expiration date of the Offer (or as of the date when made in the case of any representation and warranty which specifically relates to the date of this Agreement or an earlier date), except where the failure of such representations and warranties in the aggregate, to be true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company and (B) the representations and warranties of the Company set forth in Section 4.1.15 of the Agreement (which representations and warranties for purposes of this paragraph (ii)(b)(B) shall be read as written, including with any qualifiers such as “Material Adverse Effect,” “Aggregate MAE,” “in all material respects” or other materiality qualifiers) shall not have been true and correct as of the date of this Agreement and the then scheduled expiration date of the Offer (or as of the date when made in the case of any representation and warranty which specifically relates to the date of this Agreement or an earlier date); provided, that any failure of any representation or warranty of the Company set forth in Section 4.1 of the Agreement, including those set forth in Section 4.1.15, to be true and correct cannot be, or has not been, cured in all material respects within 30 days after the giving of written notice to the Company of such failure;

            (c) the Company shall have breached or failed in any material respect to perform and comply with any of its material obligations, covenants or agreements contained in the Agreement and required to be performed or complied with by it;

            (d) any Governmental Entity shall have enacted, issued, promulgated, enforced or entered any Order which is in effect and which (i) enjoins, restrains or prohibits consummation of the Offer or the Merger, (ii) enjoins, restrains or prohibits the ownership or operation by the Company, Parent or any of their subsidiaries of all or any material portion of the business or assets of the Company and its subsidiaries taken as a whole, or as a result of the Offer or the Merger requires the Company, Parent or any of their subsidiaries to dispose of or hold separate all or any material portion of their respective business assets, (iii) enjoins, restrains or prohibits Parent or any subsidiary of Parent from exercising effectively full rights of ownership of any Company Common Shares, including the right to vote any shares acquired by Purchaser pursuant to the Offer on all matters properly presented to the Company’s shareholders including the approval and adoption of the Agreement and the transactions contemplated

2

 

thereby, (iv) requires divestiture by Parent or any affiliate of Parent of any Company Common Shares; provided however, that notwithstanding the forgoing, Purchaser may not invoke any condition in clauses (i), (ii), (iii) and (iv) above if (A) Purchaser shall have failed in any material respect to use its reasonable best efforts to oppose, contest, resolve, appeal, defend against or lift, as applicable, such Order, (B) compliance with such Order would not reasonably be expected to have an Aggregate MAE or (C) violation of such Order would expose Parent or Purchaser to a maximum monetary fine or penalty which is less than $15,000,000.00 and would not in the reasonable judgment of Parent or Purchaser (i) expose Parent or Purchaser or any officer, director, agent or attorney of Parent or Purchaser to violating any criminal law or to any criminal sanction (ii) expose any officer, director, agent or attorney of Parent or Purchaser to any contempt proceeding which could result in a fine or imprisonment (iii) constitute a matter which an officer or director would have to disclose in a proxy statement or Annual Report on Form 10-K under Item 401(f) of Regulation S-K or (iv) constitute a “material violation” as such term is defined in 17 C.F.R. Section 205.2;

            (e) there shall have occurred and be continuing: (i) any general suspension of trading in, or limitation on prices for, securities on The NASDAQ Stock Market or NYSE for a period equal to or in excess of one week (excluding any organized halt triggered solely as a result of a specified decrease in a market index or suspensions or limitations resulting solely from physical damage, technological or software breakdowns or malfunctions or interference with such exchange not related to market conditions); (ii) a declaration by a Governmental Entity of a banking moratorium or any suspension of payments in respect of banks in the United States; (iii) any extraordinary limitation (whether or not mandatory) by any Governmental Entity on the extension of credit generally by banks or other financial institutions; (iv) commencement of a new war or material escalation of current wars, armed hostilities or terrorism directly or indirectly involving the United States, which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company or Parent; or (v) a change in the general financial, bank or capital market conditions which (1) materially and adversely affects the ability of financial institutions in the United States to extend credit or syndicated loans and (2) closes as a practical matter the capital markets to Parent for more than one week;

            (f) the Agreement shall have been terminated in accordance with its terms or Parent or Purchaser shall have reached an agreement or understanding in writing with the Company providing for termination or amendment of the Offer or delay in payment for Company Common Shares; or

            (g) a Triggering Event shall have occurred.

     Subject to Section 3.1.2, the foregoing conditions are for the sole benefit of Parent and Purchaser. Except for the Minimum Condition, the foregoing conditions may be waived by Parent and Purchaser, in whole or in part at any time and from time to time, in the sole discretion of Parent and Purchaser. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time prior to the Share Purchase Date.

3

EX-2 3 j0833601exv2.htm EXHIBIT 2 EXHIBIT 2
 

EXHIBIT 2

SHAREHOLDER TENDER AGREEMENT

     This SHAREHOLDER TENDER AGREEMENT (this “Agreement”), dated as of June 21, 2004, is entered into by and among Dick’s Sporting Goods, Inc., a Delaware corporation (the “Parent”), Diamondbacks Acquisition Inc., an Indiana corporation and a direct wholly-owned subsidiary of Parent (the “Purchaser”), and certain shareholders of Galyan’s Trading Company, Inc., an Indiana corporation (the “Company”), each of which is identified on Schedule A attached hereto (each a “Shareholder” and collectively, the “Shareholders”).

     WHEREAS, simultaneously with the execution of this Agreement, Parent, Purchaser and the Company are entering into an Agreement and Plan of Merger, dated as of the date hereof (as the same may be amended or supplemented, the “Merger Agreement”), which provides, among other things, for the acquisition of the Company by Parent by means of a cash tender offer (the “Offer”) by Purchaser for all outstanding shares of common stock, no par value per share, of the Company (the “Company Common Stock”) and for the subsequent merger of Purchaser with and into the Company with the Company continuing as the surviving entity (the “Merger”);

     WHEREAS, as of the date hereof, each Shareholder is the Beneficial Owner (as defined below) of the outstanding shares of Company Common Stock set forth opposite such Shareholder’s name in Schedule A (such Shareholder’s “Owned Shares”); and

     WHEREAS, as an inducement and a condition to its entering into the Merger Agreement and incurring the obligations set forth therein, Parent has required that each Shareholder enter into this Agreement;

     NOW, THEREFORE, in consideration of the foregoing and the mutual premises, representations, warranties, covenants and agreements contained herein and in the Merger Agreement, the parties hereto, intending to be legally bound hereby, agree as follows:

     1. Certain Definitions. (a) Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to such terms in the Merger Agreement. In addition, for purposes of this Agreement:

     “Affiliate” means, with respect to any specified Person, any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. For purposes of this Agreement, with respect to any Shareholder, “Affiliate” shall not include the Company or the Persons that directly, or indirectly through one or more intermediaries, are controlled by the Company.

     “Beneficially Owned” or “Beneficial Ownership” with respect to any securities means having both voting power and investment power (as determined pursuant to Rule 13d-3(a) under the Exchange Act) over such securities, including pursuant to any agreement, arrangement or understanding, whether or not in writing. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a Person shall include securities Beneficially Owned by all Affiliates of such Person and all other Persons with whom such Person would

1

 

constitute a “Group” within the meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder; provided that, FS Equity Partners IV, L.P. shall not be deemed to have Beneficial Ownership over any shares held of record by Limited Brands, Inc. or G Trademark, Inc., and G Trademark, Inc. and Limited Brands, Inc. shall not be deemed to have Beneficial Ownership over any shares held of record by FS Equity Partners IV, L.P., in either case as a result of the circumstances described in that certain Schedule 13D filed by FS Equity Partners IV, L.P., Limited Brands, Inc. and G Trademark, Inc., as most recently amended on August 18, 2003.

     “Beneficial Owner” with respect to any securities means a Person who has Beneficial Ownership of such securities.

     “Company Group” means the Company and its subsidiaries Galyan’s Nevada, Inc., a Nevada corporation, and Galyan’s of Virginia, Inc., a Virginia corporation.

     “Offer Completion Date” means the date of purchase of shares of Company Common Stock by the Purchaser in the Offer.

     “Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

     “Proposed Business Combination” means the Offer, the Merger and the related transactions contemplated by the Merger Agreement.

     “Transfer” means, with respect to a security, the sale, transfer, pledge, hypothecation, encumbrance, assignment or disposition of such security or the Beneficial Ownership thereof (other than by operation of law), the offer to make such a sale, transfer or other disposition, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing. As a verb, “Transfer” shall have a correlative meaning.

     2. Tender of Shares; Agreement to Sell.

     (a) In order to induce Parent and the Purchaser to enter into the Merger Agreement, each Shareholder hereby agrees to validly tender (or cause the record owner of such shares to validly tender), pursuant to and in accordance with the terms of the Offer, not later than the 20th business day after commencement of the Offer, such Shareholder’s Owned Shares. If a Shareholder acquires Beneficial Ownership of additional shares of Company Common Stock after the date hereof and prior to termination of this Agreement, such Shareholder shall tender such additional shares of Company Common Stock on such 20th business day or, if later, on the second business day after such acquisition. A Shareholder shall not withdraw any shares tendered pursuant this Section 2(a) unless this Agreement is terminated or the Offer is terminated or has expired without Purchaser purchasing all shares validly tendered in the Offer and not withdrawn. Notwithstanding anything herein to the contrary, Limited Brands, Inc. shall not be obligated to tender its warrant for 1,350,000 shares of Company Common Stock, with an exercise price in excess of $44.82 per share

2

 

(the “Warrant”), or any shares of Company Common Stock issuable upon exercise of the Warrant (unless Limited Brands, Inc. elects to exercise such Warrant).

     (b) Without the written consent of each Shareholder, Purchaser shall not (i) decrease the Offer Price, (ii) decrease the aggregate number of shares of Company Common Stock sought or (iii) change the form of consideration to be paid pursuant to the Offer.

     3. No Disposition or Solicitation.

     (a) Each Shareholder agrees that from and after the date hereof, except as contemplated by this Agreement, such Shareholder will not (as a Shareholder, trustee or custodian) Transfer or agree to Transfer any of such Shareholder’s Owned Shares or any options or warrants or other rights held or owned by such Shareholder to acquire Company Common Stock (other than any transfer of an option or warrant to the Company in connection with the exercise of such option or warrant by such Shareholder) without Parent’s prior written consent (which consent shall not be unreasonably withheld or delayed in the context of a Transfer to any member of the immediate family of such Shareholder or to any trust the Beneficial Ownership of which is held by such Shareholder, provided in each case that such transferee agrees, in a form satisfactory to Parent, to be bound by the terms of this Agreement), or grant any proxy or power-of-attorney with respect to any such Company Common Stock other than pursuant to this Agreement.

     (b) Shareholder will not, in its capacity as a shareholder of the Company, and will use its reasonable best efforts to ensure that its investment bankers, attorneys, accountants, agents or other advisors or representatives (the “Shareholder Representatives”), directly or indirectly, will not take any action with respect to any Takeover Proposal that the Company is prohibited from taking under clause (i) or (ii) of Section 5.1.3 of the Merger Agreement; provided that, in the event the Company takes action under Section 5.1.3 of the Merger Agreement, each Shareholder will be entitled to participate in all actions that the Company is or would be entitled to take under Section 5.1.3 of the Merger Agreement so long as such actions are taken in compliance with such Section 5.1.3. Notwithstanding the foregoing, it is agreed and understood by the parties that the term “Shareholder Representatives” shall not include the Company or any subsidiary of the Company or any of their respective investment bankers, attorneys, accountants, agents or other advisors or representatives.

     (c) Shareholder will cease and cause to be terminated all existing discussions or negotiations conducted by it or its behest with respect to any Takeover Proposal (other than with Parent and Purchaser).

     4. Option.

     (a) On the terms and subject to the conditions set forth herein, each Shareholder hereby grants to each of Parent and Purchaser an irrevocable option (the “Option”) to purchase all of the right, title and interest of such Shareholder in and to such Shareholder’s Owned Shares at a price per share equal to the Offer Price but not less than $16.75 per share. The Parent or Purchaser, as the case may be, may exercise an Option in whole, but

3

 

not in part, if, but only if, (i) Purchaser has acquired all shares of Company Common Stock validly tendered pursuant to the Offer and (ii) such Shareholder shall have failed to tender into the Offer any Owned Shares or shall have withdrawn the tender of any Owned Shares into the Offer.

     (b) In the event that Parent or Purchaser is entitled to and wishes to exercise an Option, Parent or Purchaser shall send a written notice to the relevant Shareholder or parties prior to the termination of this Agreement specifying the place and the date for the closing of such purchase, which date shall be not less than three business days and not more than five business days after the date of such notice; provided that in the event that prior notification to, or approval of, any Governmental Entity is required in connection with the exercise of an Option or there shall be in effect any preliminary or final injunction or other order issued by any Governmental Entity prohibiting the exercise of an Option, the period of time during which the date of the closing may be fixed shall be extended until the tenth day following the last date on which all required approvals shall have been obtained, all required waiting periods shall have expired or been terminated and any such prohibition shall have been vacated, terminated or waived.

     (c) At the closing of the purchase of a Shareholder’s Owned Shares pursuant to exercise of an Option, simultaneously with the payment by Parent or Purchaser of the purchase price for a Shareholder’s Owned Shares, such Shareholder shall deliver, or cause to be delivered, to Parent or Purchaser certificates representing such Owned Shares duly endorsed to Parent or Purchaser or accompanied by stock powers duly executed by the Company in blank, together with any necessary stock transfer stamps properly affixed, free and clear of all Liens.

     5. Agreement to Vote. Each Shareholder agrees that (a) at such time as the Company conducts a meeting (including any adjournment thereof) of or otherwise seeks a vote or consent of its shareholders for the purpose of approving the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, such Shareholder will vote, or provide a consent with respect to, all Company Common Stock (including the Owned Shares) which, as of the relevant record date, such Shareholder has the power to vote, in favor of approving the Merger Agreement and the transactions contemplated by such Agreement, including the Merger, and (b) such Shareholder will (at any meeting of shareholders or in connection with any consent solicitation) vote all shares of Company Common Stock (including the Owned Shares) which, as of the relevant record date, such Shareholder has the power to vote, against, and will not consent to, any Takeover Proposal with a Person other than Parent and Purchaser or any action that would or is designed to delay, prevent or frustrate the Proposed Business Combination. Without limiting the foregoing, it is understood that the obligations under clause (a) in this Section 5 shall remain applicable in respect of each meeting of shareholders of the Company duly called for the purpose of approving the Merger Agreement and the transactions contemplated thereby, including the Merger, regardless of the position of the Company’s board of directors as to the Proposed Business Combination at the time of such meeting.

4

 

     6. Information. Each Shareholder will provide any information requested by the Company or Parent for any regulatory application or filing made or approval sought for such transactions (including filings with the SEC).

     7. Additional Stock. Each Shareholder agrees that any additional shares of Company Common Stock or securities convertible into Company Common Stock acquired by such Shareholder or over which it acquires Beneficial Ownership or voting power or dispositive power, whether pursuant to existing stock option agreements, warrants or otherwise, shall be subject to the provisions of this Agreement.

     8. Irrevocable Proxy.

     (a) In furtherance of the agreements contained in this Agreement, each Shareholder hereby irrevocably grants to, and appoints, Edward W. Stack, Chairman and Chief Executive Officer of Parent, William J. Colombo, President of Parent, Michael F. Hines, Chief Financial Officer of Parent, and William R. Newlin, Chief Administrative Officer of Parent, in their respective capacities as officers of Parent, and any individual who shall hereafter succeed to any such office of Parent, and each of them individually, such Shareholder’s proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote all shares of such Shareholder’s Owned Shares or Company Common Stock over which such Shareholder has voting power, or grant a consent or approval in respect of such shares, or execute and deliver a proxy to vote such shares, (i) in favor of adopting the Merger Agreement and approving the transactions contemplated thereby, including the Merger, and (ii) against any Takeover Proposal with a Person other than Parent and Purchaser or any other matter referred to in clause (b) of Section 5 hereof. For the avoidance of doubt, the proxy granted by each Shareholder pursuant to this Section 8(a) is not granted with respect to any matter other than those matters set forth in items (i) and (ii) of this Section 8(a).

     (b) Each Shareholder represents and warrants to Parent and Purchaser that any proxies heretofore given by it in respect of shares of Company Common Stock are not irrevocable, and that any such proxies are hereby revoked, and agrees to communicate in writing notice of revocation of such proxies to the relevant proxy holders.

     (c) Each Shareholder hereby affirms that the irrevocable proxy set forth in Section 8(a) is given in connection with, and in consideration of, the execution of the Merger Agreement by Parent and Purchaser, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Each Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked. Such Shareholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 3 of Chapter 30 of the Indiana Business Corporation Law.

     (d) Nothing contained in this Agreement shall give Parent or Purchaser the right to control or direct the Company or the Company’s operations.

5

 

     9. Representations, Warranties and Covenants of the Shareholders. Each Shareholder hereby individually (and not jointly or severally) represents and warrants to, and agrees with, Parent and Purchaser as follows:

     (a) Such Shareholder has all necessary power and authority and legal capacity to execute and deliver this Agreement and perform its obligations hereunder. In the case of each Shareholder who is not a natural person, no other proceedings or actions on the part of such Shareholder are necessary to authorize the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby.

     (b) This Agreement has been duly and validly executed and delivered by such Shareholder and constitutes a valid, legal and binding agreement of such Shareholder, enforceable against such Shareholder in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles.

     (c) Each Shareholder is the sole Beneficial Owner of such Shareholder’s Owned Shares, other than those Owned Shares Beneficially Owned by a family trust or child of such Shareholder. Each Shareholder has the sole right to vote, or cause to be voted, and to dispose, or cause the disposition, of such Shareholder’s Owned Shares and there exist no limitations on its ability to exercise such right. Each Shareholder has good and marketable title (which may include holding in nominee or “street” name) to all of such Shareholder’s Owned Shares (other than those Owned Shares Beneficially Owned by a family trust or child of such Shareholder), free and clear of all Liens (other than as created by this Agreement and the restrictions on Transfer under applicable securities laws). The Owned Shares constitute all of the capital stock of the Company Beneficially Owned by such Shareholder.

     (d) Subject to requisite shareholder approval and except for the consents referred to in Section 4.1.8 of the Merger Agreement, neither the execution nor delivery of this Agreement by such Shareholder nor the Shareholder’s consummation of the transactions contemplated hereby will conflict with, result in any violation of, or constitute a default under, (i) any material mortgage, bond, indenture, agreement, instrument or obligation to which such Shareholder is a party or by which such Shareholder or any of the Owned Shares is bound (or, in the case of each Shareholder that is not a natural person, such Shareholder’s constituent documents), or (ii) any judgment, decree, order or material law or regulation of any governmental agency or authority in the United States by which such Shareholder or any of its subsidiaries is bound, except, with respect to clauses (i) and (ii) above, where the conflict or default, individually or in the aggregate, will not have a material adverse effect on such Shareholder.

     (e) Each Shareholder understands and acknowledges that each of Parent and Purchaser is entering into the Merger Agreement in reliance upon such Shareholder’s execution, delivery and performance of this Agreement.

6

 

     10. Representations and Warranties of Parent. Parent represents and warrants to each Shareholder as follows:

     (a) Organization, Good Standing, Capitalization. Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with all requisite corporate power and authority to own, operate and lease its properties, to carry on its business as now being conducted, and to enter into this Agreement and perform its obligations hereunder.

     (b) Purchaser. Parent owns all of the issued and outstanding shares of Purchaser. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Indiana with all requisite corporate power to enter into this Agreement and perform its obligations hereunder. All of the issued and outstanding shares of Purchaser have been validly issued and are fully paid and non-assessable with no personal liability attaching to the ownership thereof. There are no outstanding rights, options, warrants, conversion rights or agreements for the purchase or acquisition from, or the sale or issuance by, Purchaser of any shares of its capital stock, other than this Agreement. Since its organization, Purchaser has conducted no business activities, except such as are related to this Agreement and the performance of its obligations hereunder.

     (c) Authority Relative to this Agreement, etc. Each of Parent and Purchaser has taken all necessary corporate action to approve this Agreement and the performance of its obligations hereunder. This Agreement has been duly and validly executed and delivered by each of Parent and Purchaser and constitutes a valid, legal and binding agreement of each of Parent and Purchaser, respectively, enforceable against each of Parent and Purchaser in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles.

     (d) Compliance with other Instruments, etc. Subject to the consents referred to in Section 4.2.5 of the Merger Agreement, neither the execution nor delivery of this Agreement by Parent or Purchaser nor Parent’s or Purchaser’s consummation of the transactions contemplated hereby will conflict with, result in any violation of, or constitute a default under, the Articles or Certificate of Incorporation or Bylaws of Parent or Purchaser or any agreement, mortgage, indenture, license, permit, lease or other instrument material to Parent and its subsidiaries taken as a whole or any judgment, decree, order, or any material law or regulation of any governmental agency or authority in the United States by which Parent or any of its subsidiaries is bound.

     (e) Governmental and other Consents, etc. Subject to any required filing with the U.S. Department of Justice or the Federal Trade Commission, no material consent, approval or authorization of or designation, declaration or filing with any Governmental Entity on the part of Parent or Purchaser is required in connection with the execution or delivery by Parent and Purchaser of this Agreement or the consummation of the transactions by Parent

7

 

and Purchaser contemplated hereby other than filings with the SEC and any applicable national securities exchange or quotation system.

     (f) No Broker. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Purchaser other than Peter J. Solomon Company, L.P.

     (g) Litigation. There is not now pending, and to the knowledge of Parent and Purchaser there is not threatened, any litigation, action, suit or proceeding to which Parent or Purchaser or any of their respective subsidiaries is or will be a party in or before or by any Governmental Entity, except for any litigation, action, suit or proceeding (whether instituted, pending or threatened) involving claims which, individually or in the aggregate, will not have a Material Adverse Effect on Parent and Purchaser or the Merger. In addition, there is no judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against Parent or Purchaser or any of their respective subsidiaries having or which, individually or in the aggregate, will not have a Material Adverse Effect on Parent and Purchaser or the Merger.

     (h) Offer Documents; Proxy Statement.

          (1) None of the Offer Documents will, at the times such documents are filed with the SEC and are mailed to the shareholders of the Company, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by Parent or Purchaser with respect to information supplied in writing by the Company or an affiliate of the Company expressly for inclusion therein. The Offer Documents will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations of the SEC thereunder.

          (2) None of the information supplied by Parent, Purchaser or any affiliate of Parent or Purchaser for inclusion in the Proxy Statement or the Schedule 14D-9 will, at the date of filing with the SEC, and, in the case of the Proxy Statement, at the time the Proxy Statement is mailed and at the time of the Special Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

     11. Termination. This Agreement, and all rights and obligations of the parties hereunder (other than those set forth in Section 12(a)), shall terminate upon the earlier of: (i) the Effective Time of the Merger, (ii) the acceptance for payment of the Owned Shares by Parent or Purchaser in the Offer, (iii) the failure of Purchaser timely to commence the Offer, (iv) the failure of Purchaser timely to purchase all Owned Shares of the Shareholders in the Offer or (v) the date upon which the Merger Agreement is terminated pursuant to Section 7 thereof without the Merger having been consummated.

8

 

12. Miscellaneous.

     (a) Costs and Expenses. Except as otherwise provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses.

     (b) Execution in Counterparts. For the convenience of the parties, this Agreement and any amendments, supplements, waivers and modifications may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document.

     (c) Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and their respective successors, personal or legal representatives, executors, administrators, heirs, distributees, devisees, legatees and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party (whether by operation of law or otherwise), in whole or in part, without the prior written consent of the other parties; provided, that Parent or Purchaser may assign any or all rights under this Agreement to any subsidiary of Parent, and Purchaser may assign any or all rights under this Agreement to Parent.

     (d) Amendments and Waivers. This Agreement may not be amended, changed, supplemented, or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties hereto; provided, that each of Parent and Purchaser may waive compliance by any other party with any representation, agreement or condition otherwise required to be complied with by any other party under this Agreement or release any other party from its obligations under this Agreement, but any such waiver or release shall be effective only if in a writing executed by Parent and Purchaser.

     (e) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given (i) upon transmitter’s confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a nationally reputable standard overnight carrier or (iii) when delivered by hand, addressed at the address for such party set forth below.

     
  If to a Shareholder, to such Shareholder at the address set forth beside its name on Schedule A hereto with a copy to:
 
    
  Galyan’s Trading Company, Inc.
  One Galyans Parkway
  Plainfield, Indiana 46168
  Fax: (317) 532-0269
  Attention: C. David Zoba, Executive Vice President, General
  Counsel and Secretary

9

 

     
  and to:
 
    
  Drake S. Tempest, Esq.
  O’Melveny & Myers LLP
  Times Square Tower
  7 Times Square
  New York, NY 10036
  Fax: (212) 326-2061
 
    
  If to Parent or Purchaser, to:
 
    
  Dick’s Sporting Goods, Inc.
  200 Industry Drive
  RIDC Park West
  Pittsburg, Pennsylvania 15275
  Fax: (412) 490-1394
  Attention: William R. Newlin, Executive Vice President and Chief
  Administrative Officer
 
    
  With a copy to:
 
    
  Lewis U. Davis, Jr., Esq.
  Jeremiah G. Garvey, Esq.
  Buchanan Ingersoll PC
  One Oxford Centre
  300 Grant Street, 20th Floor
  Pittsburgh, PA 15219
  Fax: (412) 562-1041

or to such other address or facsimile number as the Person to whom notice is given shall have previously furnished to the others in writing in the manner set forth above.

     (f) Inadequate Remedy at Law; Specific Performance. Each Shareholder acknowledges and agrees that in the event of any breach of this Agreement, Parent would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed with respect to any provision of this Agreement that (i) each Shareholder will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) Parent shall be entitled, in addition to any other remedy to which it may be entitled at law or in equity, to compel specific performance of this Agreement.

     (g) Cumulative Rights, Powers and Remedies. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. The failure of any party hereto to exercise any right, power or remedy provided

10

 

under this Agreement or otherwise available in respect hereof at law or in equity, or to insist upon compliance by any other party hereto with its obligations hereunder, and any custom or practice of the parties at variance with the terms hereof, shall not constitute a waiver by such party of its right to exercise any such or other right, power or remedy or to demand such compliance.

     (h) Entire Agreement; No Third Party Beneficiaries. This Agreement, along with the specific references to the Merger Agreement, constitutes the complete, final and exclusive agreement among the parties and supersedes any and all prior agreements and understandings, written or oral, among the parties heretofore made with respect to the subject matter hereof. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.

     (i) Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Indiana without regard to any principles of conflict of laws. Each of the parties hereto consents to submit itself to the personal jurisdiction of any federal court located in the Northern District of Indiana or any Indiana state court located in a county within the area comprising the Federal District Court for the Northern District of Indiana in the event any dispute arises out of this Agreement or the transactions contemplated by the Merger Agreement, (ii) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iii) agrees that it shall not bring any action relating to this Agreement or the transactions contemplated by the Merger Agreement in any court other than a federal or state court sitting in the Federal District Court for the Northern District of Indiana or a county within the area comprising the Federal District Court for the Northern District of Indiana.

     (j) Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12(j).

11

 

     (k) Severability. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable under any rule of law in any particular respect or under any particular circumstances, the remainder of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

     (l) Interpretation. The section and paragraph captions herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. The words “include,” “includes,” and “including” shall be deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import.

     (l) Publicity. The initial press release concerning the Offer and the Merger shall be a joint press release from the Company and Parent and, thereafter, except as otherwise required by law or the rules of the SEC, the NYSE or NASDAQ, for so long as this Agreement is in effect, no party shall, or shall permit any of their respective subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by this Agreement without the consent of the other parties, which consent shall not be unreasonably withheld; provided, however, that any party hereto may file a copy of this Agreement and the related agreements with the SEC and the Purchaser and the Parent may summarize the terms of this Agreement in the Purchaser’s tender offer materials and in any oral solicitations made in accordance with Regulation 14D promulgated by the SEC and in any other filings made by Parent with the SEC.

     13. Shareholder Capacity. No Shareholder executing this Agreement nor any partner, member, employee or Affiliate of a Shareholder who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein in his or her capacity as such a director or officer, and this Agreement does not bind any partner, member, employee or Affiliate of a Shareholder in such person’s capacity as a director of officer. Each Shareholder executing this Agreement does so solely in such Shareholder’s capacity as the owner of record and/or Beneficial Owner of the Owned Shares or as having the power to vote or dispose of the Owned Shares and nothing herein (including in Section 4) shall limit or affect any actions taken or omitted to be taken by a Shareholder, or any partner, member, employee or Affiliate of a Shareholder, in his or her capacity as an officer or director of the Company (including, for the avoidance of doubt, any action in the discharge of fiduciary duties in compliance with Section 5.1.3 of the Merger Agreement); provided, that nothing in this Section 13 shall be deemed to permit any Shareholder to take any action on behalf of the Company that is prohibited by the Merger Agreement.

     14. Further Assurances. From time to time, at Parent’s or Purchaser’s request and without further consideration, each Shareholder shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make

12

 

effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement.

[Remainder of page intentionally left blank]

13

 

[Shareholder Signature Page to Shareholder Tender Agreement]

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

                 
    FS EQUITY PARTNERS IV, L.P.
 
                
    By: FS Capital Partners LLC
    Its: General Partner
 
                
        By:     /s/ John M. Roth
           
          Name:   John M. Roth
          Title:    
             

S-1

 

[Shareholder Signature Page to Shareholder Tender Agreement]

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

             
    LIMITED BRANDS, INC.
 
            
    By:     /s/ Timothy J. Faber
       
        Name: Timothy J. Faber
        Title: Vice President Treasurer
 
            
    G TRADEMARK, INC.
 
            
    By:     /s/ Timothy J. Faber
       
        Name: Timothy J. Faber
      Title:    
         

S-2

 

[Parent’s and Purchaser’s Signature Page to Shareholder Tender Agreement]

             
    DICK’S SPORTING GOODS, INC.
 
            
    By:     /s/ William R. Newlin
       
      Name:   William R. Newlin
      Title:   Executive Vice President &
          Chief Administrative Officer
 
            
    DIAMONDBACKS ACQUISITION INC.
 
            
    By:     /s/ William R. Newlin
       
        Name: William R. Newlin
        Title: President

S-3

 

SCHEDULE A

SHAREHOLDERS

             
        NUMBER
NAME
   ADDRESS
   OF SHARES
FS Equity Partners IV, L.P.
   11100 Santa Monica Blvd     5,694,500  
 
   Suite 1900        
 
   Los Angeles, CA 90025        
Limited Brands, Inc.
   Three Limited Parkway     550,500  
 
   Columbus, OH 43230        
G Trademark, Inc.
   c/o Limited Brands, Inc.     3,350,000  
 
   Three Limited Parkway        
 
   Columbus, OH 43230        

S-4

EX-3 4 j0833601exv3.htm EXHIBIT 3 EXHIBIT 3
 

EXHIBIT 3

OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

OF

GALYAN’S TRADING COMPANY, INC.

BY

DIAMONDBACKS ACQUISITION INC.

A WHOLLY OWNED SUBSIDIARY

OF

DICK’S SPORTING GOODS, INC.

AT

$16.75 NET PER SHARE

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,

NEW YORK CITY TIME, ON WEDNESDAY, JULY 28, 2004, UNLESS THE OFFER IS EXTENDED.

     THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED AS OF JUNE 21, 2004 (THE “MERGER AGREEMENT”), BY AND AMONG GALYAN’S TRADING COMPANY, INC. (“GALYAN’S” OR THE “COMPANY”), DICK’S SPORTING GOODS, INC. (“DICK’S” OR “PARENT”) AND DIAMONDBACKS ACQUISITION INC., A WHOLLY OWNED SUBSIDIARY OF DICK’S (“PURCHASER”). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN A NUMBER OF SHARES OF COMMON STOCK, NO PAR VALUE PER SHARE, OF GALYAN’S (“COMPANY COMMON SHARES,” “SHARES” OR “GALYAN’S SHARES”), THAT REPRESENTS AN AMOUNT EQUAL TO A NUMBER OF COMPANY COMMON SHARES THAT (INCLUDING THE SHARES TENDERED UNDER THE SHAREHOLDER TENDER AGREEMENT (AS DEFINED BELOW)) IMMEDIATELY PRIOR TO THE ACCEPTANCE FOR PAYMENT OF COMPANY COMMON SHARES PURSUANT TO THE OFFER REPRESENTS AT LEAST A MAJORITY OF THE SUM OF (A) THE AGGREGATE NUMBER OF COMPANY COMMON SHARES OUTSTANDING IMMEDIATELY PRIOR TO THE ACCEPTANCE OF COMPANY COMMON SHARES PURSUANT TO THE OFFER, PLUS (B) THE AGGREGATE NUMBER OF COMPANY COMMON SHARES ISSUABLE UPON THE EXERCISE OF ANY OPTION, WARRANT, OTHER RIGHT TO ACQUIRE CAPITAL STOCK OF GALYAN’S OR OTHER SECURITY EXERCISABLE OR CONVERTIBLE FOR COMPANY COMMON SHARES OR OTHER CAPITAL STOCK OF GALYAN’S OUTSTANDING IMMEDIATELY PRIOR TO THE ACCEPTANCE OF COMPANY COMMON SHARES PURSUANT TO THE OFFER (WHICH AMOUNT AS OF JUNE 28, 2004, EQUALED 10,794,518 SHARES) AND (II) ANY WAITING PERIOD (AND ANY EXTENSION THEREOF) APPLICABLE TO THE CONSUMMATION OF THE OFFER AND THE MERGER UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, HAVING EXPIRED OR BEEN TERMINATED. THE OFFER ALSO IS SUBJECT TO OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14—“CONDITIONS OF THE OFFER.”

THE BOARD OF DIRECTORS OF GALYAN’S UNANIMOUSLY, WITH THE MANAGEMENT DIRECTOR ABSTAINING, (I) DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE AND IN THE BEST INTERESTS OF GALYAN’S, (II) APPROVED AND ADOPTED THE PLAN OF MERGER CONTAINED IN THE MERGER AGREEMENT, (III) RECOMMENDED ACCEPTANCE OF THE OFFER AND APPROVAL OF THE PLAN OF MERGER CONTAINED IN THE MERGER AGREEMENT BY THE SHAREHOLDERS OF GALYAN’S, (IV) IRREVOCABLY TOOK ALL NECESSARY STEPS TO CAUSE CHAPTER 42 OF THE INDIANA BUSINESS CORPORATION LAW TO BE INAPPLICABLE TO THE MERGER, THE SHAREHOLDER TENDER AGREEMENT AND THE

 

ACQUISITION OF SHARES PURSUANT TO THE OFFER AND THE SHAREHOLDER TENDER AGREEMENT, (V) IRREVOCABLY TOOK ALL NECESSARY STEPS TO APPROVE DICK’S AND PURCHASER BECOMING, PURSUANT TO THE MERGER, THE SHAREHOLDER TENDER AGREEMENT AND/ OR THE ACQUISITION OF COMPANY STOCK PURSUANT TO THE OFFER AND THE SHAREHOLDER TENDER AGREEMENT, “INTERESTED SHAREHOLDERS” WITHIN THE MEANING OF SECTION 23-1-43-10 OF THE INDIANA BUSINESS CORPORATION LAW AND TO CAUSE ANY OTHER REQUIREMENTS OF CHAPTER 43 OF THE INDIANA BUSINESS CORPORATION LAW TO BE INAPPLICABLE TO THE MERGER, THE SHAREHOLDER TENDER AGREEMENT AND THE ACQUISITION OF SHARES PURSUANT TO THE OFFER AND THE SHAREHOLDER TENDER AGREEMENT AND (VI) IRREVOCABLY RESOLVED TO ELECT, TO THE EXTENT OF THE COMPANY’S BOARD OF DIRECTORS’ POWER AND AUTHORITY AND TO THE EXTENT PERMITTED BY LAW, NOT TO BE SUBJECT TO ANY OTHER “MORATORIUM,” “CONTROL SHARE ACQUISITION,” “BUSINESS COMBINATION,” “FAIR PRICE” OR OTHER FORM OF ANTI-TAKEOVER LAWS AND REGULATIONS OF ANY JURISDICTION THAT MAY PURPORT TO BE APPLICABLE TO THE MERGER AGREEMENT OR THE SHAREHOLDER TENDER AGREEMENT.

      UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS “WE,” “US,” AND “OUR” REFER TO DICK’S SPORTING GOODS, INC. AND/OR DIAMONDBACKS ACQUISITION INC.

IMPORTANT

      Any Galyan’s shareholder wishing to tender Shares in the Offer must either (i) complete and sign the letter of transmittal (or a facsimile) in accordance with the instructions in the letter of transmittal, and mail or deliver the letter of transmittal and all other required documents to Computershare Trust Company of New York (the “Depositary”) together with certificates representing Shares tendered or follow the procedure for book-entry transfer set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares” or (ii) request the Galyan’s shareholder’s broker, dealer, commercial bank, trust company or other nominee to effect the tender of Shares to Purchaser. Any Galyan’s shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact that person if the Galyan’s shareholder wishes to tender those Shares.

      Any Galyan’s shareholder that wishes to tender Shares and cannot deliver certificates representing those Shares and all other required documents to the Depositary on or prior to the Expiration Date (as defined below) or that cannot comply with the procedures for book-entry transfer on a timely basis may tender the Shares pursuant to the guaranteed delivery procedure set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares.” Questions and requests for assistance may be directed to Georgeson Shareholder Communications, Inc., the Information Agent, at its address and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the letter of transmittal, the notice of guaranteed delivery and other related materials may be obtained from the Information Agent. Galyan’s shareholders also may contact their broker, dealer, commercial bank, trust company or other nominee for copies of these documents.

The Dealer Manager for the Offer is:

(Georgeson Shareholders Securities)

June 29, 2004

 

TABLE OF CONTENTS

         
Page
Summary Term Sheet
    Q-1  
Frequently Asked Questions
    Q-5  
Introduction
    1  
Terms of the Offer
    3  
Acceptance for Payment and Payment for Shares
    5  
Procedures for Accepting the Offer and Tendering Shares
    6  
Withdrawal Rights
    9  
Material U.S. Federal Income Tax Consequences
    10  
Price Range of the Shares; Dividends
    10  
Possible Effects of the Offer on the Market for the Shares; Nasdaq Listing; Securities Exchange Act Registration; Margin Regulations
    11  
Information Concerning Galyan’s
    12  
Information Concerning Dick’s and Purchaser
    12  
Background of the Offer; Past Contacts or Negotiations with Galyan’s
    13  
Purpose of the Offer; the Merger Agreement; the Shareholder Tender Agreement; Statutory Requirements; Dissenters’ Rights; “Going Private” Transactions; Plans for Galyan’s
    16  
Source and Amount of Funds
    34  
Dividends and Distributions
    38  
Conditions of the Offer
    38  
Legal Matters; Required Regulatory Approvals
    40  
Fees and Expenses
    44  
Miscellaneous
    45  

i

 

Summary Term Sheet

 
Securities Sought: All outstanding common stock of Galyan’s Trading Company, Inc.
 
Price Offered Per Share: $16.75
 
Scheduled Expiration Date: July 28, 2004
 
Purchaser: Diamondbacks Acquisition Inc., a wholly owned subsidiary of Dick’s Sporting Goods, Inc.
 
Minimum Condition: There being validly tendered and not withdrawn a number of shares of common stock, no par value per share, of Galyan’s (“Company Common Shares” or “Shares”), that represents an amount equal to a number of Company Common Shares that (including the shares tendered under the shareholder tender agreement) immediately prior to the acceptance for payment of Company Common Shares pursuant to the offer represents at least a majority of the sum of (i) the aggregate number of Company Common Shares outstanding immediately prior to the acceptance of Company Common Shares pursuant to the offer, plus (ii) the aggregate number of Company Common Shares issuable upon the exercise of any option, warrant, other right to acquire capital stock of the Company or other security exercisable or convertible for Company Common Shares or other capital stock of the Company outstanding immediately prior to the acceptance of Company Common Shares pursuant to the offer.
 
As of June 28, 2004, the required minimum number of Shares would have been 10,794,518 Galyan’s Shares.
 
Shareholder Tender Agreement: Holders of Galyan’s common stock who collectively beneficially own 9,595,000 Shares (approximately 55% of the outstanding common stock or approximately 44% on a fully diluted basis) directly or through affiliates of Freeman Spogli & Co. and Limited Brands, Inc. have agreed to tender their Shares to Purchaser.
 
Galyan’s Board of Directors Recommendation: Galyan’s Board of Directors recommends that Galyan’s shareholders tender into the Offer.

Principal Terms

  •  Dick’s, a Delaware corporation, through its wholly owned subsidiary, is offering to buy all outstanding common stock of Galyan’s Trading Company, Inc., an Indiana corporation.
 
  •  The tender price is $16.75 per share in cash.
 
  •  The offer is the first step in Dick’s plan to acquire all outstanding Galyan’s Shares, as provided in Dick’s merger agreement with Galyan’s. If the offer is successful, Dick’s, through its wholly owned subsidiary, will acquire any remaining Galyan’s Shares in a later merger for $16.75 per share in cash.
 
  •  Under Section 23-1-40-4 of the Indiana Business Corporation Law, if Purchaser acquires, pursuant to the offer or otherwise, at least 90% of the outstanding Shares, Purchaser will be able to effect the merger, and is required to do so under the merger agreement, after consummation of the Offer without a vote of Galyan’s shareholders. However, if Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the offer or otherwise, a vote at a meeting of Galyan’s shareholders is required under Indiana law, and a significantly longer period of time will be required to effect the merger.

Q-1

 

  •  If Galyan’s stock is delisted from Nasdaq prior to the effective date of the merger and Galyan’s shareholders have the right to vote on the merger, then and only then will Galyan’s shareholders have dissenters’ rights in the merger. We can give no assurances that Galyan’s Shares will continue to trade over Nasdaq. In no event do Galyan’s shareholders have dissenters’ rights in the offer.
 
  •  The initial offering period of the offer will expire at 12:00 midnight, New York City time, on Wednesday, July 28, 2004 unless we extend the offer. If certain conditions are not met, we may, without the consent of Galyan’s, elect (and under certain circumstances are required to at the request of Galyan’s) to extend the scheduled expiration date of the offer period in increments of not more than 10 business days beginning immediately after the expiration date of the offer.
 
  •  If we decide to extend the offer, we will issue a press release giving the new expiration date no later than 9:00 a.m., New York City time, on the first business day after the previously scheduled expiration date of the offer.
 
  •  Pursuant to a shareholder tender agreement among Dick’s, Purchaser and certain holders of Galyan’s common stock, holders of Galyan’s common stock who collectively beneficially own approximately 55% of the outstanding common stock of Galyan’s (or approximately 44% on a fully diluted basis) have agreed to tender their Shares to Purchaser.

Galyan’s Board of Directors Recommendation

      The Board of Directors of Galyan’s unanimously, with the management director abstaining:

  •  determined that the merger agreement, the offer, the merger and the other transactions contemplated thereby and the shareholder tender agreement and the transactions contemplated thereby were advisable and in the best interests of the Company;
 
  •  approved the merger agreement and the transactions contemplated thereby, including the offer and the merger, and the shareholder tender agreement and the transactions contemplated thereby; and
 
  •  recommended that Galyan’s shareholders accept the offer and tender their shares pursuant to the offer and, if necessary under the Indiana Business Corporation Law, approve and adopt the merger agreement and the transactions contemplated thereby.

      See Section 11—“Purpose of the Offer; the Merger Agreement; the Shareholder Tender Agreement; Statutory Requirements; Dissenters’ Rights; “Going Private” Transactions; Plans for Galyan’s.”

Conditions and Termination

      We are not required to complete the offer, unless:

  •  There being validly tendered and not withdrawn a number of Company Common Shares that represents an amount equal to a number of Company Common Shares that (including the shares tendered under the shareholder tender agreement) immediately prior to the acceptance for payment of Company Common Shares pursuant to the offer represents at least a majority of the sum of (a) the aggregate number of Company Common Shares outstanding immediately prior to the acceptance of Company Common Shares pursuant to the offer, plus (b) the aggregate number of Company Common Shares issuable upon the exercise of any option, warrant, other right to acquire capital stock of Galyan’s or other security exercisable or convertible for Company Common Shares or other capital stock of the Company outstanding immediately prior to the acceptance of Company Common Shares pursuant to the offer (which amount, as of June 28, 2004, equaled 10,794,518 shares) and
 
  •  Any waiting period (and any extension thereof) applicable to the consummation of the offer and the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, having expired or been terminated.

Q-2

 

      Other conditions to the offer and Dick’s and Galyan’s respective rights to terminate the merger agreement are described on pages 29 through 30 of this offer to purchase. The offer is not conditioned on Dick’s obtaining financing.

Procedures for Tendering

      If you wish to accept the offer, this is what you must do:

  •  If you are a record holder (i.e., a stock certificate has been issued to you), you must complete and sign the enclosed letter of transmittal and send it with your stock certificate to the depositary for the offer or follow the procedures described in this offer to purchase and the enclosed letter of transmittal for book-entry transfer. These materials must reach the depositary before the offer expires. Detailed instructions are contained in the letter of transmittal and on pages six through nine of this offer to purchase.
 
  •  If you are a record holder but your stock certificate is not available or you cannot deliver your stock certificate to the depositary before the offer expires, you may be able to tender your Galyan’s shares using the enclosed notice of guaranteed delivery. Please call the Information Agent, Georgeson Shareholder Communications, Inc., at (800) 248-6973 (Toll-Free) or (212) 440-9800 (Collect) for assistance. See pages six through nine of this offer to purchase for further details.
 
  •  If you hold your Galyan’s Shares through a broker or bank, you should contact your broker or bank and give instructions that your Galyan’s Shares be tendered.

Withdrawal Rights

  •  If, after tendering your Galyan’s Shares in the offer, you decide that you do not want to accept the offer, you can withdraw your Galyan’s Shares by so instructing the depositary in writing before the offer expires. If you tendered your Galyan’s Shares by giving instructions to a broker or bank, you must instruct the broker or bank to arrange for the withdrawal of your Galyan’s Shares. See page nine of this offer to purchase for further details.

Recent Galyan’s Trading Prices

  •  The closing price for Galyan’s Shares at the closing of regular trading hours of the Nasdaq National Market (“Nasdaq”) was:

  $11.10 per share on June 21, 2004, the last trading day before we announced the merger agreement, and $16.64 per share on June 28, 2004, the last trading day before the date of this offer to purchase.
 
  Before deciding whether to tender, you should obtain a current market quotation for the Shares.

  •  If the offer is successful, we expect Galyan’s Shares to continue to be traded over Nasdaq until the time of the merger, although we expect trading volume to be significantly below its pre-offer level. Please note that the time period between completion of the offer and the merger may be very short (i.e., less than one trading day). However, we can give no assurances that Galyan’s Shares will continue to be traded over Nasdaq. See pages 10 through 11 of this offer to purchase for further details.

Q-3

 

Income Tax Consequences of Tendering Your Galyan’s Shares

  •  The sale or exchange of Galyan’s Shares pursuant to the offer or the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a Galyan’s shareholder that sells Galyan’s Shares pursuant to the offer or receives cash in exchange for Galyan’s Shares pursuant to the merger will recognize gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received and the Galyan’s shareholder’s tax basis in the Galyan’s Shares sold or exchanged. See pages nine through 10 of this offer to purchase for further details.

Further Information

  •  If you have questions about the offer, you can call:

The Information Agent:

Georgeson Shareholder Communications, Inc.

17 State Street
New York, NY 10004

Call Toll-Free (800) 248-6973

Q-4

 

Frequently Asked Questions

      The following are answers to some of the questions you, as a Galyan’s shareholder, may have about the offer. We urge you to carefully read the remainder of this offer to purchase and the letter of transmittal and the other documents to which we have referred because the information in this summary term sheet is not complete. Additional important information is contained in the remainder of this offer to purchase and the letter of transmittal.

Who is offering to buy my securities?

      We are Diamondbacks Acquisition Inc., an Indiana corporation formed for the purpose of making this acquisition. We are a wholly owned subsidiary of Dick’s. See the “Introduction” to this offer to purchase and Section 9 — “Information Concerning Dick’s and Purchaser” in this offer to purchase.

Will I have to pay any fees or commissions?

      If you are the record owner of your Galyan’s Shares and you directly tender your Galyan’s Shares to us in the offer, you will not have to pay brokerage fees or similar expenses. If you own your Galyan’s Shares through a broker or other nominee, and your broker tenders your Galyan’s Shares on your behalf, your broker or nominee may charge you a fee or commission for doing so. You should consult your broker or nominee to determine whether any charges will apply. See the “Introduction” to this offer to purchase.

Have any Galyan’s shareholders agreed to tender their Shares?

      Yes. Pursuant to a shareholder tender agreement certain holders of Galyan’s common stock who collectively beneficially own approximately 55% of the outstanding common stock (or approximately 44% on a fully diluted basis) have agreed to tender their Shares to Dick’s.

      The Shareholder Tender Agreement provides, among other things, that these shareholders have:

  •  agreed to tender all outstanding Shares beneficially owned as of the date of the tender, including Shares acquired subsequent to the shareholder tender agreement;
 
  •  granted to Dick’s an irrevocable option to purchase the outstanding Shares owned by such shareholders, which option may be exercised in whole, but not in part, if Purchaser has acquired all Shares tendered pursuant to the offer and such shareholder fails to tender or withdraws its Shares from the offer;
 
  •  agreed to, at any meeting of the shareholders of Galyan’s, vote all Shares in favor of the merger agreement, against any other takeover proposal, and against any action that would delay the offer;
 
  •  granted an irrevocable proxy to the officers of Dick’s, or their successors, to vote all Shares owned by the shareholder in favor of adopting the merger agreement and against any other takeover proposal; and
 
  •  agreed not to transfer any Shares without the prior written consent of Dick’s.

      The shareholder tender agreement contains other important terms and provisions that limit these shareholders’ actions with respect to their Galyan’s Shares and the circumstances under which the agreement terminates. See Section 11 — “Shareholder Tender Agreement” in this offer to purchase for a description of the material terms of the shareholder tender agreement.

Do you have the financial resources to make payment?

      Dick’s, our parent company, is to provide us with sufficient funds to purchase all Galyan’s Shares validly tendered in the offer and to provide funding for our acquisition of the remaining Galyan’s Shares in the merger, which is expected to follow the successful completion of the offer in accordance with the terms and conditions of the merger agreement. The offer is not conditioned upon any financing arrangements. Dick’s will obtain the necessary funds from its current cash or short term investments and sources of debt

Q-5

 

including existing or new credit facilities and/or a new bridge loan. See Section 12 — “Source and Amount of Funds” of this offer to purchase.

Is your financial condition relevant to my decision to tender my Galyan’s Shares in the offer?

      No. We do not believe our financial condition is relevant to your decision whether to tender your Galyan’s Shares and accept the offer because:

  •  the offer is being made for all outstanding Galyan’s Shares solely for cash;
 
  •  the offer is not subject to any financing condition; and
 
  •  if we consummate the offer, we will acquire all remaining Galyan’s Shares for the same cash price in the merger.

      See Section 12 — “Source and Amount of Funds” in this offer to purchase.

Will the offer be followed by a merger?

      Yes, unless the conditions to the merger are not satisfied or waived. If we accept for payment and pay for at least a number of Company Common Shares that (including the shares tendered under the shareholder tender agreement) immediately prior to the acceptance for payment of Company Common Shares pursuant to the offer represents at least a majority of the sum of (a) the aggregate number of Company Common Shares outstanding immediately prior to the acceptance of Company Common Shares pursuant to the offer, plus (b) the aggregate number of Company Common Shares issuable upon the exercise of any option, warrant, other right to acquire capital stock of the company or other security exercisable or convertible for Company Common Shares or other capital stock of the company outstanding immediately prior to the acceptance of Company Common Shares pursuant to the offer (which amount, as of June 28, 2004, equaled 10,794,518 shares) and the other conditions are satisfied or waived, Purchaser will merge with and into Galyan’s. That number assumes that no Shares or options to acquire Shares are issued after June 28, 2004 and assuming that no Galyan’s shareholder that is a party to the shareholder tender agreement purchases or sells any Shares other than pursuant to the Offer. If the merger takes place, Dick’s will own all Galyan’s Shares, and all the remaining Galyan’s shareholders, other than the Galyan’s dissenting shareholders, if dissenters’ rights become available, that properly exercise dissenters’ rights, will receive $16.75 per Galyan’s share in cash. See the “Introduction” to this offer to purchase. See also Section 11 — “The Merger Agreement” and Section 14 — “Conditions of the Offer” in this offer to purchase for a description of the conditions to the merger.

      Under Section 23-1-40-4 of the Indiana Business Corporation Law, if purchaser acquires, pursuant to the offer or otherwise, at least 90% of the outstanding Shares, Purchaser may be able to effect the merger, and is required to do so under the merger agreement, after consummation of the offer without a vote of the Galyan’s shareholders. However, if purchaser does not acquire at least 90% of the outstanding Shares pursuant to the offer or otherwise, approval of the merger requires the affirmative vote of holders of a majority of the outstanding Shares.

Whom should I call if I have questions about the tender offer? Where do I get additional copies of the offer documents?

      You may call Georgeson Shareholder Communications, Inc. collect at (212) 440-9800 or toll-free at (800) 248-6973. Georgeson Shareholder Communications, Inc. is acting as the Information Agent. See the back cover of this offer to purchase.

Q-6

 

To: All Holders of Shares of Common Stock of Galyan’s Trading Company, Inc.:

Introduction

      Diamondbacks Acquisition Inc. (“Purchaser”), an Indiana corporation and a wholly owned subsidiary of Dick’s Sporting Goods, Inc., a Delaware corporation (“Dick’s” or “Parent”), is offering to purchase all outstanding shares (“Company Common Shares,” “Shares” or “Galyan’s Shares”) of common stock of Galyan’s Trading Company, Inc., an Indiana corporation (“Galyan’s” or the “Company”), at a purchase price of $16.75 per Share, net to the seller in cash, without interest (the “Per Share Amount”), on the terms and subject to the conditions set forth in this offer to purchase (the “Offer to Purchase”) and in the related letter of transmittal (the “Letter of Transmittal” which, together with any amendments or supplements to the Offer to Purchase and the Letter of Transmittal, collectively constitute the “Offer”).

      The tendering Galyan’s shareholders that are record owners of their Shares and tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer. Galyan’s shareholders that hold their Shares through bankers or brokers should check with those institutions as to whether or not they charge any service fee. However, if a Galyan’s shareholder does not complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal, he or she may be subject to a required backup U.S. federal income tax withholding of 28% of the gross proceeds payable to that Galyan’s shareholder. See Section 3 — “Procedures for Accepting the Offer and Tendering Shares.” Dick’s will pay all charges and expenses of Georgeson Shareholder Securities, as the dealer manager (the “Dealer Manager”), Computershare Trust Company of New York, as Depositary, and Georgeson Shareholder Communications, Inc., as Information Agent, incurred in connection with the Offer. See Section 16 — “Fees and Expenses.”

      The Board of Directors of Galyan’s unanimously, with one management director abstaining, (i) determined that the Offer and the Merger (as defined below) are advisable and in the best interests of the Company, (ii) approved and adopted the plan of merger (as such term is used in section 23-1-40-1 of the Indiana Business Corporation Law) contained in the Merger Agreement (as defined below), (iii) recommended acceptance of the Offer and approval of the plan of merger contained in the Merger Agreement by the shareholders of the Company, (iv) irrevocably took all necessary steps to cause Chapter 42 of the Indiana Business Corporation Law to be inapplicable to the Merger, the Shareholder Tender Agreement (as defined below) and the acquisition of shares pursuant to the Offer and the Shareholder Tender Agreement, (v) irrevocably took all necessary steps to approve Dick’s and Purchaser becoming, pursuant to the Merger, the Shareholder Tender Agreement and/or the acquisition of Company Common Shares pursuant to the Offer and the Shareholder Tender Agreement, “interested shareholders” within the meaning of Section 23-1-43-10 of the Indiana Business Corporation Law and to cause any other requirements of Chapter 43 of the Indiana Business Corporation Law to be inapplicable to the Merger, the Shareholder Tender Agreement and the acquisition of Shares pursuant to the Offer and the Shareholder Tender Agreement and (vi) irrevocably resolved to elect, to the extent of the Company’s Board of Directors’ power and authority and to the extent permitted by law, not to be subject to any other “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws and regulations of any jurisdiction that may purport to be applicable to the Merger Agreement or the Shareholder Tender Agreement.

      Purchaser is not required to purchase any Shares unless at least 10,794,518 Shares (calculated as of June 28, 2004), representing a number of Company Common Shares that (including the shares tendered under the Shareholder Tender Agreement) immediately prior to the acceptance for payment of Company Common Shares pursuant to the Offer represents at least a majority of the sum of (a) the aggregate number of Company Common Shares outstanding immediately prior to the acceptance of Company Common Shares pursuant to the Offer, plus (b) the aggregate number of Company Common Shares issuable upon the exercise of any option, warrant, other right to acquire capital stock of the Company or other security exercisable or convertible for Company Common Shares or other capital stock of the Company outstanding immediately prior to the acceptance of Company Common Shares pursuant to the Offer (the “Minimum Condition”).

1

 

      Pursuant to a Shareholder Tender Agreement among Dick’s, Purchaser, and certain holders of Galyan’s common stock (the “Shareholder Tender Agreement”), holders of Galyan’s Shares that collectively beneficially own 9,595,000 outstanding Shares (approximately 55% of the outstanding common stock or approximately 44% on a fully diluted basis) have agreed to tender their Shares to Dick’s.

      The Shareholder Tender Agreement provides, among other things, that these shareholders have:

  •  agreed to tender all outstanding Shares beneficially owned as of the date of the tender, including Shares acquired subsequent to the Shareholder Tender Agreement;
 
  •  granted to Dick’s an irrevocable option to purchase the Shares owned by such shareholder, which option may be exercised in whole, but not in part, if Purchaser has acquired all Shares tendered pursuant to the Offer and such shareholder fails to tender or withdraws its Shares from the Offer;
 
  •  agreed to, at any meeting of the shareholders of Galyan’s, vote all Shares in favor of the Merger Agreement, against any other acquisition proposal, and against any action that would delay the Offer;
 
  •  granted an irrevocable proxy to the officers of Dick’s or their successors, to vote all Shares owned by the shareholder in favor of adopting the Merger Agreement and against any other Takeover Proposal; and
 
  •  agreed not to transfer any Shares without the prior written consent of Dick’s.

      See Section 11 — “The Shareholder Tender Agreement.”

      Purchaser reserves the right (subject to the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “Commission” or “SEC”) and to the prior written consent of Galyan’s), which Purchaser presently has no intention of exercising, to waive or reduce the Minimum Condition and to elect to purchase a smaller number of Shares. The Offer is also subject to certain other terms and conditions. See Sections 1 — “Terms of the Offer,” 14 — “Conditions of the Offer” and 15 — “Legal Matters; Required Regulatory Approvals.”

      Galyan’s has informed Dick’s and Purchaser that, as of Monday, June 28, 2004, there were (i) 17,388,368 Shares issued and outstanding and (ii) outstanding options, warrants or other rights to acquire capital stock of Galyan’s or other securities exercisable or convertible for 4,200,667 Shares. Based on these numbers, and assuming that no Shares or options or warrants to acquire Shares are issued after June 28, 2004 and assuming that no Galyan’s shareholder party to the Shareholder Tender Agreement purchases or sells any Shares other than pursuant to the Offer, the Minimum Condition will be satisfied if at least 10,794,518 Shares are validly tendered and not withdrawn prior to the expiration of the Offer.

      Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), Purchaser will purchase all Shares validly tendered and not withdrawn in accordance with the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares” on or prior to the Expiration Date. “Expiration Date” means 12:00 midnight, New York City time, on Wednesday, July 28, 2004, unless Purchaser determines to extend (or is required under the Merger Agreement to extend) the period of time for which the initial offering period of the Offer is open, in which case “Expiration Date” will mean the time and date at which the initial offering period of the Offer, as so extended, expires. See Section 1 — “Terms of the Offer” and Section 3 — “Procedures for Accepting the Offer and Tendering Shares.”

      Purchaser is making the Offer pursuant to the Agreement and Plan of Merger, dated as of June 21, 2004 by and among Galyan’s, Dick’s and Purchaser (the “Merger Agreement”). Following the consummation of the Offer and the satisfaction or waiver of certain conditions, Galyan’s will merge with Purchaser (the “Merger”), with Galyan’s continuing as the surviving corporation after the Merger. In the Merger, each outstanding Share that is not owned by Galyan’s or by Dick’s, Purchaser or any of their subsidiaries (other than Shares held by Galyan’s shareholders that perfect their dissenters’ rights under the Indiana Business Corporation Law, to the extent such rights become available) will be converted into the right to receive $16.75 net in cash, or any higher price paid per Share in the Offer (the “Merger Consideration”). See

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Section 11 — “Dissenters’ Rights.” Section 11 contains a more detailed description of the Merger Agreement. Section 5 describes the material U.S. federal income tax consequences of the sale of Shares in the Offer (including any Subsequent Offering Period (as defined below)) and the Merger.

      Goldman Sachs & Co. (“Galyan’s Financial Advisor”) has delivered to Galyan’s Board of Directors a written opinion, dated June 21, 2004, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth in its opinion, the $16.75 in cash to be received by holders of the Shares (other than Dick’s or any of its direct or indirect subsidiaries) in the Offer and the Merger is fair from a financial point of view to such holders. A copy of Galyan’s Financial Advisors’ opinion is attached as Annex A to Galyan’s Solicitation/ Recommendation Statement on Schedule 14D-9, which is being mailed with this Offer to Purchase, and Galyan’s shareholders are urged to read the opinion in its entirety for a description of the assumptions made, matters considered and limitations of the review undertaken by Galyan’s Financial Advisor. The opinion of Galyan’s Financial Advisor is not a recommendation as to how any holder of Shares should tender such Shares in connection with the Offer or how any holder of such Shares should vote with respect to the Merger.

      Under Section 23-1-40-4 of the Indiana Business Corporation Law, if Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding Shares, Purchaser may be able to effect the Merger, and is required to do so under the Merger Agreement, after consummation of the Offer without a vote of the Company’s shareholders. However, if Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise, approval of the Merger requires the affirmative vote of holders of a majority of the outstanding Shares. As a result, if the Minimum Condition and the other conditions to the Offer are satisfied or waived and the Offer is completed, Purchaser will own a sufficient number of Shares to either ensure that the Merger will be approved by Galyan’s shareholders or effected the Merger without a vote of Galyan’s shareholders. See Section 11 — “Purpose of the Offer; the Merger Agreement; the Shareholder Tender Agreement; Statutory Requirements; Dissenters’ Rights; “Going Private” Transactions; Plans for Galyan’s.”

The Offer is conditioned upon the fulfillment of the conditions described in Section 14 — “Conditions of the Offer.” The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Wednesday, July 28, 2004, unless the Offer is extended.

This Offer to Purchase and the related Letter of Transmittal contain important information that Galyan’s shareholders should read carefully before making any decision with respect to the Offer.

1.  Terms of the Offer

      Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), Purchaser will purchase all Shares validly tendered and not withdrawn in accordance with the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares,” on or prior to the Expiration Date. If, at the Expiration Date, any of the conditions to the Offer set forth in clauses (i), (ii)(a), (b), (c), (d), (e) and (g) of the conditions described in Section 14 — “Conditions of the Offer” have not been satisfied or waived, then, subject to the provisions of the Merger Agreement, Purchaser may, without the consent of Galyan’s, extend the Expiration Date in accordance with the Merger Agreement for one or more periods not to exceed 10 business days. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer and subject to your right to withdraw your Shares. Galyan’s shareholders may withdraw their Shares previously tendered at any time prior to the Expiration Date as it may be extended from time to time. See Section 4 — “Withdrawal Rights.”

      Upon the written request of Galyan’s, Purchaser will extend the Offer for one or more periods in increments not to exceed 10 business days, if, as of any Expiration Date, any of the conditions set forth in clauses (i), (ii)(a), (d) and (e) of the conditions set forth in Section 14 — “Conditions of the Offer” are not satisfied. In no case can any extension be made such that the Expiration Date is extended beyond December 31, 2004. See Section 11 — “Purpose of the Offer; the Merger Agreement; the Shareholder Tender Agreement; Statutory Requirements; Dissenters’ Rights; “Going Private” Transactions; Plans for Galyan’s.”

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      Any extension, delay, termination, waiver or amendment will be followed promptly by a public announcement. The announcement, in the case of an extension, will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date, in accordance with the public announcement requirements of Rule 14e-1(d) under the Securities Exchange Act, as amended (the “Exchange Act” or the “Securities Exchange Act”). Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Securities Exchange Act, which requires that material changes be promptly disseminated to shareholders in a manner reasonably designed to inform them of material changes), and without limiting the manner in which Dick’s and Purchaser may choose to make any public announcement, Dick’s and Purchaser will have no obligation to publish, advertise or otherwise communicate any public announcement other than by issuing a press release to a national news service.

      If Purchaser makes a material change to the terms of the Offer, or if Purchaser waives a material condition to the Offer, Purchaser will extend the Offer and disseminate additional tender offer materials to the extent required by applicable law and the applicable regulations of the Commission. The minimum period during which a tender offer must remain open following material changes to the terms of the Offer, other than a change in price or a change in the percentage of securities sought, depends upon the facts and circumstances, including the materiality of the changes. In the Commission’s view, an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to shareholders, and, if material changes are made with respect to information that approaches the significance of price and the percentage of securities sought, a minimum of 10 business days may be required to allow for adequate dissemination and investor response. With respect to a change in price, a minimum 10-business-day period from the date of the change is generally required to allow for adequate dissemination to shareholders. Accordingly, if, prior to the Expiration Date, with the approval of the Company (which is required by the Merger Agreement), Purchaser decreases the number of Shares being sought, or increases or decreases the consideration offered pursuant to the Offer, and if the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from the date that notice of the increase or decrease is first published, sent or given to Galyan’s shareholders, Purchaser will extend the Offer at least until the expiration of that period of 10 business days. For purposes of the Offer, a “business day” means any day other than a Saturday, Sunday or a U.S. federal holiday, and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

      The Offer is conditioned upon, among other things, the satisfaction of the Minimum Condition. See Section 14 — “Conditions of the Offer.”

      Consummation of the Offer is also conditioned upon expiration or termination of all waiting periods imposed by the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (including the rules and regulations promulgated thereunder, the “HSR Act”) and the satisfaction or waiver of other conditions set forth in Section 14 — “Conditions of the Offer.” Purchaser reserves the right (but is not obligated), in accordance with applicable rules and regulations of the Commission and with the Merger Agreement, to waive any or all of those conditions other than the Minimum Condition, which may be waived only with Galyan’s prior written consent. If, by the Expiration Date, any or all of those conditions have not been satisfied, Purchaser may, in the exercise of its good faith judgment, elect to (a) extend (and, in some instances, may be required by the Company) the Offer for one or more periods of not more than 10 business days and, subject to applicable withdrawal rights, retain all tendered Shares until the expiration of the Offer, as extended, subject to the terms of the Offer and the Merger Agreement; (b) waive all of the unsatisfied conditions (other than the Minimum Condition), and, subject to complying with applicable rules and regulations of the Commission, accept for payment all Shares so tendered; or (c) after December 31, 2004, terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering Galyan’s shareholders. In the event that Purchaser waives any condition set forth in Section 14 — “Conditions of the Offer,” the Commission may, if the waiver is deemed to constitute a material change to the information previously provided to Galyan’s shareholders, require that the Offer remain open for an additional period of time and/or that Dick’s and Purchaser disseminate information concerning such waiver.

      If, on the Expiration Date, the Minimum Condition has been satisfied or, with the consent of the Company, waived, and all other conditions to the Offer have been satisfied or waived but less than 90% of

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the Company Common Shares then issued and outstanding on a fully-diluted basis, together with Company Common Shares beneficially owned by Dick’s, Purchaser and their subsidiaries, have been validly tendered and not withdrawn, Dick’s may extend the Offer for a further period of time, after it has accepted and paid for all of the Company Common Shares tendered in the initial offer period, by means of a subsequent offering period (a “Subsequent Offering Period”) of at least three but no more than 20 business days in accordance with Rule 14d-11 under the Securities Exchange Act to meet the objective (which is not a condition to the Offer) that there be tendered prior to the Expiration Date (as so extended) and not withdrawn a number of Company Common Shares which, together with Company Common Shares beneficially owned by Dick’s, Purchaser and their subsidiaries, represents at least 90% of the then issued and outstanding Company Common Shares on a fully-diluted basis. During the Subsequent Offering Period, Purchaser shall immediately accept for payment and promptly pay for all Company Common Shares as they are tendered pursuant to the Offer in accordance with Rule 14d-11 under the Exchange Act.

      Galyan’s has provided Dick’s and Purchaser with its shareholder lists and security position listings for the purpose of disseminating the Offer to Galyan’s shareholders. Dick’s and Purchaser will mail this Offer to Purchase, the related Letter of Transmittal and other relevant materials to record holders of Shares, and Dick’s and Purchaser will furnish the materials to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder lists or, if applicable, that are listed as participants in a clearing agency’s security position listing, for forwarding to beneficial owners of Shares.

2.  Acceptance for Payment and Payment for Shares

      Upon the terms and subject to the conditions of the Offer (including, if Purchaser extends or amends the Offer, the terms and conditions of the Offer as so extended or amended) and the applicable regulations of the Commission, Purchaser will purchase, by accepting for payment, and will pay for, all Shares validly tendered and not withdrawn (as permitted by Section 4 — “Withdrawal Rights”) prior to the Expiration Date, promptly after the Expiration Date following the satisfaction or waiver of the conditions to the Offer set forth in Section 14 — “Conditions of the Offer.”

      For information with respect to approvals that Dick’s and Purchaser are required to obtain prior to the completion of the Offer, including under the HSR Act and other laws and regulations, see Section 15 — “Legal Matters; Required Regulatory Approvals.”

      In all cases, Purchaser will pay for Shares purchased in the Offer only after timely receipt by the Depositary of (a) certificates representing the Shares (“Share Certificates”) or timely confirmation (a “Book-Entry Confirmation”) of the book-entry transfer of the Shares into the Depositary’s account at The Depository Trust Company (the “Book-Entry Transfer Facility”) pursuant to the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares;” (b) the appropriate Letter of Transmittal (or a facsimile), properly completed and duly executed, with any required signature guarantees or an Agent’s Message (as defined below) in connection with a book-entry transfer; and (c) any other documents that the Letter of Transmittal requires.

      “Agent’s Message” means a message transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which message states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that are the subject of the Book-Entry Confirmation that the participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce that agreement against the participant.

      For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and purchased, Shares validly tendered and not withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of its acceptance of the Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price for the Shares with the Depositary, which will act as agent for tendering

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Galyan’s shareholders for the purpose of receiving payment from Purchaser and transmitting payment to validly tendering Galyan’s shareholders.

Under no circumstances will Purchaser pay interest on the purchase price for Shares.

      If Purchaser does not purchase any tendered Shares pursuant to the Offer for any reason, or if you submit Share Certificates representing more Shares than you wish to tender, Purchaser will return Share Certificates representing unpurchased or untendered Shares, without expense to you (or, in the case of Shares delivered by book-entry transfer into the Depositary’s account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares,” Shares will be credited to an account maintained within the Book-Entry Transfer Facility), as promptly as practicable following the expiration, termination or withdrawal of the Offer.

      If, prior to the Expiration Date, Purchaser increases the price offered to Galyan’s shareholders in the Offer, Purchaser will pay the increased price to all Galyan’s shareholders from whom Purchaser purchases Shares in the Offer, whether or not Shares were tendered before the increase in price. As of the date of this Offer to Purchase, we have no intention to increase the price in the Offer.

      Purchaser reserves the right, subject to the provisions of the Merger Agreement, to transfer or assign, in whole or from time to time in part, to one or more of its subsidiaries or affiliates, the right to purchase all or any portion of the Shares tendered in the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer or prejudice your rights to receive payment for Shares validly tendered and accepted for payment in the Offer. In addition, any such transfer or assignment may require the Expiration Date of the Offer to be extended under applicable law.

3.  Procedures for Accepting the Offer and Tendering Shares

      Valid Tender of Shares. Except as set forth below, in order for you to tender Shares in the Offer, the Depositary must receive the Letter of Transmittal (or a facsimile), properly completed and signed, together with any required signature guarantees, or an Agent’s Message in connection with a book-entry delivery of Shares, and any other documents that the Letter of Transmittal requires at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, and either (a) you must deliver Share Certificates to the Depositary or you must cause your Shares to be tendered pursuant to the procedure for book-entry transfer set forth below and the Depositary must receive Book-Entry Confirmation, in each case, on or prior to the Expiration Date, or (b) you must comply with the guaranteed delivery procedures set forth below.

      The method of delivery of Share Certificates, the Letter of Transmittal and all other required documents is at your option and sole risk, and delivery will be considered made only when the Depositary actually receives the Share Certificates. If delivery is by mail, registered mail with return receipt requested, properly insured, is encouraged and strongly recommended. In all cases, you should allow sufficient time to ensure timely delivery prior to the Expiration Date.

      Book-Entry Transfer. The Depositary will make a request to establish an account with respect to Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer the Shares into the Depositary’s account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility’s procedures. However, although Shares may be delivered through book-entry transfer into the Depositary’s account at a Book-Entry Transfer Facility, the Depositary must receive the Letter of Transmittal (or a facsimile), properly completed and signed, with any required signature guarantees, or an Agent’s Message in connection with a book-entry transfer, and any other required documents, at one of its addresses set forth on the back cover of this Offer to Purchase on or before the Expiration Date, or you must comply with the guaranteed delivery procedure set forth below.

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      Delivery of documents to a Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility’s procedures does not constitute delivery to the Depositary.

      Purchaser may, in compliance with applicable law, provide an additional period following the Offer in which the Galyan’s shareholders would be able to tender Shares not tendered in the Offer (a “Subsequent Offering Period”) of three to 20 business days. See Section 1 — “Terms of the Offer.” For Shares to be validly tendered during a Subsequent Offering Period, the tendering Galyan’s shareholder must comply with the foregoing procedures, except that required documents and Share Certificates must be received during the Subsequent Offering Period.

      The tender of Shares pursuant to any one of the procedures described above will constitute the tendering Galyan’s shareholder’s acceptance of the Offer, as well as the tendering Galyan’s shareholder’s representation and warranty that the Galyan’s shareholder has the full power and authority to tender and assign the Shares tendered, as specified in the Letter of Transmittal. Purchaser’s acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between Purchaser and you upon the terms and subject to the conditions of the Offer.

      Signature Guarantees. A bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program or any other “eligible guarantor institution” (as defined in Rule 17Ad-15 under the Securities Exchange Act) (each, an “Eligible Institution” and collectively “Eligible Institutions”) must guarantee signatures on all Letters of Transmittal, unless the Shares tendered are tendered (a) by a registered holder of Shares that has not completed either the box labeled “Special Payment Instructions” or the box labeled “Special Delivery Instructions” in the Letter of Transmittal or (b) for the account of an Eligible Institution. See Instruction 1 of the Letter of Transmittal.

      If Share Certificates are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made to, or Share Certificates for unpurchased Shares are to be issued or returned to, a person other than the registered holder, then the tendered Share Certificates must be endorsed or accompanied by appropriate stock powers, signed exactly as the name or names of the registered holder or holders appear on Share Certificates, with the signatures on the Share Certificates or stock powers guaranteed by an Eligible Institution as provided in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal.

      If Share Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or a facsimile) must accompany each delivery of Share Certificates.

      Guaranteed Delivery. If you want to tender Shares in the Offer and your Share Certificates are not immediately available or time will not permit all required documents to reach the Depositary on or before the Expiration Date or the procedures for book-entry transfer cannot be completed on time, your Shares may nevertheless be tendered if you comply with all of the following guaranteed delivery procedures:

      (a) your tender is made by or through an Eligible Institution;

      (b) the Depositary receives, as described below, a properly completed and signed Notice of Guaranteed Delivery on or before the Expiration Date, substantially in the form made available by Purchaser; and

      (c) the Depositary receives the Share Certificates (or a Book-Entry Confirmation) representing all tendered Shares, in proper form for transfer together with a properly completed and duly executed Letter of Transmittal (or a facsimile), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message) and any other documents required by the Letter of Transmittal within three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery.

      Delivery of the Notice of Guaranteed Delivery may be made by hand, mail or facsimile transmission to the Depositary. The Notice of Guaranteed Delivery must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery.

      Notwithstanding any other provision of the Offer, Purchaser will pay for Shares only after timely receipt by the Depositary of Share Certificates for, or, of Book-Entry Confirmation with respect to, the Shares, a

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properly completed and duly executed Letter of Transmittal (or facsimile of the Letter of Transmittal), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent’s Message) and any other documents required by the appropriate Letter of Transmittal. Accordingly, payment might not be made to all tendering Galyan’s shareholders at the same time, and will depend upon when the Depositary receives Share Certificates or Book-Entry Confirmation that the Shares have been transferred into the Depositary’s account at a Book-Entry Transfer Facility.

      Backup United States Federal Income Tax Withholding. Under U.S. federal income tax law, the Depositary may be required to withhold and pay over to the U.S. Internal Revenue Service a portion of the amount of any payments made pursuant to the Offer. To avoid backup withholding, unless an exemption applies, a Galyan’s shareholder that is a United States person (as defined for U.S. federal income tax purposes) must provide the Depositary with the Galyan’s shareholder’s correct taxpayer identification number (“TIN”) and certify under penalties of perjury that the TIN is correct and that the Galyan’s shareholder is not subject to backup withholding by completing the Substitute Form W-9 in the Letter of Transmittal. If a shareholder does not provide its correct TIN or fails to provide the certifications described above, the U.S. Internal Revenue Service may impose a penalty on the Galyan’s shareholder and any payment made to the Galyan’s shareholder pursuant to the Offer may be subject to backup withholding. All Galyan’s shareholders surrendering Shares pursuant to the Offer that are United States persons should complete and sign the Substitute Form W-9 included in the Letter of Transmittal to provide the information and certifications necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Depositary). Certain Galyan’s shareholders (including, among others, all corporations and certain foreign individuals and entities) may not be subject to backup withholding. Galyans’ foreign shareholders should complete and sign the appropriate Form W-8 (a copy of which may be obtained from the Depositary) in order to avoid backup withholding. These Galyan’s shareholders should consult a tax advisor to determine which Form W-8 is appropriate. See Instruction 11 of the Letter of Transmittal.

      Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from payments made to a Galyan’s shareholder may be refunded or credited against the Galyan’s shareholder’s U.S. federal income tax liability, if any, provided that the required information is furnished to the U.S. Internal Revenue Service.

      Appointment as Proxy. By executing the Letter of Transmittal, you irrevocably appoint Purchaser’s designees, and each of them, as your agents, attorneys-in-fact and proxies, with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of your rights with respect to Shares that you tender and that Purchaser accepts for payment and with respect to any and all other Shares and other securities or rights issued or issuable in respect of those Shares on or after the date of this Offer to Purchase. All such powers of attorney and proxies will be considered irrevocable and coupled with an interest in the tendered Shares. This appointment will be effective when Purchaser accepts your Shares for payment in accordance with the terms of the Offer. Upon acceptance for payment, all other powers of attorney and proxies given by you with respect to your Shares and other securities or rights prior to such payment will be revoked, without further action, and no subsequent powers of attorney and proxies may be given by you (and, if given, will not be deemed effective). Purchaser’s designees will, with respect to the Shares and other securities and rights for which the appointment is effective, be empowered to exercise all your voting and other rights as they, in their sole discretion, may deem proper at any annual or special meeting of Galyan’s shareholders, or any adjournment or postponement thereof, or by consent in lieu of any such meeting of Galyan’s shareholders or otherwise. In order for Shares to be deemed validly tendered, immediately upon the acceptance for payment of such Shares, Purchaser or its designee must be able to exercise full voting rights with respect to Shares and other securities, including voting at any meeting of Galyan’s shareholders.

      Determination of Validity. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser, in its sole discretion, which determination will be final and binding on all parties. Purchaser reserves the absolute right, subject to the terms of the Merger Agreement and applicable law, to reject any or all tenders determined by Purchaser not to be in proper form or the acceptance of or payment for which may,

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in the opinion of Purchaser’s counsel, be unlawful. Purchaser also reserves the absolute right to waive any of the conditions of the Offer, except the Minimum Condition (which waiver requires Galyan’s prior written consent) or any defect or irregularity in any tender of Shares of any particular Galyan’s shareholder, whether or not similar defects or irregularities are waived in the case of other Galyan’s shareholders. Purchaser’s interpretation of the terms and conditions of the Offer will be final and binding. No tender of Shares will be deemed to have been validly made until all defects and irregularities with respect to the tender have been cured or waived by Purchaser. None of Dick’s, Purchaser or any of their respective affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person or entity will be under any duty to give any notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

4.  Withdrawal Rights

      Other than during a Subsequent Offering Period, you may withdraw Shares that you have previously tendered in the Offer at any time on or before the Expiration Date (including any extension of such date), and, unless theretofore accepted for payment as provided in this Offer to Purchase, you may also withdraw such Shares at any time after August 28, 2004. No withdrawal rights apply to Shares tendered in a Subsequent Offering Period and no withdrawal rights apply during the Subsequent Offering Period with respect to Shares tendered in the Offer and accepted for payment.

      If, for any reason, acceptance for payment of any Shares tendered in the Offer is delayed, or Purchaser is unable to accept for payment or pay for Shares tendered in the Offer, then, without prejudice to Purchaser’s rights set forth in this Offer to Purchase, the Depositary may, nevertheless, on Purchaser’s behalf, retain Shares that you have tendered, and you may not withdraw your Shares, except to the extent that you are entitled to and duly exercise withdrawal rights as described in this Section 4 — “Withdrawal Rights.” Any such delay will be by an extension of the Offer to the extent required by applicable law and the regulations of the Commission.

      In order for your withdrawal to be effective, you must deliver a written or facsimile transmission notice of withdrawal to the Depositary at one of its addresses or fax numbers set forth on the back cover of this Offer to Purchase. Any such notice of withdrawal must specify your name, the number of Shares that you want to withdraw, and (if Share Certificates have been tendered) the name of the registered holder of Shares as shown on the Share Certificate, if different from your name. If Share Certificates have been delivered or otherwise identified to the Depositary, then, prior to the physical release of Share Certificates, you must submit the serial numbers shown on the particular Share Certificates evidencing Shares to be withdrawn and an Eligible Institution must Medallion guarantee the signature on the notice of withdrawal, except in the case of Shares tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3 — “Procedures for Accepting the Offer and Tendering Shares,” the notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method of delivery described in the first sentence of this paragraph. You may not rescind a withdrawal of Shares. Any Shares that you withdraw will be considered not validly tendered for purposes of the Offer, but you may tender your Shares again at any time before the Expiration Date by following any of the procedures described in Section 3 — “Procedures for Accepting the Offer and Tendering Shares.”

      All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, which determination will be final and binding. None of Dick’s, Purchaser or any of their respective affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person or entity will be under any duty to give any notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification.

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5.  Material U.S. Federal Income Tax Consequences

      Your receipt of cash for Shares in the Offer, the Subsequent Offering Period (if one is provided) or the Merger will be a taxable transaction for U.S. federal income tax purposes. For U.S. federal income tax purposes, if you sell or exchange your Shares in the Offer, the Subsequent Offering Period (if one is provided) or the Merger, you generally will recognize gain or loss equal to the difference between the amount of cash received and your tax basis in the Shares that you sold or exchanged. That gain or loss will be capital gain or loss (assuming you hold your Shares as a capital asset), and any such capital gain or loss will be long term if, as of the date of sale or exchange, you have held such Shares for more than one year. The discussion above may not be applicable to certain types of Galyan’s shareholders, including Galyan’s shareholders who acquired Shares through the exercise of employee stock options, through Galyan’s employee stock purchase plan or otherwise as compensation, individuals who are not citizens or residents of the United States, foreign corporations, or entities that are otherwise subject to special tax treatment under the U.S. Internal Revenue Code of 1986, as amended (including the rules and regulations promulgated thereunder, the “Code”) (such as insurance companies, tax-exempt entities and regulated investment companies).

      You are urged to consult your tax advisor with respect to the specific tax consequences to you of the Offer, the Subsequent Offering Period (if one is provided) and the Merger, including U.S. federal, state, local and foreign tax consequences.

6.  Price Range of the Shares; Dividends

      The Shares are traded over Nasdaq under the symbol “GLYN.” The following table sets forth, for the periods indicated, the reported high and low sale prices for the Shares on Nasdaq during each quarter presented.

Galyan’s Trading Company, Inc.

                   
High Low
Fiscal 2002
                
 
First Quarter
  $ 20.01     $ 10.10  
 
Second Quarter
    23.85       12.10  
 
Third Quarter
    15.40       6.80  
 
Fourth Quarter
    15.38       9.05  
 
Fiscal 2003
                
 
First Quarter
  $ 16.48     $ 8.92  
 
Second Quarter
    18.02       10.81  
 
Third Quarter
    13.96       9.54  
 
Fourth Quarter
    14.19       8.38  
 
Fiscal 2004
                
 
First Quarter
  $ 11.80     $ 7.60  
 
Second Quarter (through June 28)
  $ 16.64     $ 8.50  

      Galyan’s has not paid cash dividends during the last two years. Under the terms of the Merger Agreement, Galyan’s is not permitted to declare or pay dividends with respect to the Shares.

      On June 21, 2004, the last full day of trading prior to the announcement of the execution of the Merger Agreement, the reported closing price at the closing of regular trading hours of Nasdaq for the Shares was $11.10 per Share. On June 28, 2004, the last full day of trading prior to the date of this Offer to Purchase, the reported closing price at the closing of regular trading hours of Nasdaq for the Shares was $16.64 per Share.

      Galyan’s shareholders are urged to obtain current market quotations for the Shares.

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7. Possible Effects of the Offer on the Market for the Shares; Nasdaq Listing; Securities Exchange Act Registration; Margin Regulations

      Possible Effects of the Offer on the Market for the Shares. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. The purchase of Shares pursuant to the Offer also can be expected to reduce the number of holders of Shares. Neither Dick’s nor Purchaser can predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Offer price.

      Nasdaq Listing. Purchaser intends to cause the Shares of Galyan’s common stock to be delisted from Nasdaq promptly upon completion of the Merger. Even if the Merger is not completed, depending upon the number of Shares of Galyan’s common stock tendered to and purchased by Purchaser in the Offer, the Shares of Galyan’s common stock may no longer meet the requirements of the National Association of Securities Dealers for continued inclusion on Nasdaq, which requires that an issuer either:

    (i)  have at least 750,000 publicly held shares, held by at least 400 round lot shareholders, with a market value of at least $5,000,000, have at least two market makers, have shareholders’ equity of at least $10 million, and have a minimum bid price of $1; or

  (ii)  have at least 1,100,000 publicly held shares, held by at least 400 round lot shareholders, with a market value of at least $15,000,000, have a minimum bid price of $1, have at least four market makers and have either (1) a market capitalization of at least $50,000,000 or (2) a total of at least $50,000,000 in assets and revenues, respectively.

      If Nasdaq ceased publishing quotations for the Shares of Galyan’s common stock, it is possible that the Shares of Galyan’s common stock would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market for Shares of Galyan’s common stock and the availability of such quotations would depend, however, upon such factors as the number of shareholders and the aggregate market value of the Shares available in the public market at such time, the interest in maintaining a market in the Shares of Galyan’s common stock on the part of securities firms, the possible termination of registration under the Securities Exchange Act as described below, and other factors. Purchaser cannot predict whether the reduction in the number of Shares of Galyan’s common stock that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the shares of Galyan’s common stock or whether it would cause future market prices to be greater or lesser than the price Purchaser is currently offering.

      The extent of the public market for the Shares and availability of such quotations would, however, depend upon such factors as the number of holders and/or the aggregate market value of the publicly held Shares at the time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration of the Shares under the Securities Exchange Act and other factors.

      Securities Exchange Act Registration. The Shares currently are registered under the Securities Exchange Act. The purchase of the Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Securities Exchange Act. Registration of the Shares may be terminated upon application by Galyan’s to the Commission if the Shares are not listed on a “national securities exchange” and there are fewer than 300 record holders of Shares. According to Galyan’s Annual Report on Form 10-K for the year ended January 31, 2004, there were approximately 96 holders of record of Shares as of March 19, 2004. Termination of registration of the Shares under the Securities Exchange Act would substantially reduce the information that Galyan’s is required to furnish to Galyan’s shareholders and the Commission and would make certain provisions of the Securities Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) of the Securities Exchange Act and the requirements of furnishing a proxy statement in connection with shareholders’ meetings pursuant to Section 14(a) or 14(c) of the Securities Exchange Act and the related requirement of an annual report, no longer applicable to Galyan’s. If the Shares are no longer registered under the Securities Exchange Act, the requirements of Rule 13e-3

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promulgated under the Securities Exchange Act with respect to “going private” transactions would no longer be applicable to Galyan’s. In addition, the ability of “affiliates” of Galyan’s and persons holding “restricted securities” of Galyan’s to dispose of the securities pursuant to Rule 144 promulgated under the United States Securities Act of 1933, as amended, may be impaired or, with respect to certain persons, eliminated. If registration of the Shares under the Securities Exchange Act were terminated, the Shares would no longer be “margin securities” or eligible for stock exchange listing or Nasdaq reporting. Dick’s and Purchaser believe that the purchase of the Shares pursuant to the Offer may result in the Shares becoming eligible for deregistration under the Securities Exchange Act, and it would be Purchaser’s intention to cause Galyan’s to make an application for termination of registration of the Shares as soon as possible after successful completion of the Merger if the Shares are then eligible for termination.

      If registration of the Shares is not terminated prior to the Merger, then the registration of the Shares under the Securities Exchange Act and the listing of the Shares on Nasdaq (unless delisted as set forth in “— Nasdaq Listing”) will be terminated following the completion of the Merger.

      Margin Regulations. The Shares are currently “margin securities” under the regulations of the Board of Governors of the Federal Reserve System, which regulations have the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares for the purpose of buying, carrying or trading in securities (“Purpose Loans”). Depending upon factors, such as the number of record holders of Shares and the number and market value of publicly held Shares, following the purchase of Shares pursuant to the Offer, the Shares might no longer constitute “margin securities” for purposes of the Federal Reserve Board’s margin regulations, and, therefore, could no longer be used as collateral for Purpose Loans made by brokers. In addition, if registration of the Shares under the Securities Exchange Act were terminated, the Shares would no longer constitute margin securities.

8.  Information Concerning Galyan’s

      Galyan’s is an Indiana corporation with its principal executive offices located at One Galyan’s Parkway, Plainfield, Indiana 46168. Galyan’s telephone number is (317) 612-0200. Galyan’s is a specialty retailer that offers a broad range of outdoor and athletic equipment, apparel, footwear and accessories, as well as casual apparel and footwear. Galyan’s store format and merchandising strategy are targeted to appeal to consumers with active lifestyles, from the casual consumer to the avid sports enthusiast. Galyan’s currently operates 45 stores in 21 states.

      Galyan’s is required to file its annual, quarterly and special reports, proxy statements and other information with the Commission. You may read and copy any such reports, statements or other information at the Commission’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. Galyan’s Commission filings are also available to the public from commercial document retrieval services and at the Internet world wide web site maintained by the Commission at http://www.sec.gov.

9.  Information Concerning Dick’s and Purchaser

      Dick’s is a Delaware corporation with its principal executive offices located at 300 Industry Drive, RIDC Park West, Pittsburgh, PA 15275. Dick’s telephone number is (724) 273-3400. Dick’s is an authentic full-line sporting goods retailer offering a broad assortment of brand name sporting goods equipment, apparel, and footwear in a specialty store environment. Dick’s core focus is to be an authentic sporting goods retailer by offering a broad selection of high-quality, competitively-priced brand name sporting goods equipment, apparel and footwear that enhances the customers’ performance and enjoyment of their sports activities.

      Purchaser’s principal executive offices are located c/o Dick’s at 300 Industry Drive, RIDC Park West, Pittsburgh, PA 15275. Purchaser is a newly formed Indiana corporation and a wholly owned subsidiary of Dick’s. Purchaser has not conducted any business other than in connection with the Offer and the Merger.

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      The name, business address, citizenship, present principal occupation and employment history for the past five years of each of the directors and executive officers of Dick’s and Purchaser are set forth in Schedule I to this Offer to Purchase.

      Dick’s files annual, quarterly and special reports, proxy statements and other information with the Commission. You may read and copy any such reports, statements or other information at the Commission’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. Dick’s Commission filings are also available to the public from commercial document retrieval services and at the Internet world wide web site maintained by the Commission at http://www.sec.gov.

      Except as set forth elsewhere in this Offer to Purchase, or in Schedule I to this Offer to Purchase, and except with respect to 100 Shares of Galyan’s common stock owned by Dick’s (which is less than 1% of all outstanding Shares): (a) neither Dick’s nor, to Dick’s knowledge, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority owned subsidiary of Dick’s or of any of the persons so listed, beneficially owns or has a right to acquire any Shares or any other equity securities of Galyan’s, (b) neither Dick’s nor, to Dick’s knowledge, any of the persons or entities referred to in clause (a) above or any of their executive officers, directors or subsidiaries has effected any transaction in the Shares or any other equity securities of Galyan’s during the past 60 days, (c) neither Dick’s nor, to Dick’s knowledge, any of the persons listed in Schedule I to this Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of Galyan’s (including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss, or the giving or withholding of proxies, consents or authorizations), (d) since June 29, 2002, there have been no transactions that would require reporting under the rules and regulations of the Commission between Dick’s or any its subsidiaries, or, to Dick’s knowledge, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and Galyan’s or any of its executive officers, directors or affiliates, on the other hand, and (e) since June 29, 2002, there have been no contacts, negotiations or transactions between Dick’s or any of its subsidiaries, or, to Dick’s knowledge, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and Galyan’s or any of its subsidiaries or affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets.

      None of the persons listed in Schedule I to this Offer to Purchase has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the persons listed in Schedule I to this Offer to Purchase has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, U.S. federal or state securities laws, or a finding of any violation of U.S. federal or state securities laws.

10.  Background of the Offer; Past Contacts or Negotiations with Galyan’s

      Parent had previously determined that the Company was a potential acquisition target. On April 23, 2003, Parent’s chairman and chief executive officer, Edward W. Stack, and chief financial officer, Michael F. Hines, along with representatives of Parent’s financial advisor, Peter J. Solomon Company, L.P. (“PJSC”), met with Company directors Ronald P. Spogli, John M. Roth and Norman S. Matthews, to discuss Parent’s interest in acquiring the Company and the benefits of combining the two companies. On or about June 4, 2003 Messrs. Stack and Hines along with representatives of PJSC met with Messrs. Spogli and Roth and the then chief executive officer and chairman, Robert B. Mang, to further discuss Parent’s interest in acquiring the Company. Parent also expressed a desire to obtain nonpublic information about the Company and provided a draft of a confidentiality agreement which would obligate each party to hold nonpublic information which it received from the other party confidential. On or about June 20, 2003, the Company sent a revised draft of this draft agreement which contained additional provisions restricting for a period of time the parties soliciting certain of the others employees and included restrictions on the right of Parent to acquire

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Shares, solicit proxies, or otherwise attempt to influence the management, board of directors or policies of the Company. Parent and the Company entered into that agreement effective June 27, 2003. Thereafter, the Company provided certain information to the Parent regarding the Company.

      On July 9, 2003 the Company issued a press release in which, among other matters, the Company substantially reduced its expected results of operation and comparable store sales results for its fiscal second quarter. On July 15, 2003 representatives of PJSC met with representatives of Goldman Sachs & Co., an investment bank for the Company (“Galyan’s Financial Advisor”), and indicated a potential acquisition price of $14 per share of Company common stock. Galyan’s Financial Advisor subsequently responded that the Company had no interest in pursuing a transaction at this price. Discussions regarding a possible acquisition ceased.

      By letter dated November 19, 2003, counsel for the Company alleged that Parent had breached the nonsolicitation terms of the confidentiality agreement by hiring and offering to hire certain employees of the Company. On or about December 5, 2003, William R. Newlin, executive vice president, chief administrative officer and general counsel for the Company responded by letter that Parent had not breached the nonsolicitation terms of the confidentiality agreement.

      After reviewing the Company’s performance, Parent determined to again approach the Company regarding a possible acquisition. On April 1, 2004, representatives of PJSC informed John Roth while he was meeting with representatives of PJSC regarding unrelated matters that Parent had renewed interest in acquiring the Company. Mr. Roth is a member of the Company’s board of directors and is also a general partner of Freeman Spogli & Co., an affiliate of FS Equity Partners IV, L.P., which owns 5,694,500 outstanding Company Common Shares (or approximately 33% of the currently outstanding Company Common Shares). Following that meeting, Mr. Stack called Mr. Spogli and informed Mr. Spogli that Parent desired to acquire the Company. Mr. Spogli indicated that he did not believe that a sale at that time was in the shareholders best interests and expressed concern over the Parent completing the transaction. Mr. Stack responded that Dick’s was serious about the transaction and expected to close it. Representatives of PJSC also informed Tim Faber, who is a member of the Company’s board of directors and is also employed by Limited Brands, Inc., which together with a subsidiary owns 3,900,500 outstanding Company Common Shares (or approximately 22% of the currently outstanding Company Common Shares), of Parent’s renewed interest in acquiring the Company. Representatives of PJSC also informed Mr. Faber of the Parent’s renewed interest in acquiring the Company. Representatives from PJSC subsequently informed representatives from Galyan’s Financial Advisor that Parent would be willing to structure an acquisition at a price of $15 per Company Common Share. Parent also requested access to certain nonpublic information regarding the Company. Thereafter, Mr. Stack had telephonic calls with George R. Mrkonic, Jr., a director of the Company. The Company’s board designated Mr. Mrkonic, Mr. Faber and Mr. Roth to deal with the Parent as Galyan’s board’s representatives. Mr. Stack expressed to Mr. Mrkonic Parent’s desire to acquire the Company. Mr. Mrkonic responded to Mr. Stack that the Company’s board did not have interest in pursuing a sale to Parent and that the Company would not provide nonpublic information to Parent. At Mr. Stack’s request, Messrs. Mrkonic, Faber and Roth agreed to meet with the Parent on May 5, 2004. The parties exchanged and had discussions regarding drafts of an amended confidentiality agreement which would extend the June 27, 2004 expiration date of the restrictions on employee nonsolicitation, on Parent privately submitting any acquisition proposal only to the Company’s board of directors and on Parent not acquiring any shares of Company Common Stock. Parent delivered on April 26, 2004 to the Company a draft merger agreement for an acquisition and a draft shareholder tender agreement and including a $15 price per share.

      On May 5, 2004 in Boston, Massachusetts, Mr. Stack, Mr. Newlin, and Jeffrey R. Hennion, Parent’s senior vice president — strategic planning, met with Messrs. Mrkonic, Faber and Roth. Mr. Stack and Mr. Newlin explained that Parent wanted to acquire the Company and was not seeking to use this process to gain nonpublic information for other purposes. Mr. Newlin explained the terms of the draft merger agreement and shareholder tender agreement which Parent had delivered including that the draft merger agreement reflected an acquisition price of $15 per share, called for a cash tender offer for all shares and required that the two principal shareholders which beneficially own a majority of the outstanding Company Common Shares (FS Equity Partners IV, L.P. and Limited Brands, Inc. and its subsidiary) agree to tender their shares

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pursuant to the draft shareholder tender agreement. With respect to nonpublic information, Mr. Newlin informed the three Company directors that Parent largely was willing to rely upon public information other than verifying occupancy costs for Company stores, the ability under existing Company leases and other agreements to convert Company stores into Parent stores and whether or not any substantial undisclosed contingent liabilities existed.

      A subsequent meeting occurred in New York, New York on May 10, 2004 between Mr. Newlin, Mr. Hennion, legal counsel for Parent and C. David Zoba, Company’s executive vice president, general counsel and secretary, Messrs. Faber and Roth and legal counsel for the Company. Among other matters, the parties discussed the draft merger agreement, Parent’s need to verify occupancy costs, the ability to convert Company stores to Parent stores and whether or not any substantial undisclosed liabilities existed, and an extension of the employee nonsolicitation and other Parent restrictions contained in the existing confidentiality agreement. On May 15, 2004, the Company sent to Parent a revised draft merger and shareholder tender agreement. Thereafter, various drafts of a merger agreement and a shareholder tender agreement were exchanged between Parent and the Company. Various discussions and calls occurred between and among Mr. Newlin, Mr. Zoba and the respective legal counsel for Parent and the Company regarding the drafts of a merger agreement and shareholder tender agreement and the Parent’s access to nonpublic information to verify occupancy costs for Company stores and the ability to convert Company stores to Parent stores. Among the terms being discussed and negotiated in the merger agreement were price, termination or “break-up” fee payable to Parent in certain circumstances in the event that the Company’s board received a superior proposal, expense reimbursement in the event of termination, the right of the Company’s board to consider alternative transactions (the “fiduciary out”) and the conditions under which the shareholder tender agreements could be terminated by the shareholders, conditions under which Parent would be obligated to close the tender offer and the merger, the scope of the Company’s representations and warranties and covenants, and certainty of completion of the acquisition and the material adverse change standard that would apply to the obligation of the parties to take steps to effect the transaction.

      On May 19 and 20, 2004 Mr. Newlin had telephonic calls with Mr. Zoba and Company legal counsel at different times to negotiate various unresolved issues, other than financial terms, in the draft merger agreement. A number of matters principally relating to representations and warranties were resolved. With respect to revising and extending the various employee solicitation and other restrictions imposed under the existing confidentiality agreement, Mr. Newlin later proposed that if the parties reached agreement on all terms for an acquisition, Parent would execute and deliver an amended confidentiality agreement in the form sought by the Company if the Company also executed and delivered at the same time the merger agreement (and the principal stockholders executed and delivered the shareholder tender agreement), and provided the nonpublic information sought by Parent along with the disclosure schedule under the merger agreement and permitted Parent 24 hours thereafter in which to decide whether or not to enter into the merger agreement. Subsequently, the Company agreed to provide under the terms of the existing confidentiality agreement the nonpublic information regarding occupancy costs and the ability to convert the Company’s stores to Parent stores and on May 28, 2004 the Company began providing that and certain other information to Parent. The Company’s representatives also informed the Parent’s representatives that $15 per Company Common Share was inadequate.

      On June 4, 2004, Mr. Stack sent a letter to Mr. Mrkonic following earlier conversations with the Company, its financial advisor and the financial advisor to Limited Brands on that date, that Parent’s final proposal was to increase the price to $16 per Company Common Share and requested a response by the close of business on June 9, 2004. On June 9, 2004 the financial advisor for the Company informed the Parent’s financial advisor that the Company’s board of directors did not accept this price, but stated that it would accept a price of $17 per Company Common Share if Parent accepted a revised draft of the merger agreement and the shareholder tender agreement delivered by the Company that day.

      On June 14, 2004, Messrs. Stack and Newlin informed Mr. Mrkonic that Parent would increase its offer to $16.50 per share, provided that the Company accept this offer and enter into (by the close of business on June 16, 2004) the form of merger agreement and shareholder tender agreement prepared by Parent. On June 16, 2004, the Company delivered a revised draft of the merger agreement to Parent.

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      On June 17 and 18, 2004 Mr. Zoba, Mr. Newlin and counsel for the Company and the Parent met at the Parent’s executive offices in Pittsburgh, Pennsylvania to continue negotiations of the merger agreement. Among the terms being negotiated were price, termination fee, fiduciary out, the scope of the Company’s real estate representations and warranties, covenants regarding conduct of the Company’s business after executing the merger agreement and the material adverse change standard that would apply to the obligation of the parties to take steps to effect the transaction. On June 18, 2004, Mr. Zoba informed Mr. Newlin that authorized members of Galyan’s board would not approve a transaction at $16.50 and that the Parent had to increase its offer to $16.75 per Company Common Share. Mr. Newlin responded to Mr. Zoba that only if the Company representatives agreed to recommend to the Board of Directors of the Company that it accept the resolution of the then open issues contained in the form of merger agreement presented by Parent to Company, would Parent increase its offer to $16.75 per Company’s Common Share. The representatives stated that they would make such a recommendation. Thereafter, the Company provided a draft disclosure schedule for the merger agreement to the Parent along with certain additional nonpublic information.

      Representatives of the Company informed the Parent that the Company’s board of directors met on the afternoon of June 21, 2004, and approved the Merger Agreement and the Offer and the other transactions contemplated thereby. After 4:00 PM, EDT, on June 21, 2004 the Merger Agreement was executed and delivered by the Company, the Purchaser and the Parent, and the Shareholder Tender Agreement were executed and delivered by the FS Equity Partners IV, L.P., Limited Brands, Inc., G Trademark (an affiliate of Limited Brands), the Purchaser and Parent.

      Parent also was negotiating with its existing lending group and executed a consent with its lenders dated June 14, 2002 to enter into a merger agreement with the Company. Parent also commenced negotiations with Merrill Lynch Capital Corporation for a $175 million bridge loan facility. Parent also entered into commitment letter with Merrill Lynch Capital Corporation for $175 million interim loan. See Section 13 — “Sources and Amounts of Funds.”

 
11. Purpose of the Offer; the Merger Agreement; the Shareholder Tender Agreement; Statutory Requirements; Dissenters’ Rights; “Going Private” Transactions; Plans for Galyan’s

      Purpose. The purpose of the Offer and the Merger is to acquire control of, and the entire equity interest in, Galyan’s. The Offer, as the first step in the acquisition of Galyan’s, is intended to facilitate the acquisition of all of the Shares. The purpose of the Merger is to acquire all capital stock of Galyan’s not purchased pursuant to the Offer or otherwise.

      The Merger Agreement. The following summary description of the Merger Agreement is qualified in its entirety by reference to the Merger Agreement itself, which Dick’s and Purchaser have filed as an exhibit to the Tender Offer Statement on Schedule TO that Dick’s and Purchaser have filed with the Commission, which you may examine and copy as set forth in Section 8 — “Information Concerning Galyan’s” and Section 9 — “Information Concerning Dick’s and Purchaser.”

      The Offer. The Merger Agreement provides that Purchaser will commence the Offer within six business days of the date of the Merger Agreement, and that, upon the terms and subject to prior satisfaction or waiver of the conditions of the Offer, as set forth in Section 14 — “Conditions of the Offer,” Purchaser will purchase all Shares validly tendered and not withdrawn pursuant to the Offer. The Merger Agreement provides that, without the prior written consent of Galyan’s, Purchaser will not (i) decrease the Offer Price, (ii) decrease the aggregate number of Company Common Shares sought, (iii) change the form of consideration to be paid pursuant to the Offer, (iv) modify any of the conditions to the Offer set forth in Section 14 — “Conditions of the Offer,” (v) impose conditions to the Offer in addition to those included in the Merger Agreement, (vi) except as provided in the proviso set forth below in this paragraph, extend the Offer, or (vii) amend any other term or condition of the Offer in any manner which is adverse to the holders of Company Common Shares, it being agreed that a waiver by Purchaser of any condition in its discretion shall not be deemed to be adverse to the holders of Company Common Shares; provided that, if on any scheduled expiration date of the Offer (as it may be extended in accordance with the terms of the Merger Agreement), all conditions to the Offer shall not have been satisfied or waived, Purchaser may, without the consent of Galyan’s, but shall, at the request of Galyan’s, (x) from time to time, extend the Offer in

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increments of not more than 10 business days each if any of the conditions set forth in clauses (i), (ii)(a), (d) and (e) of the conditions set forth in Section 14 — “Conditions of the Offer” have not been satisfied or waived, until such time as the conditions are satisfied or waived and (y) extend the Offer for any period required by any regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer; provided, however, that the Expiration Date may not be so extended beyond December 31, 2004. Notwithstanding the foregoing, if on any scheduled expiration date of the Offer (as it may be extended in accordance with the terms hereof), all conditions to the Offer shall not have been satisfied or waived, Purchaser may, without the consent of Galyan’s, from time to time, extend the Offer in increments of not more than 10 business days each if any of the conditions set forth in clauses (ii)(b), (c) and (g) of the conditions set forth in Section 14 — “Conditions of the Offer” have not been satisfied or waived, until such time as the conditions are satisfied or waived, provided, however, that the Expiration Date may not be so extended beyond December 31, 2004.

      Recommendation. Galyan’s has represented to Dick’s in the Merger Agreement that the Galyan’s Board of Directors, (i) determined that the Offer and the Merger are advisable and in the best interests of the Company, (ii) approved and adopted the plan of merger (as such term is used in section 23-1-40-1 of the Indiana Business Corporation Law) contained in the Merger Agreement, (iii) recommended acceptance of the Offer and approval of the Plan of Merger contained in the Merger Agreement by the shareholders of the Company, (iv) irrevocably took all necessary steps to cause Chapter 42 of the Indiana Business Corporation Law to be inapplicable to the Merger, the Shareholder Tender Agreement and the acquisition of shares pursuant to the Offer and the Shareholder Tender Agreement, (v) irrevocably took all necessary steps to approve Dick’s and Purchaser becoming, pursuant to the Merger, the Shareholder Tender Agreement and/or the acquisition of Company stock pursuant to the Offer, and the Shareholder Tender Agreement, “interested shareholders” within the meaning of Section 23-1-43-10 of the Indiana Business Corporation Law and to cause any other requirements of Chapter 43 of the Indiana Business Corporation Law to be inapplicable to the Merger, the Shareholder Tender Agreement and the acquisition of shares pursuant to the Offer and the Shareholder Tender Agreement and (vi) irrevocably resolved to elect, to the extent of the Company’s Board of Directors’ power and authority and to the extent permitted by law, not to be subject to any other “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws and regulations of any jurisdiction that may purport to be applicable to the Merger Agreement or the Shareholder Tender Agreement.

      Goldman Sachs & Co., Galyan’s Financial Advisor, has delivered to the Galyan’s Board of Directors a written opinion, dated June 21, 2004, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, in its opinion the $16.75 in cash to be received by holders of the Shares (other than Dick’s or any of its direct or indirect subsidiaries) in the Offer and Merger to the Galyan’s shareholders is fair from a financial point of view to such holders. See Annex A to the Schedule 14D-9. The opinion of Galyan’s Financial Advisor is not a recommendation as to how any holder of Shares should tender such Shares in connection with the Offer or how any holder of such Shares should vote with respect to the Merger.

      Directors. The Merger Agreement provides that Purchaser, promptly upon the purchase of and payment for Company Common Shares by Dick’s on the Share Purchase Date (as defined below) and prior to the Effective Time, (i) the size of the Board of Directors of the Company shall be decreased to seven, (ii) all current directors shall resign, other than three of the current directors who are not employees of Galyan’s or shareholders, affiliates, associates or employees of Dick’s or Purchaser (as shall be designated by the Board of Directors of Galyan’s prior to the Share Purchase Date), and (iii) a number of persons equal to the aggregate vacancies so created shall be designated by Dick’s and shall be elected to fill the vacancies so created. Any person designated by Dick’s to serve on the Board of Directors of the Company between the Share Purchase Date and the Effective Time shall be responsible, qualified and knowledgeable about the retail industry and/or the sporting goods industry, and the persons designated by Dick’s to serve shall, collectively, satisfy all applicable NASD listing standards for composition of the Board of Directors. The Company shall, upon request of Dick’s, use its reasonable best efforts promptly to secure the resignations of such number of its incumbent directors as is necessary to enable Dick’s designees to be so elected or appointed to the Board

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of Directors (and to the extent the Company is not successful in securing all of such resignations, increase the size of the Board of Directors to enable Dick’s to designate a majority of the total number of directors of the Company), and shall use its reasonable best efforts to cause Dick’s designees to be so elected or appointed at such time. Galyan’s obligations relating to the Board of Directors and its composition shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Galyan’s shall promptly take all actions required pursuant to such Section 14(f) and Rule 14f-1 in order to fulfill its obligations relating to the Board of Directors and its composition (subject to Dick’s timely notification to the Company of such information as is necessary to fulfill such obligations), including mailing to shareholders (together with the Schedule 14D-9 if Dick’s has then provided the necessary information) the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable the Dick’s designees to be elected or appointed to the Company’s Board of Directors. Dick’s or Purchaser will supply the Company in writing and be solely responsible for any information with respect to either of them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1; such information is contained in the Company’s Rule 14f-1 notice and is incorporated herein by reference.

      Following the Share Purchase Date and prior to the Effective Time, Galyan’s shall cause its Board of Directors to have at least three directors who are directors on the date hereof and who are not employed by the Company and who are not affiliates, associates, shareholders or employees of Dick’s or Purchaser (the “Independent Directors”); provided, however, that if any Independent Directors cease to be directors for any reason whatsoever, the remaining Independent Directors (or Independent Director, if there is only one remaining) shall be entitled to designate any other person(s) who shall not be shareholders, affiliates, associates or employees of Dick’s or any of its subsidiaries to fill such vacancies and such person(s) shall be deemed to be Independent Director(s) for purposes of this Agreement (provided that the remaining Independent Directors shall fill such vacancies as soon as practicable, but in any event within five business days, and provided further that if no Independent Director then remains, the other directors shall designate three persons who shall not be shareholders, affiliates, associates or employees of Dick’s or any of its subsidiaries to fill such vacancies and such persons shall be deemed to be Independent Directors for purposes of this Agreement). Following the Share Purchase Date and prior to the Effective Time, neither Dick’s nor Purchaser will take any action to cause any Independent Director to be removed other than for cause. Notwithstanding anything in the Merger Agreement to the contrary, after the Share Purchase Date and prior to the Effective Time, any approval by Galyan’s Board of Directors or any other Galyan’s action must be made at a time when there are at least three Independent Directors serving on the board of directors of Galyan’s and with the approval of at least six of the seven directors of the Company (in each case, or such other number of directors that ensures that at least a majority of the Independent Directors has granted such approval) in order to (i) amend or terminate the Merger Agreement by Galyan’s, (ii) exercise or waive any of Galyan’s rights, benefits or remedies under the Merger Agreement, or (iii) take any other action of Galyan’s Board of Directors under or in connection with the Merger Agreement in any manner that adversely affects the holders of Company Common Shares, as determined by a majority of the Independent Directors. The Independent Directors shall have the authority to retain such counsel and other advisors at the expense of the Company as determined appropriate by any of the Independent Directors. In addition, the Independent Directors shall have the authority to institute any action, on behalf of Galyan’s, to enforce performance of the Merger Agreement. For purposes of the Merger Agreement, an “affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person.

      The Merger. The Merger Agreement provides that, subject to its terms and conditions, Galyan’s and Purchaser shall be, at the Effective Time, merged in accordance with the Indiana Business Corporation Law into a single corporation existing under the laws of the State of Indiana, whereby the Company shall be the surviving corporation (the Company, in its capacity as the surviving corporation, is sometimes referred to herein as the “Surviving Corporation”). See “— Dissenters’ Rights.”

      Articles of Incorporation, Charter, By-Laws, Directors and Officers. Without any further action by Galyan’s and Purchaser, the Articles of Incorporation and Bylaws of Purchaser, as in effect immediately prior to the Effective Time, shall from and after the Effective Time be and continue to be the Bylaws of the

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Surviving Corporation until amended as provided therein. The directors of Purchaser and the officers of Purchaser at the Effective Time shall, from and after the effectiveness of the Merger, be the initial directors and officers, respectively, of the Surviving Corporation until in each case their successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Articles of Incorporation and Bylaws.

      Galyan’s Shareholder Meeting. Unless the Merger is consummated in accordance with Section 23-1-40-4 of the Indiana Business Corporation Law (where Purchaser has acquired at least 90% of the outstanding shares of each class of capital stock of Galyan’s), Galyan’s, acting through its Board of Directors, shall duly call a special meeting of its shareholders to be held in accordance with the Indiana Business Corporation Law at the earliest practicable date, upon due notice thereof to its shareholders, to consider and vote upon, among other matters, the adoption and approval of the Merger Agreement and the Merger. Galyan’s Board of Directors will recommend the approval of the Merger and will use its reasonable best efforts, consistent with its fiduciary duties and assuming the recommendation of the approval of the Merger has not been withdrawn, to solicit the requisite vote of Galyan’s shareholders to approve the Merger Agreement and the Merger pursuant to proxy solicitation materials. Each of Dick’s and Purchaser agrees that it will execute a written consent or vote, or cause to be voted, all of Galyan’s Common Shares acquired by it pursuant to the Offer and otherwise then owned by it and its subsidiaries in favor of the approval of the Merger and the adoption of the Merger Agreement. In addition, each of Dick’s and Purchaser agrees that from (and including) the date on which Dick’s or any of its subsidiaries purchases at least a majority of the issued and outstanding Company Common Shares (the “Share Purchase Date”) through the Effective Time, it will not sell, transfer, assign, pledge, exchange or otherwise dispose of Galyan’s Common Shares (including those purchased in the Offer) or rights therein (whether acquired pursuant to the Offer or otherwise).

      Additionally, under the Merger Agreement, unless the Merger is consummated in accordance with Section 23-1-40-4 of the Indiana Business Corporation Law (where Purchaser has acquired at least 90% of the outstanding shares of each class of capital stock of Galyan’s), Galyan’s is required to prepare and file with the SEC, subject to the prior review and approval of Dick’s and Purchaser (which approval shall not be unreasonably withheld), as soon as practicable after the consummation of the Offer, a preliminary proxy statement relating to the Merger as required by the Exchange Act and the rules and regulations thereunder. Galyan’s is required to obtain and furnish the information required to be included in the preliminary proxy statement, shall provide Dick’s and Purchaser with, and consult with Dick’s and Purchaser regarding, any comments that may be received from the SEC or its staff with respect thereto, shall, subject to the prior review and approval of Dick’s and Purchaser (which approval shall not be unreasonably withheld), respond promptly to any such comments made by the SEC or its staff with respect to the preliminary proxy statement, and shall cause the proxy statement to be mailed to Galyan’s shareholders at the earliest practicable date and shall use its best efforts to obtain the necessary approval of the Merger by its shareholders.

      If Purchaser owns at least 90% of the outstanding shares of each class of capital stock of Galyan’s pursuant to the Offer or otherwise, each of Dick’s, Purchaser and Galyan’s are required to take all necessary and appropriate action to cause the Merger to become effective, as soon as practicable after the consummation of the Offer, without a meeting of shareholders of Galyan’s, in accordance with Section 23-1-40-4 of the Indiana Business Corporation Law.

      Conversion of Securities. On the Effective Time, each Company Common Share issued and outstanding immediately prior to the Effective Time, other than the Company Common Shares (if any) owned by the Company, Dick’s or Purchaser, will by virtue of the Merger and without any action on part of the holders, automatically be cancelled and converted into the right to receive the price per share actually paid in the Offer in cash (the “Merger Consideration”). Each share of Purchaser common stock outstanding at the Effective Time will, by virtue of the Merger and without any action by the holder, be converted into one share of common stock, no par value, of the Surviving Corporation.

      The Merger Agreement also provides that each outstanding Company Common Share that is held of record by a holder who has properly exercised dissenters’ rights with respect thereto under Section 23-1-44 of the Indiana Business Corporation Law shall not be converted into or represent the right to receive the Merger

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Consideration, but the holder thereof shall be entitled to receive such payment of the fair value of such Company Common Share from the Surviving Corporation as shall be determined pursuant to Section 23-1-44 of the Indiana Business Corporation Law. If, however, any such holder shall have failed to perfect or shall withdraw or lose such holder’s rights under Section 23-1-44 of the Indiana Business Corporation Law, each such holder’s Company Common Shares shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the Merger Consideration, without any interest thereon.

      Under the Merger Agreement, Galyan’s shall give Dick’s (x) prompt notice of any written demands for payment of the fair value of shares, withdrawals of such demands and any other instruments delivered pursuant to Section 23-1-44 of the Indiana Business Corporation Law and (y) the opportunity jointly to participate with Galyan’s in all negotiations and proceedings with respect to demands for payment under Section 23-1-44 of the Indiana Business Corporation Law. Galyan’s will not voluntarily make any payment with respect to any demands delivered to Galyan’s pursuant to Section 23-1-44 of the Indiana Business Corporation Law and will not, except with the prior written consent of Dick’s, settle or offer to settle any such demands or waive any failure to comply with Section 23-1-44 of the Indiana Business Corporation Law by any holder of Company Common Shares. See “— Dissenters’ Rights.”

      Treatment of Stock Options and Other Rights. Under the Merger Agreement, each warrant or other right to acquire Company Common Shares, and each option granted under Galyan’s 1999 Stock Option Plan, as amended or under any other plan or agreement of Galyan’s that is outstanding and unexpired immediately prior to the Effective Time, whether or not then vested or exercisable, where the exercise price per share is less than $16.75 per share will, effective as of immediately prior to the Effective Time, be cancelled in exchange for a single lump sum cash payment equal to the product of (1) the number of Company Common Shares subject to such warrant or option and (2) the excess of $16.75 per share over the exercise price of such option or warrant (subject to any applicable withholding taxes). Each warrant to acquire Company Common Shares, and each option granted under Galyan’s 1999 Stock Option Plan or under any other plan or agreement of Galyan’s that is outstanding immediately prior to the Effective Time, whether or not then vested or exerciseable, where the exercise price per share is greater than $16.75 per share will, effective as of immediately prior to the Effective Time, be cancelled and no payments shall be made with respect thereto.

      Under the Merger Agreement, Galyan’s Board of Directors (or, if appropriate, any committee administering Company stock plans) has agreed to adopt such resolutions or take such other actions as are required to give effect to the treatment of options and other rights described herein that were granted under Galyan’s 1999 Stock Option Plan, as amended. All amounts payable in connection with these options or rights shall be subject to any required withholding of taxes or proof of eligibility of exemption therefrom and shall be paid without interest by the Surviving Corporation as soon as practicable following the Effective Time. Galyan’s shall use its reasonable best efforts to obtain all consents of the holders of Company stock options as shall be necessary, if any, to effectuate the foregoing. Notwithstanding anything to the contrary contained in the Merger Agreement, payment shall, at Dick’s request, be withheld in respect of any Company stock option until all necessary consents with respect to such Company stock option are obtained.

      Treatment of Employee Stock Purchase Plan (“ESPP”) Rights. As soon as practicable following the date of the Merger Agreement, Galyan’s Board of Directors (or, if appropriate, any committee administering Galyan’s ESPP) is required to take all action necessary to set the purchase date (as defined in Galyan’s ESPP) for the calendar half (as defined in Galyan’s ESPP) then in progress, which purchase date shall be June 30, 2004. Galyan’s shall give any required notice to participants in Galyan’s ESPP and the accumulated payroll deductions credited to each participant’s account through June 30, 2004 shall be used to acquire Company Common Shares under the ESPP. From and after June 30, 2004, no new payroll contributions shall be accepted by, or made to, Galyan’s ESPP. Galyan’s agrees that, from the date of the Merger Agreement through June 30, 2004, Galyan’s ESPP shall be operated only in the ordinary course and in a manner consistent with the previous operation of Galyan’s ESPP. All of Galyan’s stock option plans and agreements (including any warrants) and Galyan’s ESPP shall terminate as of the Effective Time, and the provisions in any other Galyan’s benefit plan providing for the issuance, transfer or grant of any capital stock of Galyan’s or any interest in respect of any capital stock of Galyan’s shall be deleted as of the Effective Time, and Galyan’s shall use its reasonable best efforts to cause, following the Effective Time, no holder of a Company

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stock option or any participant in any Company stock plan, Galyan’s ESPP or other Company benefit plan to have any right thereunder to acquire any capital stock of Galyan’s or the Surviving Corporation.

      Representations and Warranties. Pursuant to the Merger Agreement, Dick’s and Purchaser have made customary representations and warranties to Galyan’s with respect to, among other matters, Dick’s and Purchaser’s organization and standing, Dick’s and Purchaser’s corporate power and authority, conflicts, consents and approvals, brokerage and finders’ fees, information supplied and to be supplied for inclusion in the proxy statement and the Tender Offer Statement on Schedule TO and the Schedule 14D-9, and required funds. Galyan’s has made representations and warranties on customary matters to Dick’s and Purchaser with respect to, among other matters, its organization and standing, its subsidiaries, corporate power and authority, capitalization, real property matters, conflicts, consents and approvals, brokerage and finders’ fees, filings with the Commission and securities law matters, information supplied and to be supplied for inclusion in the proxy statement and the Tender Offer Statement on Schedule TO and the Schedule 14D-9, compliance with law, litigation, taxes, intellectual property, employee benefit plans, contracts, labor matters, undisclosed liabilities, operation of business and relationships, permits and compliance, environmental matters and insurance.

      As it relates to certain real property representations made by Galyan’s, these representations are required to be true and correct such that, individually or in the aggregate, a breach of the representation or warranty would not reasonably be expected to have a Material Adverse Effect (as defined below) on the Company and/or would not reasonably be expected to reduce by more than 18% the aggregate four-wall operating income, calculated in accordance with the Company’s four-wall contribution analysis, of the top nine performing stores of the Company, based on operating income for the fiscal year ended January 31, 2004; provided, however, that for purposes of determining the amount of any such reduction, the reduction in the four-wall operating income of any one store shall be deemed not to be more than 8% of the aggregate four-wall operating income of the top nine performing stores of the Company. Certain other representations of the Company contained in the Merger Agreement are qualified by Material Adverse Effect qualifiers.

      Reasonable Best Efforts Covenant (including HSR matters). The Merger Agreement obligates Galyan’s, Dick’s and Purchaser to each use their reasonable best efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary and proper under applicable law to consummate and make effective the transactions contemplated hereby as promptly as practicable, obtain from any governmental entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained or made by Galyan’s or Dick’s or any of their subsidiaries in connection with the authorization, execution and delivery of the Merger Agreement and the consummation of the transactions contemplated hereby including the Offer and the Merger, and as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to the Merger Agreement, the Offer and the Merger required under (1) the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act and any other applicable federal or state securities laws, (2) the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the “HSR Act”), and any related governmental request thereunder and (3) any other applicable law. Galyan’s, Dick’s and Purchaser shall cooperate with each other in connection with the making of all such filings, including providing copies of all such documents to the non-filing party and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith. Galyan’s, Dick’s and Purchaser shall each use its reasonable best efforts to furnish to each other all information required for any application or other filing to be made pursuant to the rules and regulations of any applicable law (including all information required to be included in any offer documents and the proxy statement) in connection with the transactions contemplated by the Merger Agreement. Under the Merger Agreement, Galyan’s, Dick’s and Purchaser are required to each use its reasonable best efforts to oppose, contest, resolve, appeal, defend against or lift, as applicable, any action, injunction, proceeding, decree, statute, legislation, rule, regulation or other order (whether temporary, preliminary or permanent) (“Order”) of any Governmental Entity (as defined in the Merger Agreement) if the Merger Agreement provides that, as a result thereof, a party would not be obligated to perform any of its obligations with respect to the Offer, the Merger or any other transaction contemplated by the Merger Agreement.

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      Pursuant to the Merger Agreement, Galyan’s and Dick’s have agreed, and shall cause each of their respective subsidiaries, to cooperate and to use their respective reasonable best efforts to obtain any government clearances required for closing (including through compliance with the HSR Act and any applicable foreign government reporting requirements), to respond to any government requests for information, and to contest and resist any Order or other action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any Order that restricts, prevents or prohibits the consummation of the Merger or any other transactions contemplated by the Merger Agreement, including by vigorously pursuing all available avenues of administrative and judicial appeal and all available legislative action. Galyan’s and Dick’s also agree to take any and all of the following actions to the extent necessary to obtain the approval of any Governmental Entity with jurisdiction over the enforcement of any applicable laws regarding the Merger: entering into negotiations; providing information; substantially complying with any second request for information pursuant to the HSR Act; making proposals; entering into and performing agreements or submitting to judicial or administrative orders; selling or otherwise disposing of, or holding separate (through the establishment of a trust or otherwise) particular assets or categories of assets, or businesses of Galyan’s, Dick’s or any of their affiliates; and withdrawing from doing business in a particular jurisdiction. Dick’s, Galyan’s and Purchaser are required to consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act or any other federal, state or foreign antitrust or fair trade law. Dick’s is also entitled to direct any proceedings or negotiations with any governmental entity relating to any of the foregoing, so long as it affords Galyan’s a reasonable opportunity to participate therein.

      Under the terms of the Merger Agreement, each of Galyan’s and Dick’s is required to give (or shall cause their respective subsidiaries to give) any notices to third parties, and use, and cause their respective subsidiaries to use, their reasonable best efforts to obtain any third party consents related to or required in connection with the Merger that are necessary to consummate the transactions contemplated hereby, or required to prevent an Aggregate MAE (as defined below) from occurring prior to or after the Effective Time.

      However, neither Galyan’s nor Dick’s nor any of their respective subsidiaries shall be required by this reasonable best efforts covenant to take any action that, individually or in the aggregate, would reasonably be expected to have an Aggregate MAE and Galyan’s, Dick’s and their respective subsidiaries shall be required by this covenant to take any actions, including selling, closing or otherwise disposing of stores, so long as such actions, individually or in the aggregate, would not reasonably be expected to have an Aggregate MAE. “Aggregate MAE” means a Material Adverse Effect with respect to both Galyan’s and Dick’s (including their respective subsidiaries), taken as a whole. “Material Adverse Effect” means any effect that with respect to Galyan’s or Dick’s (1) is both material and adverse to the financial condition, results of operations, assets or business of Galyan’s and its subsidiaries taken as a whole or Dick’s and its subsidiaries taken as a whole, respectively, excluding any such effect resulting from or arising in connection with (A) changes or conditions generally affecting the retail industry and/or the sporting goods industry, (B) changes or conditions generally affecting the U.S. economy or financial market, (C) increase or decrease in trading price or trading volume of the Galyan’s Common Shares, (D) reduction in revenues, cash flow or earnings, (E) changes or conditions arising by reason of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, including the announcement of any of the foregoing, (F) commencement of a new war or material escalation of current wars, armed hostilities or terrorism directly or indirectly involving the United States or (G) the departure of employees of Galyan’s; or (2) would materially impair the ability of Galyan’s, with respect to any effect on Galyan’s, or Dick’s or Purchaser with respect to any effect on Dick’s, to consummate the transactions under the Merger Agreement.

      Public Announcements. The Merger Agreement provides that following the initial press release concerning the Offer and the Merger, except for disclosures to shareholders in accordance with the fiduciary rights provisions in the Merger Agreement and except as otherwise required by law or the rules of the SEC, the NYSE (with respect to Dick’s) or Nasdaq (with respect to Galyan’s), for so long as the Merger Agreement is in effect, neither Dick’s nor Galyan’s can, nor shall permit any of their respective subsidiaries

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to, issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by the Merger Agreement without the consent of the other party, which consent shall not be unreasonably withheld. However, either Galyan’s or Dick’s or both may file a copy of the Merger Agreement and the related agreements with the Commission.

      Indemnification; Directors’ and Officers’ Insurance. Pursuant to the Merger Agreement, for a period of six years after the Effective Time, Dick’s is required to cause the Surviving Corporation to fulfill and honor in all respects the obligations of Galyan’s pursuant to any indemnification agreements, dated prior to the date hereof, between Galyan’s and its present and former directors and officers (the “Indemnified Parties”) and any indemnification provisions under Galyan’s Articles of Incorporation or Bylaws as in effect on the date hereof, and will indemnify the Indemnified Parties with respect to all such obligations of Galyan’s. The Articles of Incorporation and Bylaws of the Surviving Corporation shall contain provisions with respect to exculpation and indemnification that are at least as favorable to the Indemnified Parties as those contained in the Articles of Incorporation and Bylaws of Galyan’s as in effect on the date hereof, which provisions will not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of the Indemnified Parties.

      Additionally, for a period of six years after the Effective Time, Dick’s is required to, at its election, either (A) cause the Surviving Corporation to use its commercially reasonable efforts to maintain in effect, if available, directors’ and officers’ liability insurance covering those persons who are currently covered by Galyan’s directors’ and officers’ liability insurance policy on terms no less favorable to those currently applicable to the directors and officers of Galyan’s or (B) obtain, or permit Galyan’s to obtain, a six-year “tail” insurance policy that provides coverage no less favorable than the coverage currently provided under Galyan’s directors’ and officers’ liability insurance covering those persons who are currently covered by Galyan’s directors’ and officers’ liability insurance policy on terms no less favorable to those applicable to the directors and officers of Galyan’s.

      Employee Benefit Arrangements. With respect to employee benefit arrangements, the Merger Agreement provides that for a period of one year after the Closing, Dick’s shall either cause the Surviving Corporation to continue to sponsor and maintain each Company Benefit Plan (as defined in the Merger Agreement) or provide benefits to the employees of Galyan’s who continue to be employed by the Surviving Corporation (the “Company Employees”) and their eligible dependents under employee benefit plans, programs, policies or arrangements that in the aggregate are no less favorable than those benefits provided to Galyan’s Employees and their eligible dependents by Galyan’s immediately prior to the date of the closing of the Merger (the “Closing Date”). Except to the extent necessary to avoid duplication of benefits, Dick’s shall recognize (or cause to be recognized) service with Galyan’s and any predecessor entities (and any other service credited by Galyan’s under similar benefit plans) for purposes of vesting, eligibility to participate, severance and vacation accrual under employee benefit plans or arrangements maintained by Dick’s, the Surviving Corporation or any subsidiary of Dick’s, if any, in which Galyan’s employees are eligible to participate following the Closing. If Dick’s offers health benefits to Galyan’s Employees or their eligible dependents under a group health plan that is not a Company Benefit Plan that was in effect on the Closing Date, Dick’s is required to waive any pre-existing condition exclusion under such group health plan to the extent coverage existed for such condition under the corresponding Company Benefit Plan covering such Company Employee or eligible dependent on the Closing Date and credit each Company Employee and eligible dependent with all deductible payments and co-payments paid by such Company Employee or eligible dependent during the current plan year under any Company health plan covering such Company Employee or eligible dependent prior to the Closing Date for purposes of determining the extent to which any such Company Employee or eligible dependent has satisfied his or her deductible and whether he or she has reached the out-of-pocket maximum under any health plan for such plan year.

      For a period of one year after the Closing Date, Dick’s is required to cause Galyan’s to maintain any severance pay plan, policy or agreement of Galyan’s in effect as of the Closing Date on terms no less favorable to any person employed by Galyan’s on the Closing Date than the terms of such plan on the date of the Merger Agreement. Dick’s shall cause Galyan’s to pay to any person employed by Galyan’s on the Closing Date who becomes eligible to receive a severance payment under such severance pay plan or policy

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of Galyan’s at any time after the Closing Date and prior to the first anniversary thereof an amount equal to the greater of the severance amount payable to such employee under such severance pay plan or policy of Galyan’s and the severance amount that would be payable to a comparable employee of Dick’s under Dick’s severance program then in effect.

      After the Closing Date, Dick’s is required to cause the Surviving Corporation to honor all obligations under all of the employment, severance, consulting and similar agreements of Galyan’s existing on June 21, 2004.

      Nothing contained in the Merger Agreement shall be construed as giving any employee of Galyan’s any right to continued employment after the Closing Date.

      Conduct of Galyan’s Operations. The Merger Agreement obligates Galyan’s to, during the period from the date of the Merger Agreement to the Effective Time (unless the other parties shall otherwise agree in writing, which approval shall not be unreasonably withheld, conditioned or delayed and except as otherwise contemplated by the Merger Agreement), except as would not reasonably be expected to have a Material Adverse Effect on Galyan’s, and to cause each of its subsidiaries to, conduct its operations according to its ordinary course of business consistent with past practice and use all commercially reasonable efforts to preserve intact its current business organization, keep available the service of its current employees and preserve its relationship with customers, suppliers and others having significant dealings with it. Without limiting the generality of the foregoing, and except as otherwise permitted in the Merger Agreement or as disclosed to Dick’s by Galyan’s in Galyan’s disclosure letter delivered in connection with the Merger Agreement, prior to the Effective Time, neither Galyan’s nor any of its subsidiaries will, without the prior written consent of Dick’s:

  •  except for shares to be issued or delivered pursuant to Galyan’s stock plans and agreements for options outstanding and unexpired on the date of the Merger Agreement and the stock warrant to purchase 1,350,000 shares (as adjusted for any stock split, reverse stock split or similar event) of common stock at an exercise price of at least $44.82 per share, issue, deliver, sell, dispose of, pledge or otherwise encumber, or authorize or propose the issuance, sale, disposition or pledge or other encumbrance of any additional shares of capital stock of any class (including Company Common Shares), or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for any shares of capital stock, or any rights, warrants, options, calls, commitments or any other agreements of any character to purchase or acquire any shares of capital stock or any securities or rights convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of capital stock other than grants at fair market value on the date of grant made to newly-hired employees of Galyan’s, or any other securities in respect of, in lieu of, or in substitution for, of Company Common Shares outstanding on the date hereof;
 
  •  redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any of its outstanding capital stock, including Company Common Shares, or any rights, warrants or options to acquire any such Shares or other securities (except for shares of restricted stock forfeitable under the terms of any of Galyan’s stock plans and except in connection with option exercises);
 
  •  split, combine, subdivide or reclassify any Company Common Shares or declare, set aside for payment or pay any dividend, or make any other actual, constructive or deemed distribution in respect of any capital stock, including Company Common Shares or otherwise make any payments to shareholders in their capacity as such, other than the declaration and payment of any regular quarterly cash dividend on Company Common Shares and except for dividends by a wholly-owned subsidiary of Galyan’s;
 
  •  adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Galyan’s or any of its subsidiaries (other than the Merger);
 
  •  adopt any amendments to its Articles or Certificate of Incorporation or By-Laws or alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of any subsidiary of Galyan’s;

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  •  except in each case in the ordinary course of business consistent with past practice, make any acquisition, by means of merger, consolidation or otherwise, or disposition, of assets or securities, or mortgage or otherwise encumber or subject to lien any of its properties or assets;
 
  •  other than in accordance with leases or other contractual obligations in existence on the date hereof and otherwise in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money or sell any debt securities or guarantee any such indebtedness, make any loans, advances or capital contributions to, or investments in, any other person, other than to Galyan’s or any wholly-owned subsidiary of Galyan’s, or make any commitments for capital expenditures in excess of $500,000 individually, or $2,000,000 in the aggregate;
 
  •  except in the ordinary course of business consistent with past practice, grant any material increases in the compensation of any of its directors, officers or key employees;
 
  •  pay or agree to pay any pension, retirement allowance or other employee benefit not required or contemplated by any of the existing benefit, severance, termination, pension or employment plans, agreements or arrangements as in effect on the date hereof to any employee, consultant, director or officer, whether past or present, except that Galyan’s (i) may pay or commit to pay bonuses in an amount not to exceed $750,000 in the aggregate to employees of Galyan’s that are not executive officers or directors who agree to remain employed through the Effective Date and (ii) may pay or commit to pay bonuses in an amount not to exceed $750,000 in the aggregate to employees that are not executive officers or directors of Galyan’s who (A) agree to remain employed through the Effective Date and (B) with respect to whom Dick’s has provided Galyan’s prior written consent, which consent shall not be unreasonably withheld or delayed;
 
  •  enter into any new or materially amend any existing employment or severance, termination or similar agreement with any director or officer;
 
  •  except as may be required to comply with applicable law or regulation, become obligated under any new pension plan, welfare plan, multiemployer plan, employee benefit plan, severance plan, benefit arrangement, or similar plan or arrangement, which was not in existence on the date hereof, or amend any such plan or arrangement in existence on the date hereof if such amendment would have the effect of materially enhancing any benefits thereunder;
 
  •  settle or compromise any material claims or litigation (i) with the result that it would materially and adversely affect a material relationship with a landlord, vendor or other person with whom Galyan’s has a significant relationship or (ii) which would reasonably be expected to have a Material Adverse Effect on Galyan’s, or enter into, modify, amend or terminate any Material Contract or waive, release or assign any material rights or claims thereunder;
 
  •  make any material change in accounting policies or procedures applied by Galyan’s (including tax accounting policies and procedures), other than in the ordinary course of business consistent with past practice, as required by applicable law, regulation or change in generally accepted accounting principles, or based on the advice of its independent auditors, as Galyan’s determines in good faith is advisable to conform to best accounting practices;
 
  •  except in the ordinary course of business or as otherwise required by applicable law or regulation, make any tax election or permit any insurance policy naming it as a beneficiary or a loss payable payee to be canceled or terminated, except in the ordinary course of business;
 
  •  authorize, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing;
 
  •  enter into more than two real property leases relating in each case to a retail store of Galyan’s or its subsidiaries; or

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  •  enter into or become obligated under any option, right of first refusal or other contractual right to purchase, acquire, sell or dispose of Galyan’s real property or any portion thereof or interest therein other than any option, right of first refusal or other contractual right existing as of the date hereof.

      No Solicitation and Fiduciary Right of Termination. During the term of the Merger Agreement, Galyan’s cannot, nor can it permit any of its subsidiaries to, nor shall it authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it or any of its subsidiaries to solicit, initiate or encourage, or take any other action to facilitate (including by way of furnishing information), any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Takeover Proposal (as defined below) (other than disclosures to comply with its fiduciary duties or applicable law and the issuance of press releases and the filing or furnishing of documents with the SEC), or to participate in any discussions or negotiations regarding any Takeover Proposal; provided, however, that (1) Galyan’s may in response to a Takeover Proposal, request clarifications from (but not enter into negotiations with) any third party which makes such Takeover Proposal if such action is taken solely for the purpose of obtaining information reasonably necessary for Galyan’s to ascertain whether such Takeover Proposal is a Favorable Third Party Proposal (as defined below) and (2) Galyan’s may, in response to any proposal which constitutes a Favorable Third Party Proposal (as defined below), (A) furnish information with respect to it and its subsidiaries to any person pursuant to a customary confidentiality agreement, the benefits of the terms of which, if more favorable than the confidentiality agreement in place with Dick’s, shall be extended to Dick’s, and (B) negotiate or otherwise engage in substantive discussions with the party making such proposal, if the Board or Directors of Galyan’s determines in good faith by a majority vote, based on the advice of its outside legal counsel, there is a reasonable basis to conclude that such action is required for it to comply with its fiduciary duties. Galyan’s is required to, and will cause its subsidiaries and affiliates, and their respective officers, directors, employees, investment bankers, attorneys, accountants and other agents to, cease and terminate any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any possible Takeover Proposal.

      Neither the Board of Directors of Galyan’s nor any committee thereof shall (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Dick’s, the approval or recommendation by such Board of Directors or such committee of the Offer or the adoption and approval of the matters to be considered at the Special Shareholders Meeting (as defined in the Merger Agreement), (B) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal, or (C) cause Galyan’s to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an “Acquisition Agreement”) related to any Takeover Proposal; provided that (x) actions taken by the Board of Directors of Galyan’s in accordance with the proviso of the preceding paragraph shall not be deemed to be a withdrawal or modification of its approval or recommendation of the Offer or the Merger or the matters to be considered at the Special Shareholders Meeting and (y) a “stop-look-and-listen” communication of the nature contemplated in Rules 14d-9(f) under the Exchange Act with respect to an unsolicited tender offer or exchange offer that constitutes a Takeover Proposal, without more, shall not be deemed to be any such withdrawal or modification if, within the period contemplated by Rule 14e-2 under the Exchange Act, the Board of Directors of Galyan’s shall publicly confirm such approval and recommendation and recommends against the acceptance of such tender offer or exchange offer by the shareholders of Galyan’s. Notwithstanding the foregoing, in the event that the Board of Directors determines in good faith by a majority vote, based on the advice of its outside legal counsel, that there is a reasonable basis for its determination that such action is required for it to comply with its fiduciary duties with respect to a Favorable Third Party Proposal, then the Board of Directors of Galyan’s may (1) withdraw or modify its approval or recommendation of the Offer, the Merger or the adoption and approval of the matters to be considered at the Special Shareholders Meeting, (2) approve or recommend the Favorable Third Party Proposal and/or (3) after the third business day following Galyan’s written notice to Dick’s that specifies the material terms and conditions of the Favorable Third Party Proposal, terminate the Merger Agreement (and concurrently with such termination, if it so chooses, cause Galyan’s to enter into any Acquisition Agreement with respect to the Favorable Third Party Proposal).

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      As used in the Merger Agreement, “Takeover Proposal” means any written proposal from a credible third party relating to any direct or indirect acquisition or purchase of 20% or more of the assets of Galyan’s and its subsidiaries, taken as a whole, or 20% or more of any class or series of equity securities of Galyan’s or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any Person beneficially owning 20% or more of the combined voting power of Company Common Shares, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Galyan’s or any of its subsidiaries in which the other party thereto or its shareholders will own 20% or more of the combined voting power of the Dick’s entity resulting from any such transaction, other than the transactions contemplated by the Merger Agreement. As used in the Merger Agreement, “Favorable Third Party Proposal” means a written proposal from a credible third party relating to any direct or indirect acquisition or purchase of 50% or more of the assets of Galyan’s and its subsidiaries, taken as a whole, or 50% or more of any class or series of equity securities of Galyan’s or any of its subsidiaries, any tender offer or exchange offer that if consummated would result in any Person beneficially owning 50% or more of the combined voting power of Company Common Shares, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving Galyan’s or any of its subsidiaries in which the other party thereto or its shareholders will own 50% or more of the combined voting power of the Dick’s entity resulting from any such transaction, and otherwise on terms which the Board of Directors of Galyan’s determines in its good faith judgment (based on the advice of Galyan’s Financial Advisor or another financial advisor of nationally recognized reputation and considering any modifications to the Merger Agreement proposed by Dick’s), taking into account legal, financial, regulatory and other aspects of the proposal deemed appropriate by the Board of Directors of Galyan’s, to be at a higher price or financial value per Company Common Share, than the Merger (taking into account any amendments to the Merger Agreement proposed by Dick’s in response to the receipt by Dick’s of the proposal) to Galyan’s shareholders.

      Nothing in the Merger Agreement prohibits Galyan’s from taking and disclosing to its shareholders a position contemplated by Rule 14d-9 or 14e-2 promulgated under the Exchange Act or from making any disclosure to Galyan’s shareholders if the Board of Directors determines in good faith by a majority vote, based on the advice of its outside legal counsel, that there is a reasonable basis for its determination that such action is required for it to comply with fiduciary duties or applicable law.

      Access to Information. The Merger Agreement provides that until the Effective Time or until the abandonment of the Merger as permitted by the Merger Agreement, Galyan’s will allow Dick’s and its representatives reasonable access, during normal business hours and upon reasonable prior notice specifying in reasonable detail the information to which access is sought, to the properties, operations, books and records of Galyan’s and its subsidiaries that Dick’s in good faith determines is necessary (i) from and after June 21, 2004, (A) to verify the accuracy of the representations made by Galyan’s in the Merger Agreement, (B) to verify the performance of covenants made by Galyan’s in the Merger Agreement or (C) to verify the satisfaction of closing conditions and (ii) from and after the Share Purchase Date, for the purposes stated in clause (i) above and any other purpose reasonably related to the Merger, the Offer or the transactions contemplated thereby; provided, however, that, to the extent not already otherwise provided to Dick’s and its representatives, Galyan’s will allow Dick’s and its representatives reasonable access to information that may be furnished to other persons pursuant to the fiduciary right of termination provisions of the Merger Agreement.

      Delisting. Under the Merger Agreement, each of Dick’s, Galyan’s and the Purchaser agree to cooperate with each other in taking, or causing to be taken, all actions necessary to delist the Company Common Shares from Nasdaq and terminate registration under the Securities Exchange Act, except that such delisting and termination shall not be effective until after the expiration of the Offer or the Effective Time, as appropriate.

      Bank Waiver. Under the Merger Agreement, each party agrees to use its reasonable best efforts to obtain any extensions or waivers under Galyan’s existing credit and other financing facilities that may be required so that such facilities would not become due and payable until the Effective Time. In the event such extensions or waivers are not obtained, from and after the Share Purchase Date, Dick’s will make available to

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Galyan’s sufficient funds to repay all amounts that may become due and owning as of the Share Purchase Date under such facilities.

      Confidentiality. The Company and Dick’s have agreed to abide by the terms of that certain Confidentiality Agreement dated June 27, 2003 between the Company and Parent (the “Confidentiality Agreement”). In addition, the Company and Parent amended the Confidentiality Agreement in the Merger Agreement by extending the non-solicitation provision’s and no hire provision’s term from one year to two years. However, the amendments to the Confidentiality Agreement do not act in any way or manner to prohibit or limit Dick’s or its affiliates from responding to any Takeover Proposal or from making an offer to Galyan’s Board of Directors to improve the terms and conditions of the Offer and/or the Merger Agreement in response to the Company’s provision of notice of approval or recommendation of a Favorable Third Party Proposal. Moreover, the no-hire provision terminates and is of no force and effect if the Merger Agreement is terminated by Galyan’s pursuant to the fiduciary right of termination provisions of the Merger Agreement or by Dick’s or Purchaser pursuant to their right to terminate when the Galyan’s Board of Directors (or committee), pursuant to the fiduciary right of termination provisions of the Merger Agreement, withdraws or fails to reconfirm (or resolves to do the foregoing) their approval of the Offer or the Merger and a third party acquires a majority of the Company’s equity or a majority of the Company’s and its subsidiaries’ assets.

      Takeover laws. Pursuant to the Merger Agreement, Galyan’s shall not take any action that would cause the transactions contemplated by the Merger Agreement to be subject to requirements imposed by any Takeover Law (as defined in the Merger Agreement) and if any Takeover Law is or may become applicable to the Offer or the Merger, Galyan’s shall use its reasonable best efforts to ensure that the transactions contemplated by the Merger Agreement and the Shareholder Tender Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise use its reasonable best efforts to eliminate or minimize the effects of any Takeover Law on the Offer or the Merger.

      Conditions to Consummation of the Merger. Pursuant to the Merger Agreement, the respective obligations of Dick’s, Purchaser and Galyan’s to consummate the Merger are subject to the satisfaction of each of the following conditions:

  •  No Order. Whether temporary, preliminary or permanent, no order shall have been issued, enacted, promulgated, enforced or entered by any Governmental Entity to enjoin, restrain or prohibit the consummation of the Merger; provided, however, that notwithstanding the foregoing, neither party may invoke this condition if (A) it shall have failed in any material respect to use its reasonable best efforts to oppose, contest, resolve, appeal, defend against or lift, as applicable, such Order, (B) compliance with such Order would not reasonably be expected to have an Aggregate MAE or (C) violation of such Order would expose it to a maximum monetary fine or penalty which is less than $15,000,000 and would not in the reasonable judgment of it (i) expose it or any of its officers, directors, agents or attorneys to violate any criminal law or to any criminal sanction (ii) expose any of its officers, directors, agents or attorneys to any contempt proceeding which could result in a fine or imprisonment (iii) constitute a matter which an officer or director would have to disclose in a proxy statement or Annual Report on Form 10-K under Item 401(f) of Regulation S-K or (iv) constitute a “material violation” as such term is defined in 17 C.F.R. Section 205.2.
 
  •  HSR Act. Any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated.
 
  •  Shareholder Approval. Unless the Merger is consummated in accordance with Section 23-1-40-4 of the Indiana Business Corporation Law, the plan of merger contained within the Merger Agreement (within the meaning of Section 23-1-40-1 of the Indiana Business Corporation Law) shall have been approved by the affirmative vote of the shareholders of Galyan’s required by and in accordance with applicable law.

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      Termination. The Merger Agreement may be terminated and the Offer and the Merger may be abandoned (notwithstanding any approval of the Merger Agreement by the Galyan’s shareholders):

  •  if the Merger shall not have occurred on or before 5:00 p.m., local Pittsburgh, Pennsylvania time, on December 31, 2004, by either Galyan’s or Dick’s; provided, however, that (A) Galyan’s may not invoke this condition in this clause (i) if it is then in Company Material Breach (as defined below) or the existence of a Company Material Breach resulted in the failure of the Merger to be consummated on or before such date and (B) Dick’s may not invoke the condition of this clause (i) if Dick’s or Purchaser is then in Dick’s Material Breach (as defined below) or the existence of a Dick’s Material Breach resulted in the failure of the Merger to be consummated on or before such date;
 
  •  by the mutual agreement of Dick’s, Purchaser and Galyan’s;
 
  •  by either Dick’s or Purchaser on the one hand, or Galyan’s, on the other, if consummation of the Merger would violate any final, non-appealable order, decree or judgment of any U.S. court or other tribunal of competent jurisdiction, provided no party may invoke this condition if (A) it or any of its affiliates shall have failed in any material respect to use its reasonable best efforts to oppose, contest, resolve, appeal, defend against or lift, as applicable, such Order, (B) compliance with such Order would not reasonably be expected to have an Aggregate MAE or (C) (1) in the case of Dick’s or Purchaser, violation of such Order would expose Dick’s or Purchaser to a maximum monetary fine or penalty which is less than $15,000,000 and would not in the reasonable judgment of Dick’s or Purchaser (i) expose Dick’s or Purchaser or any officer, director, agent or attorney of Dick’s or Purchaser to violating any criminal law or to any criminal sanction, (ii) expose any officer, director, agent or attorney of Dick’s or Purchaser to any contempt proceeding which could result in a fine or imprisonment, (iii) constitute a matter which an officer or director would have to disclose in a proxy statement or Annual Report on Form 10-K under Item 401(f) of Regulation S-K or (iv) constitute a “material violation” as such term is defined in 17 C.F.R. Section 205.2 and (2) in the case of Galyan’s, violation of such Order would expose Galyan’s to a maximum monetary fine or penalty which is less than $15,000,000 and would not in the reasonable judgment of Galyan’s (i) expose Galyan’s or any officer, director, agent or attorney of Galyan’s to violating any criminal law or to any criminal sanction, (ii) expose any officer, director, agent or attorney of Galyan’s to any contempt proceeding which could result in a fine or imprisonment, (iii) constitute a matter which an officer or director would have to disclose in a proxy statement or Annual Report on Form 10-K under Item 401(f) of Regulation S-K or (iv) constitute a “material violation” as such term is defined in 17 C.F.R. Section 205.2;
 
  •  by either Dick’s or Purchaser on the one hand, or Galyan’s, on the other, if, at Galyan’s Special Shareholders Meeting duly convened to approve the Merger or at any adjournment or postponement thereof, Galyan’s shareholders shall not have approved the Merger;
 
  •  prior to the Share Purchase Date, by Dick’s or Purchaser, if (A) (x) any representation and warranty of Galyan’s set forth in Section 4.1 of the Merger Agreement (which for purposes of this condition shall be read as though none of them contained any qualifiers such as “Material Adverse Effect,” “Aggregate MAE,” “in all material respects” or other materiality qualifiers) shall not have been true and correct as of the date of the Merger Agreement and as of the then scheduled expiration date of the Offer (as it may be extended in accordance with the terms hereof) with the same force and effect as though made as of such date of termination pursuant to this clause (or as of the date when made in the case of any representation and warranty which specifically relates to an earlier date), except where the failure of such representations and warranties in the aggregate to be true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Galyan’s, or (y) Galyan’s shall have breached or failed in any material respect to perform and comply with any of its material obligations, covenants or agreements contained in the Merger Agreement and then required to be performed or complied by it (a condition referred to in clauses (x) and (y) above being a “Company Material Breach”) and (B) such Company Material Breach cannot be or has not been cured in all material respects within 30 days after the giving of written notice to Galyan’s of such

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  Company Material Breach; provided, however, that Dick’s and Purchaser may not invoke the condition in this clause if Dick’s or Purchaser is then in Material Breach or such Company Material Breach is curable through the exercise of Galyan’s reasonable best efforts and Galyan’s is so using its reasonable best efforts to cure such breach or failure;
 
  •  by Galyan’s in accordance with the fiduciary right of termination provisions of the Merger Agreement, (A) if it has complied in all material respects with all provisions contained in those sections, including the notice provisions therein, and that it complies in all material respects with the requirement to pay the Termination Fee, or (B) if Dick’s or Purchaser fails to commence the Offer, amends the Offer or fails to consummate the Offer, in any case in violation of Dick’s or the Purchaser’s obligations under the Merger Agreement relating to the commencement of the tender offer;
 
  •  prior to the Share Purchase Date by Galyan’s, if (A) (x) any representation and warranty of Dick’s or Purchaser set forth in Section 4.2 of the Merger Agreement, (which for purposes of this condition shall be read as though none of them contained any qualifiers such as “Material Adverse Effect,” “Aggregate MAE,” “in all material respects” or other materiality qualifiers) shall not have been true and correct as of the date of the Merger Agreement and as of the then scheduled expiration date of the Offer (as it may be extended in accordance with the terms hereof) with the same force and effect as though made as of such date of termination pursuant to this clause (or as of the date when made in the case of any representation and warranty which specifically relates to an earlier date), except where the failure of such representations and warranties in the aggregate to be true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Dick’s, or (y) Dick’s or Purchaser shall have breached or failed in any material respect to perform and comply with any of their material obligations, covenants or agreements contained in the Merger Agreement (other than those expressly referenced in Section 7.1(vi)(B) and then required to be performed or complied by either or both of them (a condition referred to in clauses (x) and (y) above being a “Dick’s Material Breach”) and (B) such Dick’s Material Breach cannot be or has not been cured in all material respects within 30 days after the giving of written notice to Dick’s of such Dick’s Material Breach; provided, however, that Galyan’s may not invoke the condition in this clause if (1) Galyan’s is then in Company Material Breach or (2) such Dick’s Material Breach is curable through the exercise of Dick’s or Purchaser’s reasonable best efforts and Dick’s and Purchaser are using their reasonable best efforts to cure such breach or failure; or
 
  •  prior to the Share Purchase Date by Dick’s or Purchaser if, pursuant to the fiduciary right of termination provisions of the Merger Agreement (A) the Board of Directors of Galyan’s (or, if applicable, any committee thereof) shall have withdrawn or modified in a manner adverse to Dick’s its approval or recommendation of the Offer or the Merger or the matters to be considered at the Special Shareholders Meeting or failed to reconfirm its recommendation within 15 business days after receiving a written request from Dick’s to do so, or approved or recommended any Takeover Proposal in respect of Galyan’s or (B) the Board of Directors of Galyan’s or any committee thereof shall have resolved to take any of the foregoing actions; provided that (x) actions taken by the Board of Directors of Galyan’s in accordance with the proviso described in the first paragraph of “No Solicitation and Fiduciary Right of Termination,” shall not be deemed to be a withdrawal or modification of its approval or recommendation of the Offer or the Merger or the matters to be considered at the Special Shareholders Meeting and (y) a “stop-look-and-listen” communication of the nature contemplated in Rules 14d-9(f) under the Exchange Act with respect to an unsolicited tender offer or exchange offer, without more, shall not be deemed to be any such withdrawal or modification if, within the period contemplated by Rule 14e-2 under the Exchange Act, the Board of Directors of Galyan’s shall publicly confirm such approval and recommendation and recommends against the acceptance of such tender offer or exchange offer by the shareholders of Galyan’s.

      Effect of Termination. If the Merger is abandoned and the Merger Agreement is terminated as provided therein, the Merger Agreement (except certain sections) shall become void and of no effect, and neither Dick’s, Galyan’s or Purchaser shall have any liability to any other party thereunder other than for (i) the payment of all amounts due pursuant to the Termination Fee section, the cost and expense section and the

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indemnification section and (ii) all damages and other amounts due in connection with fraud or the breach or failure to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the Merger Agreement.

      In the event that a Takeover Proposal shall have been made known to Galyan’s or any of its subsidiaries or has been made directly to Galyan’s shareholders generally or any person shall have publicly announced an intention (whether or not conditional) to make such a Takeover Proposal and thereafter the Merger Agreement is terminated by either Galyan’s pursuant to the fiduciary right of termination provisions of the Merger Agreement or Dick’s or Purchaser pursuant to their right to terminate when Galyan’s board (or a committee), pursuant to the fiduciary right of termination provisions of the Merger Agreement withdraws or fails to reconfirm (or resolves to do the foregoing) their approval of the Offer or the Merger, then Galyan’s shall promptly, but in no event later than two days after the date of such termination, pay Dick’s a fee equal to $13,000,000 by wire transfer of same day funds (the “Termination Fee”). If Galyan’s fails promptly to pay the amount due pursuant to the Termination Fee section of the Merger Agreement, Dick’s may, in order to obtain such payment, commence a suit which results in a judgment against Galyan’s for such fee. Galyan’s is also required to pay to Dick’s its costs and expenses (including reasonable fees and expenses of outside legal counsel for Dick’s) in connection with such suit, together with interest on the amount of the fee at the prime rate of PNC Bank, National Association in effect on the date such payment was required to be made.

      If the Merger Agreement is terminated by Galyan’s pursuant to the fiduciary right of termination provisions of the Merger Agreement or by Dick’s or Purchaser pursuant to their right to terminate when the Galyan’s Board of Directors (or committee), pursuant to the fiduciary right of termination provisions of the Merger Agreement, withdraws or fails to reconfirm (or resolves to do the foregoing) their approval of the Offer or the Merger, or by either Galyan’s or Dick’s, Galyan’s will reimburse upon demand Dick’s for all of the out-of-pocket expenses incurred by it (including reasonable fees and expenses of outside legal counsel for Dick’s).

      Amendment and Waiver. Prior to the Effective Time, the Merger Agreement may be amended, modified and supplemented in writing by the parties hereto and any failure of any of the parties hereto to comply with any of its obligations, agreements or conditions as set forth herein may be expressly waived in writing by the other parties hereto.

      Expenses. Except as otherwise set forth in the Merger Agreement, whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense (including the filing fee in connection with the filings required under the HSR Act to be incurred by Purchaser and Dick’s).

      The Shareholder Tender Agreement.

      Concurrently with the execution of and in order to induce Dick’s and Purchaser to enter into the Merger Agreement, FS Equity Partners IV, L.P., Limited Brands, Inc. and G Trademarks, Inc. (collectively the “Supporting Shareholders”) entered into the Shareholder Tender Agreement with Dick’s and the Purchaser. The following is a summary of certain provisions of the Shareholder Tender Agreement. This summary is qualified in its entirety by reference to the Shareholder Tender Agreement, which is incorporated herein by reference and a copy, or form of which, has been filed with the Commission as an exhibit to the Schedule TO. The Shareholder Tender Agreement may be examined and copies may be obtained in the manner set forth in Section 8 under “Information Concerning Galyan’s” and Section 9 — “Information Concerning Dick’s and Purchaser.”

        Tender of Shares. Each Supporting Shareholder has agreed to validly tender (or cause the record owner of such Shares to validly tender) and not to withdraw, pursuant to and in accordance with the terms of the Offer, not later than the 20th business day after commencement of the Offer (and in the case of Shares acquired after the date of the Shareholder Tender Agreement, not later than the later of the 20th business day after commencement of the Offer or two business days after such acquisition), all Shares which are beneficially owned by such Supporting Shareholder as of the date of tender, including any Shares which such Supporting Shareholder acquires beneficial ownership of after the date of the

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  Shareholder Tender Agreement and prior to the termination of the Shareholder Tender Agreement (collectively, the “Covered Shares”).
 
        Option. Pursuant to the Shareholder Tender Agreement, each Supporting Shareholder has granted to Dick’s an irrevocable option (each, a “Shareholder Option”) to purchase the Covered Shares beneficially owned by such Supporting Stockholder at a price per Share equal to the Offer Price. Purchaser may exercise the Shareholder Option in whole, but not in part if, but only if, (a) Purchaser has acquired all shares tendered pursuant to the Offer and (b) such Supporting Shareholder has not tendered into the Offer any Covered Shares or has withdrawn the tender of any Covered Shares.
 
        Voting Agreement. Each Supporting Shareholder has agreed, at any meeting of the shareholders of Galyan’s, however called, or in connection with any written consent of the shareholders of Galyan’s, to vote (or cause to be voted) all Shares, (a) in favor of adopting the Merger Agreement and any transactions contemplated thereby, (b) against any proposal relating to a Takeover Proposal and (c) against any proposal, action or agreement that would delay, prevent or frustrate the Offer and the related transactions contemplated by the Merger Agreement.
 
        Irrevocable Proxy. Each Supporting Shareholder has irrevocably granted the officers of Dick’s and any of their successors, the Supporting Shareholder’s irrevocable proxy to vote all of the Supporting Shareholder’s Covered Shares or grant a consent or approval in respect of the Covered Shares to secure the performance of the duties of such Supporting Shareholder.
 
        Restriction on Transfer of Covered Shares, Proxies and Noninterference. Each Supporting Shareholder has undertaken that such Supporting Shareholder will not offer to transfer, transfer or consent to any transfer of, any or all of the Covered Shares or other shares over which he has voting and dispositive power, or any interest therein without the prior written consent of Dick’s or grant any proxy or power-of-attorney with respect to the Covered Shares.
 
        Termination. The Shareholder Tender Agreement will terminate upon the earlier of (1) the termination of the Merger Agreement, (2) the acceptance of payment for Owned Shares by Parent or Purchaser in the Offer, (3) the failure of Purchaser to commence the Offer in accordance with the Merger Agreement, (4) failure of Purchaser to purchase all Covered Shares in the Offer, or (5) the Effective Time of the Merger.

      As of June 28, 2004, FS Equity Partners IV, L.P., Limited Brands, Inc. and G Trademark, Inc. collectively beneficially owned an aggregate of 9,595,000 outstanding Shares (which represents approximately 55% of the outstanding Shares or approximately 44% on a fully diluted basis).

 
Statutory Requirements.

      In addition to the other conditions and requirements related to consummation of the Merger, in order to effect the Merger, the parties must file articles of merger with the Indiana Secretary of State in accordance with Section 23-1-40-5 of the Indiana Business Corporation Law.

      Indiana also has a takeover offer statute that applies to the Offer. This statute and related rules require Purchaser to file a takeover offer statement with the Indiana Securities Commissioner (the “Indiana Commissioner”). The Indiana Commissioner will hold a hearing within 20 business days of the filing to determine whether the takeover offer statement provides full and fair disclosure and, according to the statute, the Indiana Commissioner has the power to prohibit purchases under the Offer unless the takeover offer statement is deemed adequate by the Indiana Commissioner.

      Galyan’s has been identified as a “subject company”, as defined in the Ohio Control Bid Statute, R.C. 1707.041-1707.043, which defines a “subject company” as one in which the issuer (i) has its principal place of business or its principal executive offices located in Ohio, or an issuer that owns or controls assets located within Ohio that has a fair market value of at least one million dollars, and (ii) more than 10% of its beneficial or record equity security holders are residents of Ohio. Based on information supplied by Galyan’s, Galyan’s satisfies both of these requirements. As such, Dick’s and Purchaser are filing Form 041, Filing of

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Information Pertaining to a Control Bid, with the Ohio Division of Securities concurrently with filing of the Schedule TO with the SEC. The Ohio Division of Securities will have five days to complete its review of the filing and to notify Dick’s and the Purchaser in the event they determine that the filing contained any deficiencies or if additional information is required. If the Ohio Division of Securities does not contact Dick’s and Purchaser within that five day period, then Ohio’s jurisdiction with regard to the Offer lapses. See Section 7 — “Possible Effects of the Offer on the Market for the Shares; Nasdaq Listing; Securities Exchange Act Registration; Margin Regulations.”

      Dissenters’ Rights. No dissenters’ rights are available in connection with the Offer. Holders of Company Common Shares currently have no dissenters’ rights. Section 23-1-44 of the Indiana Business Corporation Law provides that, so long as the Company Common Shares are registered on a U.S. securities exchange registered under the Exchange Act or traded on the Nasdaq National Market System or a similar market, shareholders will not be entitled to exercise dissenters’ rights with respect to the Merger. However, if the Shares are not so registered or traded on the record date for any shareholders’ meeting called to vote on the Merger (if any such vote is required), holders of Shares at the Effective Time of the Merger will have certain rights under Indiana law to dissent and demand payment of the fair value of their Shares. Dissenters’ rights will not be available for a merger effected pursuant to Indiana’s short-form merger provisions (where Purchaser acquires more than 90% of the outstanding Shares). To obtain fair value, a dissenting shareholder must notify the Company in writing of his or her intent to dissent, not vote in favor of the Merger and comply with other requirements under Indiana law. Fair value means the value of the Shares immediately before the effectuation of the Merger, excluding any appreciation or depreciation in anticipation of the Merger unless that exclusion would be inequitable. Fair value could be more or less than the price per Share to be paid in the Merger. See Section 7 — “Possible Effects of the Offer on the Market for the Shares; Nasdaq Listing; Securities Exchange Act Registration; Margin Regulations.”

      “Going Private” Transactions. The Commission has adopted Rule 13e-3 promulgated under the Securities Exchange Act (“Rule 13e-3”), which is applicable to certain “going private” transactions and which may, under certain circumstances, be applicable to the Merger. However, Rule 13e-3 would be inapplicable if (1) the Shares are deregistered under the Securities Exchange Act prior to the Merger or other business combination or (2) the Merger or other business combination is consummated within one year after the purchase of the Shares pursuant to the Offer and the amount paid per Share in the Merger or other business combination is at least equal to the amount paid per Share in the Offer. Dick’s and Purchaser believe that Rule 13e-3 will not be applicable to the Merger because it is anticipated that the Merger will be effected within one year following the consummation of the Offer and, in the Merger, the Galyan’s shareholders will receive the same price per Share as paid in the Offer. If applicable, Rule 13e-3 requires, among other things, that certain financial information concerning the fairness of the proposed transaction and the consideration offered to minority shareholders in the transaction be filed with the Commission and disclosed to shareholders prior to the consummation of the transaction.

      Plans for Galyan’s. In connection with the Offer, Dick’s and Purchaser have reviewed and will continue to review various possible business strategies that they might consider in the event that Purchaser acquires control of Galyan’s, whether pursuant to the Offer, the Merger or otherwise. These changes will include, among other things, changes in Galyan’s business corporate structure, capitalization and management. Upon the consummation of the Merger, Galyan’s will become a wholly owned subsidiary of Dick’s.

      The Galyan’s Board of Directors has approved the Merger and the Merger Agreement. Depending upon the number of Shares purchased by Purchaser pursuant to the Offer, the Galyan’s Board of Directors may be required to submit the Merger Agreement to the Galyan’s shareholders for their approval. If Galyan’s shareholder approval is required, the Merger Agreement must be approved by a majority of all votes entitled to be cast at the Galyan’s shareholders meeting.

      If the Minimum Condition is satisfied, Purchaser will have sufficient voting power to approve the Merger Agreement by written consent or at a duly convened meeting of the Galyan’s shareholders without the affirmative vote of any other Galyan’s shareholder. Purchaser has agreed to vote for or enter into a written consent with respect to all Shares acquired by Purchaser in the Offer to cause the approval of the Merger. If

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Purchaser acquires at least 90% of the then-issued and outstanding Shares pursuant to the Offer or otherwise, the Merger will be consummated without a meeting of Galyan’s shareholders and without the approval of Galyan’s shareholders. The Merger Agreement provides that Purchaser will be merged with and into Galyan’s and that Purchaser’s Articles of Incorporation and Purchaser’s By-laws will be the Surviving Corporation’s Articles of Incorporation and the Surviving Corporation’s By-laws following the Merger; provided that the name of the Surviving Corporation will be “Galyan’s Trading Company, Inc.”

12.     Source and Amount of Funds

      The Offer is not conditioned upon any financing arrangements.

      The Purchaser will need approximately $305 million to purchase all Shares, plus pay for outstanding options under the Company’s option plans and rights under the Company’s employee stock purchase plan and to pay related fees and expenses. Dick’s and the Purchaser will also be required, if we cannot come to other arrangements with the Company’s senior lenders, to fund all amounts then due under the Company’s current amended and restated credit agreement in accordance with the terms of that agreement. Pursuant to the terms of the Company’s current amended and restated credit agreement, the consummation of the Offer and the Merger and other related transactions will constitute an event of default and require a consent or waiver under that facility. In total, including the potential repayment of the Company’s indebtedness, $373 million would be required to fund and consummate the Offer and the Merger.

      As of May 29, 2004, Dick’s had cash and cash equivalents and short-term investments in the amount of $162 million.

      The Purchaser’s source of funds for the Offer is contributions or intercompany loans from Dick’s. Dick’s expects, based upon the combination of internally available cash and borrowings under either an amended or new revolving line of credit or an alternative acquisition facility, to have sufficient cash on hand at the expiration of the Offer to contribute or lend to Purchaser to pay the offer price for all Shares in the Offer.

      Dick’s is currently a party to a revolving line of credit, entered into as of July 26, 2000, among Dick’s certain lenders and General Electric Capital Corporation as agent. This senior secured revolving credit facility currently provides for revolving loans in an aggregate outstanding principal amount of up to $180 million, including up to $50 million in the form of letters of credit. In addition to cash and cash equivalents and short-term investments on hand, Dick’s desires to enter into an amendment with its current lenders to increase the size of the facility and to use borrowings under it to purchase all the Shares, to pay for outstanding options and rights under the Company employee stock purchase plan, to pay related fees and expenses and to cover the Company’s indebtedness for borrowed money. On June 14, 2004, Dick’s obtained a waiver under our senior secured revolving credit facility to permit us to enter into the Merger Agreement and the Shareholder Tender Agreement. Currently, Dick’s senior secured revolving credit facility covenants do not allow Dick’s to close the Offer or the Merger and the transactions contemplated thereby or to use borrowings under it to close the Offer and the Merger. Dick’s is working with its current lenders regarding an amendment to this facility to permit such actions as well as to increase the aggregate outstanding principal amount available for borrowings under this facility to be up to $350 million. Dick’s has obtained numerous amendments in the past to permit various transactions and fully expects that they will enter into an amendment on mutually agreeable and satisfactory terms to permit borrowing under this facility to close the Offer and the Merger. In the event that they do not reach a satisfactory agreement on an amendment with their existing lenders, they would seek and believe that Dick’s would be able to replace the existing lenders with new lenders and have a senior credit facility under which they would borrow to close the Offer and the Merger.

      As an alternative source of financing which would be used in lieu of our expanded or replaced credit facility (if Dick’s is not able to expand their current facility or replace it with another source of banking financing), Dick’s has obtained a commitment from Merrill Lynch Capital Corporation (“Merrill Lynch”) to provide a senior secured interim loan facility (the “Acquisition Facility”) to Dick’s in the aggregate amount of up to $175 million. Merrill Lynch has committed to provide the full amount of the loans under the

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Acquisition Facility and has indicated its intention to form a syndicate of lenders that would become lenders thereunder.

Description of Existing Senior Secured Revolving Credit Facility

      The following is a description of the current terms of Dick’s senior secured revolving credit facility. In the event that Dick’s enters into an amendment to this facility to permit them to borrow under it and close the Offer and the Merger, some or all of these terms may be changed in ways that may be material. A copy of Dick’s current credit agreement and its amendments have been filed as exhibits to Dick’s SEC reports, and this summary description is qualified in its entirety by those documents.

      The current availability under Dick’s senior secured revolving credit facility is limited to the lesser of 70% of Dick’s eligible inventory or 85% of Dick’s inventory’s liquidation value, in each case net of specified reserves and less any letters of credit outstanding. There were no outstanding borrowings on the senior secured revolving credit facility as of January 31, 2004 or May 1, 2004. Total remaining borrowing capacity, after subtracting letters of credit as of January 31, 2004 and May 1, 2004 was $154.3 million and $167.5 million, respectively.

      Interest on outstanding indebtedness under the senior secured revolving credit facility currently accrues, at Dick’s option, at a rate based on either:

the lender’s prime commercial lending rate or

at the one month LIBOR plus 1.25% based on
our current interest coverage ratio.

      The senior secured revolving credit facility matures on May 30, 2006. The senior secured revolving credit facility contains affirmative covenants on Dick’s and its subsidiaries, including (i) delivery of financial statements and other information, including providing further assurance and appraisals, (ii) payment of obligations, (iii) continuation of business, (iv) maintenance of existence, (v) compliance with laws, leases and material contractual obligations, (vi) maintenance of property and insurance and books and records, and (vii) use of proceeds.

      The senior secured revolving credit facility also contains negative covenants concerning Dick’s and its subsidiaries, including, without limitation, restrictions (with certain limited exceptions) on the ability of Dick’s (and its subsidiaries) to:

  •  make particular investments and issue paying dividends;
 
  •  redeem capital stock;
 
  •  enter into or be a party to any lending, borrowing or other commercial transactions with subsidiaries, affiliates or its employees;
 
  •  create or permit to exist liens on its properties in excess of $5 million;
 
  •  make changes to its business objectives or certain changes to its capital structure, including the issuance of additional capital stock in certain circumstances;
 
  •  sell, transfer, convey, assign or dispose of its assets or properties outside of the ordinary course of business;
 
  •  acquire any ERISA affiliate;
 
  •  use, store, generate, treat or dispose of any hazardous materials, except in compliance with applicable laws;
 
  •  engage in certain sale-leaseback, synthetic lease or similar transaction;
 
  •  cancel any claim of indebtedness Dick’s has owing to it;

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  •  maintain bank accounts other than those disclosed in the senior secured revolving credit facility;
 
  •  engage in any speculative investments; or
 
  •  cancel or terminate any material contracts.

      The senior secured revolving credit facility imposes the following additional obligations and restrictions (with certain limited exceptions), among others, on Dick’s unless a waiver or amendment is obtained:

      Indebtedness. Except as permitted in Dick’s senior secured revolving credit agreement, neither Dick’s nor any of its subsidiaries will be permitted to create, incur, assume, guarantee or permit to exist (i) any indebtedness for borrowed money or for the deferred purchase price of property or services, (ii) any obligations evidenced by notes, bonds, debentures or similar instruments, (iii) all indebtedness created or arising under any conditional sale or other title retention agreements with respect to property acquired by Dick’s or any of its subsidiaries, (iv) certain capital lease obligations, (v) certain guaranteed indebtedness, (vi) any obligations of Dick’s or any subsidiary of Dick’s under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate option contract, foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap, commodity purchase or option agreements or other similar agreement or contract designed to protect Dick’s or any of its subsidiaries against fluctuations in interest rates, currency values or commodity prices, as the case may be, or other hedging or derivative agreements, (vii) any indebtedness referred to above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any lien upon or in property (including accounts and contract rights) owned by Dick’s or any of Dick’s subsidiaries, even though they have not assumed or become liable for the payment of such indebtedness, (viii) any other loans, advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts owed except as otherwise set forth under the senior secured revolving credit facility, and (ix) any liabilities under Title IV of ERISA.

      Notwithstanding these prohibitions, Dick’s and any of its subsidiaries may permit to exist: (i) indebtedness related to deferred taxes, (ii) subordinated loans from Dick’s subsidiaries to them, with prior approval of the lenders, (iii) indebtedness under interest rate agreements that are non-speculative and do not involve commodities options or futures contracts, (iv) loans by Dick’s to its subsidiary, American Sports Licensing, Inc., so long as such loan does not offset any existing debt Dick’s owes to them and so long as any such existing debt is evidenced by a subordinated note that is pledged to the senior secured revolving credit facility, and (v) non-cash obligations for construction in progress.

      Under Dick’s senior secured revolving credit facility, Dick’s is permitted to incur certain types of indebtedness, including trade payables, certain leasing transactions, certain historical obligations for which Dick’s has obtained consent under the senior secured revolving credit agreement and any indebtedness for which Dick’s receives the required waiver under the senior secured revolving credit agreement.

      Acquisitions. Neither Dick’s nor its subsidiary are permitted, directly or indirectly without obtaining a consent under the senior secured revolving credit facility, to merge, consolidate or acquire non-subsidiary entities (including the Company), assets or capital stock of any entity or form, acquire or hold any subsidiary (except certain currently permitted holdings) except that Dick’s (so long as no default has occurred and is continuing or would occur as a result of such merger) may merge with and into a wholly-owned subsidiary with Dick’s as the surviving corporation.

      Restricted Payments. Neither Dick’s nor any subsidiary will be permitted to declare or pay any cash dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Dick’s capital stock of ours or any of its subsidiaries, or make any other distribution in respect thereof, except for, among other things, payments under the senior secured revolving credit facility and currently existing subordinated notes, provided that both before and after giving effect to any such payment no default or event of default shall have occurred and be continuing.

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      Fixed Charge Coverage Ratio. Dick’s is obligated to maintain a fixed charge coverage ratio, of not less than 1.0 to 1.0, as calculated in accordance with the terms and definitions determining such ratio contained in the senior secured revolving credit facility.

      Defaults. Dick’s senior secured revolving credit facility also contains customary events of default, including a cross-default to certain other debt, breaches of representations and warranties, change of control and breaches of covenants.

      Security. The obligations of Dick’s under the senior secured revolving credit facility are secured under various collateral documents (including a security agreement, pledge agreement, blocked account agreements, concentration account agreement, disbursement account agreements, and a trademark security agreement) by interests in substantially all of Dick’s personal property excluding store and distribution center equipment and fixtures, including the pledge of the stock of Dick’s wholly-owned subsidiary, American Sports Licensing, Inc.

Description of Acquisition Facility

      A copy of the Merrill Lynch commitment letter is filed as an exhibit to the Tender Offer Statement on Schedule TO filed by Dick’s pursuant to Rule 14d-3 under the Exchange Act with the SEC in connection with the Offer. Reference is made to such exhibit for a more complete description of the proposed terms and conditions of the Acquisition Facility.

      Borrowings under the Acquisition Facility will be secured by first priority perfected security interest (or to the extent the current facility remains in place a second priority perfected security interest) on Dick’s, Dick’s subsidiaries and the Company and its subsidiaries’ assets, will mature on the date that twelve months from the initial closing date of the Acquisition Facility and will bear interest at a rate per annum equal to the three-month LIBOR (as adjusted at the end of each interest period and adjusted for all applicable reserve requirements) at such time, plus a basis point spread which for the first three months of the loan will be an additional 500 basis point spread and which increases by an additional 50 basis point spread beginning in each of the fourth, seventh and tenth months following the closing date of the Acquisition Facility but in no event will be less than 6.25% per annum. Upon and during the continuance of an event of default, the interest rate then applicable to the Acquisition Facility will increase to margin of 200 basis point spread over the rate otherwise in effect.

      It is anticipated that the Acquisition Facility will contain representations and warranties customary for credit facilities of this nature as may reasonably be required by Merrill Lynch. It is also anticipated that the Acquisition Facility will contain certain covenants, customary for facilities similar to the Acquisition Facility and such others as may reasonably be required by Merrill Lynch (with customary baskets and exceptions to be negotiated), including, but not limited to, limitation on indebtedness; limitation on liens; limitation on investments; limitation on capital expenditures; limitation on contingent obligations; limitation on dividends, redemptions and repurchases of equity interests; limitation on mergers, acquisitions and asset sales; limitation on restrictions on amending the Acquisition Facility; limitation on issuance, sale or other disposition of subsidiary stock; limitation on sale-leaseback transactions; limitation on transactions with affiliates; limitation on dividend and other payment restrictions affecting subsidiaries; limitation on changes in business conducted; and limitation on prepayment or repurchase of subordinated or other pari passu indebtedness. No material change under the Acquisition Facility commitment, may be made to the Merger Agreement without the consent of the Merrill Lynch and the lenders having a majority of the credit exposure for the Acquisition Facility.

      The commitment of Merrill Lynch is subject to, among other things, the negotiation and execution of mutually acceptable loan documentation. It is anticipated that the obligations of Merrill Lynch and other lenders in the syndicate of lenders to make the loans under the Acquisition Facility will be conditioned upon, among other things, the delivery of certain certificates by Dick’s; Dick’s having sufficient available cash investments (including available borrowings) sufficient for Dick’s purchase all Shares, plus pay for outstanding options and rights under the Company employee stock purchase plan, to pay related fees and expenses, and if required refinance the Company’s indebtedness for borrowed money; the merger and tender

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offer documents being reasonably satisfactory to Merrill Lynch; the refinancing of the Company’s indebtedness for borrowed money, if it occurs, being on terms, satisfactory to Merrill Lynch; Merrill Lynch’s satisfaction with the Company’s, Dick’s and each of Dick’s subsidiaries capitalizations and structures; absence of material adverse change; the pro forma consolidated EBITDA (to be defined by the parties) of Dick’s and Dick’s subsidiaries for the 12 months preceding the closing of the Acquisition Facility being not less than $137.5 million and the ratio of pro forma consolidated debt to pro forma consolidated EBITDA of Dick’s and Dick’s subsidiaries after giving effect to the Merger and the Offer for 12 months preceding the closing of the Acquisition Facility being not less than 2.75x; the sources and use of the Acquisition Facility being satisfactory to Merrill Lynch that Dick’s shall have purchased $175 million of Company Common Shares with funds other than the Acquisition Facility; the receipt of certain searches, appraisal, proof of insurance coverage, government approvals; the absence of material governmental actions; the satisfaction of Merrill Lynch of all tax, ERISA, employee retirement benefits and other contingent liabilities of Dick’s, the Company and Dick’s subsidiaries; the payment of certain expenses of Merrill Lynch and the other lenders; delivery of certain financial statements; completion of confirmatory due diligence; absence of certain market conditions; no new and adverse information inconsistent with past disclosure; the consummation of the Merger as soon as practicable after the closing of the Offer under applicable law and the receipt by Merrill Lynch and the other lenders of such other documents and instruments as they may reasonable request.

      In the event that Dick’s borrows under the Acquisition Facility, Dick’s will be required to use its best efforts to consummate an underwritten offering of debt securities to refinance as soon as practicable the amount borrowed under the Acquisition Facility.

13.     Dividends and Distributions

      The Merger Agreement provides that, without the prior written consent of Dick’s, Galyan’s will not, and will not permit any of its subsidiaries to, prior to the Effective Time: split, combine, subdivide or reclassify any Galyan’s Shares or declare, set aside for payment or pay any dividend, or make any other actual, constructive or deemed distribution in respect of any capital stock, including Galyan’s Shares or otherwise make any payments to shareholders in their capacity as such, other than the declaration and payment of any regular quarterly cash dividend on Galyan’s Shares and except for dividends by a wholly-owned subsidiary of Galyan’s.

14.     Conditions of the Offer

      For the purposes of this Section:

      “Minimum Condition” means that there shall be validly tendered and not withdrawn a number of shares of Company Common Shares that (including the Shares tendered under the Shareholder Tender Agreement) immediately prior to the acceptance for payment of Company Common Shares pursuant to the Offer represents at least a majority of the Fully Diluted Number of Company Common Shares.

      “Fully Diluted Number of Company Shares” means the sum of (i) the aggregate number of Shares outstanding immediately prior to the acceptance of Company Common Shares pursuant to the Offer, plus (ii) the aggregate number of Shares issuable upon the exercise of any option, warrant, other right to acquire capital stock of Galyan’s or other security exercisable or convertible for Company Common Shares or other capital stock of Galyan’s outstanding immediately prior to the acceptance of Company Common Shares pursuant to the Offer.

      A “Triggering Event” shall be deemed to have occurred if (A) the Board of Directors of Galyan’s (or, if applicable, any committee thereof) shall have withdrawn or modified in a manner adverse to Dick’s its approval or recommendation of the Offer or the Merger or the matters to be considered at the special shareholders meeting or failed to reconfirm its recommendation within 15 business days after receiving a written request from Dick’s to do so, or approved or recommended any Takeover Proposal in respect of Galyan’s or (B) the Board of Directors of Galyan’s or any committee thereof shall have resolved to take any of the foregoing actions; provided that (x) actions taken by the Board of Directors of Galyan’s in accordance with the proviso to Section 5.1.3(i) of the Merger Agreement shall not be deemed to be a withdrawal or

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modification of its approval or recommendation of the Offer of the Merger or the matters to be considered at the special shareholder meeting and (y) a “stop-look-and-listen” communication of the nature contemplated in Rules 14d-9(f) under the Exchange Act with respect to an unsolicited tender offer or exchange offer, without more, shall not be deemed to be any such withdrawal or modification if, within the period contemplated by Rule 14e-2 under the Exchange Act, the Board of Directors or Galyan’s shall publicly confirm such approval and recommendation and recommends against the acceptance of such tender offer or exchange offer by the shareholders of Galyan’s.

      Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser’s obligation to pay for or return tendered Company Common Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to any applicable rules and regulations of the SEC, the payment for, any tendered Company Common Shares, and may amend the Offer consistent with the terms of the Agreement or terminate the Offer and not accept for payment any tendered Company Common Shares, if:

      (i) the Minimum Condition shall not have been satisfied at the time of expiration of the Offer, as it may be extended; or

      (ii) on any scheduled expiration date as the same may be extended of the Offer any of the following events or circumstances shall occur or exist or shall be reasonably determined by Dick’s or Purchaser to have occurred or exist:

        (a) any waiting period (and any extension thereof) applicable to the consummation of the Offer and the Merger under the HSR Act shall not have expired or been terminated;
 
        (b) (A) with the exception of the representations and warranties set forth in Section 4.1.15, any representation and warranty of Galyan’s set forth in Section 4.1 of the Agreement (which representations and warranties for purposes of this paragraph (ii)(b)(A) shall be read as though none of them contained any qualifiers such as “Material Adverse Effect,” “Aggregate MAE,” “in all material respects” or other materiality qualifiers) shall not have been true and correct as of the date of the Merger Agreement and as of then scheduled expiration date of the Offer with the same force and effect as though made as of the then scheduled expiration date of the Offer (or as of the date when made in the case of any representation and warranty which specifically relates to the date of the Merger Agreement or an earlier date), except where the failure of such representations and warranties in the aggregate, to be true and correct, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Galyan’s and (B) the representations and warranties of Galyan’s set forth in Section 4.1.15 of the Merger Agreement (which representations and warranties for purposes of this paragraph (ii)(b)(B) shall be read as written, including with any qualifiers such as “Material Adverse Effect,” “Aggregate MAE,” “in all material respects” or other materiality qualifiers) shall not have been true and correct as of the date of the Merger Agreement and the then scheduled expiration date of the Offer (or as of the date when made in the case of any representation and warranty which specifically relates to the date of the Merger Agreement or an earlier date); provided, that any failure of any representation or warranty of Galyan’s set forth in Section 4.1 of the Merger Agreement, including those set forth in Section 4.1.15, to be true and correct cannot be, or has not been, cured in all material respects within 30 days after the giving of written notice to Galyan’s of such failure;
 
        (c) Galyan’s shall have breached or failed in any material respect to perform and comply with any of its material obligations, covenants or agreements contained in the Merger Agreement and required to be performed or complied with by it;
 
        (d) any Governmental Entity shall have enacted, issued, promulgated, enforced or entered any Order which is in effect and which (i) enjoins, restrains or prohibits consummation of the Offer or the Merger, (ii) enjoins, restrains or prohibits the ownership or operation by Galyan’s, Dick’s or any of their subsidiaries of all or any material portion of the business or assets of Galyan’s and its subsidiaries taken as a whole, or as a result of the Offer or the Merger requires Galyan’s, Dick’s or any of their

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  subsidiaries to dispose of or hold separate all or any material portion of their respective business assets, (iii) enjoins, restrains or prohibits Dick’s or any subsidiary of Dick’s from exercising effectively full rights of ownership of any Company Common Shares, including the right to vote any shares acquired by Purchaser pursuant to the Offer on all matters properly presented to Galyan’s shareholders including the approval and adoption of the Agreement and the transactions contemplated thereby, (iv) requires divestiture by Dick’s or any affiliate of Dick’s of any Company Common Shares; provided however, that notwithstanding the forgoing, Purchaser may not invoke any condition in clauses (i), (ii), (iii) and (iv) above if (A) Purchaser shall have failed in any material respect to use its reasonable best efforts to oppose, contest, resolve, appeal, defend against or lift, as applicable, such Order, (B) compliance with such Order would not reasonably be expected to have an Aggregate MAE or (C) violation of such Order would expose Dick’s or Purchaser to a maximum monetary fine or penalty which is less than $15,000,000 and would not in the reasonable judgment of Dick’s or Purchaser (i) expose Dick’s or Purchaser or any officer, director, agent or attorney of Dick’s or Purchaser to violating any criminal law or to any criminal sanction, (ii) expose any officer, director, agent or attorney of Dick’s or Purchaser to any contempt proceeding which could result in a fine or imprisonment, (iii) constitute a matter which an officer or director would have to disclose in a proxy statement or Annual Report on Form 10-K under Item 401(f) of Regulation S-K or (iv) constitute a “material violation” as such term is defined in 17 C.F.R. Section 205.2;
 
        (e) there shall have occurred and be continuing: (i) any general suspension of trading in, or limitation on prices for, securities on Nasdaq or the NYSE for a period equal to or in excess of one week (excluding any organized halt triggered solely as a result of a specified decrease in a market index or suspensions or limitations resulting solely from physical damage, technological or software breakdowns or malfunctions or interference with such exchange not related to market conditions); (ii) a declaration by a Governmental Entity of a banking moratorium or any suspension of payments in respect of banks in the United States; (iii) any extraordinary limitation (whether or not mandatory) by any Governmental Entity on the extension of credit generally by banks or other financial institutions; (iv) commencement of a new war or material escalation of current wars, armed hostilities or terrorism directly or indirectly involving the United States, which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Galyan’s or Dick’s; or (v) a change in the general financial, bank or capital market conditions which (1) materially and adversely affects the ability of financial institutions in the United States to extend credit or syndicated loans and (2) closes as a practical matter the capital markets to Dick’s for more than one week;
 
        (f) the Agreement shall have been terminated in accordance with its terms or Dick’s or Purchaser shall have reached an agreement or understanding in writing with Galyan’s providing for termination or amendment of the Offer or delay in payment for Company Common Shares; or
 
        (g) a Triggering Event shall have occurred.

      Subject to Section 3.1.2 of the Merger Agreement, the foregoing conditions are for the sole benefit of Dick’s and Purchaser. Except for the Minimum Condition, the foregoing conditions may be waived by Dick’s and Purchaser, in whole or in part at any time and from time to time, in the sole discretion of Dick’s and Purchaser. The failure by Dick’s or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time prior to the Share Purchase Date.

15.     Legal Matters; Required Regulatory Approvals

      Except as set forth in this Offer to Purchase, based on Dick’s and Purchaser’s review of publicly available filings by Galyan’s with the Commission and other information regarding Galyan’s, neither Dick’s nor Purchaser is aware of any licenses or regulatory permits that appear to be material to the business of Galyan’s and its subsidiaries, taken as a whole, and that might be adversely affected by Purchaser’s acquisition of Shares in the Offer. In addition, neither Dick’s nor Purchaser is aware of any filings, approvals or other actions by or with any governmental authority or administrative or regulatory agency under laws

40

 

regulating competition other than the filings (i) under the HSR Act (ii) made with the Ohio Securities Division and (iii) made with the Indiana Commissioner that would be required for Purchaser’s acquisition or ownership of the Shares. See Section 11 — “Statutory Requirements.” Should any such approval or other action be required, Dick’s and Purchaser expect to seek such approval or action, except as described under “— State Takeover Laws.” Should any such approval or other action be required, Dick’s and Purchaser cannot be certain that Dick’s and Purchaser would be able to obtain any such approval or action without substantial conditions or that adverse consequences might not result to Galyan’s or its subsidiaries’ businesses, or that certain parts of Galyan’s, Dick’s, Purchaser’s or any of their respective subsidiaries’ businesses might not have to be disposed of or held separate in order to obtain such approval or action. In that event, Purchaser may not be required to purchase any Shares in the Offer. See Section 14 — “Conditions of the Offer” for a description of the conditions to the Offer. In addition, Dick’s is aware that in certain circumstances, certain governmental consents and/or filings may be required as a result of the transactions for Dick’s to sell firearms and certain fishing and hunting licenses from Galyan’s stores.
 
      State Takeover Laws.

      A number of states have adopted takeover laws and regulations that purport to be applicable to attempts to acquire securities of corporations that are incorporated outside those states but that have substantial assets, shareholders, principal executive offices or principal places of business in those states. To the extent that these state takeover statutes (other than Chapter 43 of the Indiana Business Corporation Law) purport to apply to the Offer or the Merger, Dick’s and Purchaser believe that those laws conflict with United States federal law and are an unconstitutional burden on interstate commerce. In 1982, the Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on constitutional grounds the Illinois Business Takeovers Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. The reasoning in that decision is likely to apply to certain other state takeover statutes. In 1987, however, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States held that the State of Indiana could, as a matter of corporate law and, in particular, those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining shareholders, as long as those laws were applicable only under certain conditions. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma because they would subject those corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a federal district court in Florida held, in Grand Metropolitan PLC v. Butterworth, that the provisions of the Florida Affiliated Transactions Act and the Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida.

      Chapter 43 of the Indiana Business Corporation Law restricts the ability of a “resident domestic corporation” to engage in any combination with an “interested shareholder” for five years after the interested shareholder’s date of acquiring shares, unless the combination or the purchase of shares by the interested shareholder is approved by the board of directors of the resident domestic corporation before the interested shareholder’s date of acquiring shares. If the combination was not previously approved, the interested shareholder may effect a combination after the five-year period only if the shareholder receives approval from a majority of the disinterested shares or the offer meets certain fair price criteria. A corporation may elect out of these provisions in an amendment to its articles of incorporation approved by a majority of the disinterested shares. Such an amendment, however, would not become effective for 18 months after its passage and would apply only to stock acquisitions occurring after its effective date.

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      For purposes of these provisions:

  •  “Resident domestic corporation” means an Indiana corporation that has 100 or more shareholders.
 
  •  “Interested shareholder” means any person, other than the resident domestic corporation or its subsidiaries, who is:

  •  the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the resident domestic corporation, or
 
  •  an affiliate or associate of the resident domestic corporation and at any time within the five-year period immediately before the date in question was the beneficial owner of 10% or more of the voting power of the outstanding shares of the resident domestic corporation.

      We understand from information provided to us, that Galyan’s Board of Directors has taken all necessary steps to approve Dick’s and Purchaser becoming, pursuant to the Merger, the Shareholder Tender Agreement and/or the acquisition of Shares pursuant to the Offer and the Shareholder Tender Agreement, “interested shareholders” and to cause Chapter 43 of the Indiana Business Corporation Law to be inapplicable to the Merger, the Shareholder Tender Agreement and the acquisition of Shares pursuant to the Offer and the Shareholder Tender Agreement.

      Chapter 42 of the Indiana Business Corporation Law gives the disinterested shareholders of certain Indiana corporations a right to vote collectively on whether or not to accord voting power to shares that would give their acquirer a significant level of influence or control over the future governance of the corporation. Under the Indiana Business Corporation Law, an acquiring person who makes a “control share acquisition” in an “issuing public corporation” may not exercise voting rights on any “control shares” unless such voting rights are conferred by a majority vote of the disinterested shareholders of the issuing public corporation at a special meeting of such shareholders held upon the request and at the expense of the acquiring person. Unless otherwise provided in a corporation’s articles of incorporation or bylaws before a control share acquisition has occurred, in the event that control shares acquired in a control share acquisition are accorded full voting rights and the acquiring person acquires control shares with a majority or more of all voting power, all shareholders of the issuing public corporation have dissenters’ rights to receive the fair value of their shares.

  •  “Control shares” means shares acquired by a person that, when added to all other shares of the issuing public corporation owned by that person or in respect of which that person may exercise or direct the exercise of voting power, would otherwise entitle that person to exercise voting power of the issuing public corporation in the election of directors within any of the following ranges: 20% or more but less than 33 1/3%, 33 1/3% or more but less than a majority or a majority or more.
 
  •  “Control share acquisition” means, subject to certain exceptions, the acquisition, directly or indirectly, by any person of ownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares. Shares acquired within 90 days or pursuant to a plan to make a control share acquisition are considered to have been acquired in the same acquisition.
 
  •  “Issuing public corporation” means a corporation which is organized in Indiana, has 100 or more shareholders, its principal place of business, its principal office or substantial assets within Indiana and one of the following:

  •  more than 10% of its shareholders resident in Indiana,
 
  •  more than 10% of its shares owned by Indiana residents, or
 
  •  10,000 shareholders resident in Indiana.

      These control share acquisition provisions do not apply if, before a control share acquisition is made, the corporation’s articles of incorporation or bylaws (including a board-adopted bylaw) provide that they do not apply. Galyan’s Board of Directors adopted a by-law amendment to provide that Chapter 42 does not apply

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to acquisitions of Shares on or after June 21, 2004, including acquisitions of Shares pursuant to the Merger Agreement (including the Offer and Merger) or the Shareholder Tender Agreement.

      Indiana law specifically authorizes directors, in considering the best interests of a corporation, to consider both the long term and short term interests of the corporation, as well as the effects of any action on shareholders, employees, suppliers and customers of the corporation, and communities in which offices or other facilities of the corporation are located, and any other factors the directors consider pertinent. The directors are permitted to weigh these factors as they deem appropriate and are not required to consider the effects of a proposed corporate action on any particular corporate constituent group or interest as a dominant or controlling factor. Under Indiana law, directors are not required to approve a proposed business combination or other corporate action if they determine in good faith that the action is not in the best interests of the corporation. In addition, Indiana law states that directors are not required to redeem any rights under or render inapplicable a shareholder rights plan or to take or decline to take any other action solely because of the effect such action or inaction might have on a proposed change of control of the corporation or the amounts to be paid to shareholders upon such a change of control. The Delaware Supreme Court has held that defensive measures in response to a potential takeover must be “reasonable in relation to the threat posed.” Indiana law explicitly provides that the different or higher degree of scrutiny imposed in Delaware and some other jurisdictions relating to director actions taken in response to potential changes in control does not apply.

      Various provisions contained in Galyan’s Second Amended and Restated Articles of Incorporation and Galyan’s Second Amended and Restated Bylaws could delay or discourage some transactions involving an actual or potential change in control of Galyan’s and may limit the ability of shareholders to remove current management or approve transactions that shareholders may deem to be in their best interests. This could adversely affect the price of Galyan’s common stock. These provisions:

  •  authorize Galyan’s board of directors to issue one or more series of undesignated preferred stock, the terms of which can be determined by the board of directors at the time of issuance;
 
  •  do not permit cumulative voting in the election of directors unless required by applicable law. Under cumulative voting, a minority shareholder holding a sufficient percentage of a class of shares may be able to ensure the election of one or more directors;
 
  •  permit special meetings of Galyan’s shareholders to be called only by the chairman of the board of directors, by Galyan’s Chief Executive Officer, by the Board of Directors after a resolution is duly adopted by a majority of Galyan’s board of directors, or by the holders of a majority of Galyan’s shares;
 
  •  establish procedures, including advance notice requirements for submitting nominations for election to the Board of Directors and for proposing matters that can be acted upon by shareholders at a meeting; and
 
  •  grant Galyan’s Board of Directors the exclusive power to adopt, alter, amend and repeal Galyan’s bylaws.

      Except as set forth in this Offer to Purchase, Dick’s and Purchaser have not attempted to comply with any state takeover statutes in connection with the Offer or the Merger. Dick’s and Purchaser reserve the right to challenge the validity or applicability of any state law allegedly applicable to the Offer or the Merger, and nothing in this Offer to Purchase nor any action that Dick’s and Purchaser take in connection with the Offer is intended as a waiver of that right. In the event that it is asserted that one or more takeover statutes apply to the Offer or the Merger, and it is not determined by an appropriate court that the statutes in question do not apply or are invalid as applied to the Offer or the Merger, as applicable, Dick’s and Purchaser may be required to file certain documents with, or receive approvals from, the relevant state authorities, and Dick’s and Purchaser might be unable to accept for payment or purchase Shares tendered in the Offer or be delayed in continuing or consummating the Offer. In that case, Purchaser may not be obligated to accept for purchase, or pay for, any Shares tendered. See Section 14 — “Conditions of the Offer.”

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Antitrust

      Under the HSR Act, and the related rules and regulations that have been issued by the U.S. Federal Trade Commission (the “FTC”), certain acquisition transactions may not be consummated until certain information and documentary material has been furnished for review by the FTC and the Antitrust Division of the U.S. Department of Justice (the “Antitrust Division”) and certain waiting period requirements have been satisfied. These requirements apply to Dick’s by virtue of Purchaser’s acquisition of Shares in the Offer and the Merger.

      Under the HSR Act, the purchase of Shares in the Offer may not be completed until the expiration of a 15-calendar-day waiting period following the filing of certain required information and documentary material concerning the Offer with the FTC and the Antitrust Division, unless the waiting period is earlier terminated by the FTC and the Antitrust Division. Dick’s filed a Premerger Notification and Report Form under the HSR Act with the FTC and the Antitrust Division in connection with the purchase of Shares in the Offer and the Merger on June 24, 2004, and the required waiting period with respect to the Offer and the Merger will expire at 11:59 p.m., New York City time, on July 9, 2004, unless earlier terminated by the FTC or the Antitrust Division or Dick’s receives a request for additional information or documentary material prior to that time. If, within the 15-calendar-day waiting period, either the FTC or the Antitrust Division requests additional information or documentary material from Dick’s, the waiting period with respect to the Offer and the Merger would be extended for an additional period of ten calendar days following the date of Dick’s substantial compliance with that request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act rules. After that time, the waiting period could be extended only by court order or with Dick’s consent. The FTC or the Antitrust Division may terminate the additional ten-calendar-day waiting period before its expiration. In practice, complying with a request for additional information or documentary material can take a significant period of time. Although Galyan’s is required to file certain information and documentary material with the FTC and the Antitrust Division in connection with the Offer, neither Galyan’s failure to make those filings nor a request made to Galyan’s from the FTC or the Antitrust Division for additional information or documentary material will extend the waiting period with respect to the purchase of Shares in the Offer and the Merger.

      The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions, such as Dick’s acquisition of Shares in the Offer and the Merger. At any time before or after Purchaser’s purchase of Shares, the FTC or the Antitrust Division could take any action under the antitrust laws that either considers necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares in the Offer and the Merger, the divestiture of Shares purchased in the Offer or the divestiture of substantial assets of Dick’s, Purchaser, Galyan’s or any of their respective subsidiaries or affiliates. Private parties as well as state attorneys general also may bring legal actions under the antitrust laws under certain circumstances. See Section 14 — “Conditions of the Offer.”

      Based upon an examination of publicly available information relating to the businesses in which Galyan’s is engaged, Dick’s and Purchaser believe that the acquisition of Shares in the Offer and the Merger does not violate the applicable antitrust laws. Nevertheless, Dick’s and Purchaser cannot be certain that a challenge to the Offer and the Merger on antitrust grounds will not be made, or, if such challenge is made, what the result will be. See Section 14 — “Conditions of the Offer.”

16.     Fees and Expenses

      Peter J. Solomon Company, L.P. (“PJSC”) has provided certain financial advisory services to Dick’s in connection with the Offer and the Merger. In addition, Dick’s has agreed to pay PJSC fees for its services and to indemnify PJSC and related parties against certain liabilities in connection with PJSC’s engagement, including certain liabilities under the U.S. federal securities laws.

      Merrill Lynch & Co. will also provide financial advisory services to Dick’s in connection with the Offer and the Merger. Merrill Lynch has agreed to provide certain financing in connection with the transaction. See Section 12 — “Source and Amount of Funds.” Merrill Lynch will receive customary fees in connection with that financing and Dick’s has agreed to indemnify Merrill Lynch and related parties against certain liabilities

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in connection with its engagement of Merrill Lynch and its affiliates, including certain liabilities under U.S. federal securities laws.

      Dick’s has retained Georgeson Shareholder Securities as Dealer Manager and Georgeson Shareholder Communications, Inc. as Information Agent in connection with the Offer. The Dealer Manager and Information Agent may contact the Galyan’s shareholders by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee shareholders to forward material relating to the Offer to beneficial owners of Shares. Dick’s will pay the Information Agent and Dealer Manager reasonable and customary compensation for these services in addition to reimbursing the Information Agent and Dealer Manager for their reasonable out-of-pocket expenses. Dick’s has agreed to indemnify the Information Agent and Dealer Manager against certain liabilities and expenses in connection with the Offer, including certain liabilities under the United States federal securities laws. In addition, Dick’s has retained Computershare Trust Company of New York as the Depositary. Dick’s will pay the Depositary reasonable and customary compensation for its services in connection with the Offer, will reimburse the Depositary for its reasonable out-of-pocket expenses, and will indemnify the Depositary against certain liabilities and expenses, including certain liabilities under the United States federal securities laws.

      Except as set forth above, Dick’s will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. Dick’s will reimburse brokers, dealers, commercial banks and trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers.

17.     Miscellaneous

      Dick’s and Purchaser are not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If Dick’s and Purchaser become aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Shares, Dick’s and Purchaser will make a good faith effort to comply with that state statute. If, after a good faith effort, Dick’s and Purchaser cannot comply with the state statute, Purchaser will not make the Offer to, nor will Purchaser accept tenders from or on behalf of, the Galyan’s shareholders in that state. Dick’s and Purchaser have filed with the Commission a Tender Offer Statement on Schedule TO pursuant to Rule 14d-3 promulgated under the Securities Exchange Act, together with exhibits furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, Galyan’s has filed with the Commission the Schedule 14D-9, together with exhibits, pursuant to Rule 14d-9 promulgated under the Securities Exchange Act, setting forth the recommendation of the Galyan’s Board of Directors with respect to the Offer and the reasons for the recommendation of the Galyan’s Board of Directors and furnishing certain additional related information. A copy of these documents, and any amendments thereto, may be examined at, and copies may be obtained from, the Commission in the manner set forth under Section 8 — “Information Concerning Galyan’s” and Section 9 — “Information Concerning Dick’s and Purchaser.”

      Neither Dick’s nor Purchaser has authorized any person to give any information or to make any representation on behalf of either Dick’s or Purchaser not contained in this Offer to Purchase or in the related Letter of Transmittal, and, if given or made, you should not rely on any such information or representation as having been authorized.

      Neither the delivery of the Offer to Purchase nor any purchase pursuant to the Offer will, under any circumstances, create any implication that there has been no change in the affairs of Dick’s, Purchaser, Galyan’s or any of their respective subsidiaries since the date as of which information is furnished or the date of this Offer to Purchase.

  DIAMONDBACKS ACQUISITION INC.,

June 29, 2004

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Schedule I

Directors and Executive Officers of Dick’s and Purchaser

      Directors and Executive Officers of Dick’s. The following table sets forth the name and present principal occupation or employment, and material occupations, positions, offices or employment for the past five years of each director and executive officer of Dick’s. Unless otherwise indicated, each director and executive officer has been so employed for a period in excess of five years. Unless otherwise indicated, the business address of each of these individuals is c/o Dick’s, at 300 Industry Drive, RIDC Park West, Pittsburgh, PA 15275, and each of these individuals is a citizen of the United States of America.

1.     Directors of Dick’s Sporting Goods, Inc.

     
Name
   Principal Occupation and Five-Year Employment History
Edward W. Stack
   Chairman and Chief Executive Officer of Dick’s Sporting Goods, Inc., 300 Industry Drive, RIDC Park West, Pittsburgh, PA.
Emanuel Chirico
   Executive Vice President and Chief Financial Officer of the Phillips-Van Heusen Corporation, New York, NY, an apparel and footwear retailer listed on the NYSE. From 1993 until 1999, Mr. Chirico was Phillips-Van Heusen Corporation’s controller.
William J. Colombo
   President and Chief Operating Officer of Dick’s Sporting Goods, 300 Industry Drive, RIDC Park West, Pittsburgh, PA. From late in 1998 to 2000, Mr. Colombo served as President of dsports.com LLC, Dick’s Sporting Goods, Inc.’s internet commerce subsidiary.
David I. Fuente
   Retired Chairman of Office Depot, Inc., Del Ray Beach, FL, an office supply retailer listed on the NYSE from 1987 to 2001 and its Chief Executive Officer from 1987 to 2000. He currently serves as a director for Office Depot, Inc. and Ryder System, Inc. (a truck leasing and logistics company listed on the NYSE).
Walter Rossi
   Current director of Guitar Center, Inc. (a retailer of musical instruments listed on Nasdaq). Retired Chief Executive Officer of Naartjie Custom Kids, Inc., Burlingame, CA, a children’s apparel retailer, Chief Executive Officer of Home Express, Newark, CA, a retailer of home furnishings, and Chairman of the Retail Group at Phillips-Van Heusen Corporation, New York, NY, an apparel and footwear company listed on the NYSE.
Lawrence J. Schorr
   Chief Executive Officer of Empire Plastics, Inc., located in Vestal, NY, a privately owned plastics manufacturing company, and as co-managing partner of the law firm of Levene, Gouldin and Thompson LLP, Vestal, NY.

 

2.     Executive Officers of Dick’s Sporting Goods, Inc.

     
Name
   Principal Occupation and Five-Year Employment History
Edward W. Stack
   Chairman and Chief Executive Officer of Dick’s Sporting Goods, Inc., 300 Industry Drive, RIDC Park West, Pittsburgh, PA
William J. Colombo
   President and Chief Operating Officer of Dick’s Sporting Goods, Inc., 300 Industry Drive, RIDC Park West, Pittsburgh, PA. From late in 1998 to 2000, Mr. Colombo served as President of dsports.com LLC, Dick’s Sporting Goods, Inc.’s internet commerce subsidiary.
William R. Newlin
   Executive Vice President and Chief Administrative Officer of Dick’s Sporting Goods, Inc., 300 Industry Drive, RIDC Park West, Pittsburgh, PA; former Chief Executive Officer and Managing Partner of Buchanan Ingersoll PC, a law firm headquartered in Pittsburgh, PA.
Michael F. Hines
   Executive Vice President and Chief Financial Officer of Dick’s Sporting Goods, Inc., 300 Industry Drive, RIDC Park West, Pittsburgh, PA.
Gary M. Sterling
   Senior Vice President — Merchandising, Planning and Allocation of Dick’s Sporting Goods, Inc., 300 Industry Drive, RIDC Park West, Pittsburgh, PA since 2001. Mr. Sterling served as Senior Vice President — Merchandising of Dick’s from 1999 to 2000 and as Senior Vice President — Merchandising and Product Development for the remainder of 2000 and in the beginning of 2001.

      The following table sets forth the name and present principal occupation or employment, and material occupations, positions, offices or employment for the past five years of each director and executive officer of Purchaser. Unless otherwise indicated, each director and executive officer has been so employed for a period in excess of five years. Unless otherwise indicated below, each occupation set forth opposite each person refers to employment with Dick’s. The business address of each of these individuals is c/o Dick’s, at 300 Industry Drive, RIDC Park West, Pittsburgh, PA 15275, and each of these individuals is a citizen of the United States of America.

3.     Directors and Executive Officers of Diamondbacks Acquisition Inc.

     
Name
   Principal Occupation and Five-Year Employment History
William R. Newlin
   Executive Vice President and Chief Administrative Officer; former Chief Executive Officer and Managing Partner of Buchanan Ingersoll PC, a law firm headquartered in Pittsburgh, PA.
Michael F. Hines
   Executive Vice President and Chief Financial Officer.

 

Facsimile copies of Letters of Transmittal, properly completed and duly executed, will be accepted. The appropriate Letter of Transmittal, the Share Certificates and any other required documents should be sent or delivered by each Galyan’s shareholder or the Galyan’s shareholder’s broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below:

The Depositary for the Offer is:

Compushare Logo

         
By Mail:
   By Facsimile Transmission:   By Hand or Overnight Courier:
Computershare Trust Company   For Eligible Institutions Only:   Computershare Trust Company
of New York   (212) 701-7636   of New York
Wall Street Station       Wall Street Plaza
P.O. Box 1010
  For Confirmation Only Telephone:   88 Pine Street, 19th Floor
New York, NY 10268-1010   (212) 701-7600   New York, NY 10005

You may direct questions and requests for assistance to the Information Agent at its address and telephone number set forth below. You may obtain additional copies of this Offer to Purchase, the related Letter of Transmittal and other tender offer materials from the Information Agent as set forth below, and they will be furnished promptly at Dick’s expense. You also may contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer.

The Information Agent for the Offer is:

(GEORGESON SHAREHOLDER LOGO)
17 State Street
New York, New York 10016

Call Collect (212) 440-9800

or

Call Toll-Free (800) 248-6973 EX-4 5 j0833601exv4.htm EXHIBIT 4 EXHIBIT 4

 

Exhibit 4

CONSENT AND WAIVER TO AMENDED AND
RESTATED CREDIT AGREEMENT

     CONSENT AND WAIVER, dated as of June 14, 2004, to the Amended and Restated Credit Agreement referred to below (this “Consent”) among DICK’S SPORTING GOODS, INC., a Delaware corporation (“Borrower”), the lenders party hereto (“Lenders”), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, “Agent”).

W I T N E S S E T H

     WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”); and

     WHEREAS, Agent and Required Lenders have agreed to waive certain violations of the Loan Agreement and consent to certain actions to be taken by the Borrower that would otherwise be in violation of the Credit Agreement, all in the manner, and on the terms and conditions, provided for herein;

     NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1. Definitions. Capitalized terms not otherwise defined herein (including in the recitals hereto) shall have the meanings ascribed to them in the Credit Agreement.

     2. Consent and Waiver.

          (a) As of the Consent Effective Date (as hereinafter defined), Agent and Required Lenders hereby consent to, and waive any Event of Default under Sections 6.1 and 6.2 of the Credit Agreement arising solely out of, the formation by Borrower of Diamondbacks Inc., a Delaware corporation (“DI”) and Diamondback Acquisition Inc, an Indiana corporation (“DAI”, together with DI, the “Acquisition Subsidiaries”); provided that, within 10 days of the request of Agent, Borrower shall, or shall cause the Acquisition Subsidiaries, to (x) provide to Agent a joinder to the Credit Agreement, together with such other such security documents, as well as appropriate financing statements, all in form and substance satisfactory to Agent (including being sufficient to grant Agent a first priority Lien (subject to Permitted Encumbrances) in and to the assets of each Acquisition Subsidiary), (y) provide to Agent a pledge agreement and appropriate certificates and powers or financing statements, hypothecating all of the direct or beneficial ownership interest in each Acquisition Subsidiary, in form and substance satisfactory to Agent, and (z) provide to Agent all other documentation (including a legal opinion of counsel acceptable to Agent), which in its opinion is

 

 

appropriate with respect to the execution and delivery of the applicable documentation referred to above;

          (b) As of the Consent Effective Date (as hereinafter defined), Agent and Required Lenders hereby consent to, and waive any Event of Default under Section 6.1(b) of the Credit Agreement arising solely out of, the execution and delivery of the Agreement and Plan of Merger (the “Merger Agreement”), by and among the Acquisition Subsidiaries and Giants Inc. (“Giants”), and the Shareholder Tender Agreement (the “Tender Agreement”, together with the Merger Agreement, the “Merger Documents”), by and among Acquisition Subsidiaries and Giants, each in substantially in the form provided to Agent on June 14, 2004; and

          (c) As of the Consent Effective Date (as hereinafter defined), Agent and Required Lenders hereby consent to, and waive any Event of Default under Section 8.1(e) of the Credit Agreement arising solely out of the breach of the representations and warranties set forth in Section 3.9 of the Credit Agreement which would be rendered untrue or incorrect as of the date of this Consent as a result of the formation of the Acquisition Subsidiaries and the execution and delivery of the Merger Documents.

     3. Merger. Notwithstanding the foregoing, Borrower, Agent and Required Lenders acknowledge and agree that nothing set forth herein shall be deemed to be a consent by Agent and Lenders to the consummation of the merger or any other transaction contemplated by Merger Documents, and Borrower, Agent and Required Lenders further acknowledge and agree that the consent of Agent and Required Lenders is required by the terms of the Credit Agreement in order to consummate the merger and the other transactions contemplated by Merger Documents.

     4. Representations and Warranties. To induce Required Lenders and Agent to enter into this Consent, Borrower hereby represents and warrants that:

          (a) The execution, delivery and performance by Borrower and each Guarantor of this Consent is (i) within Borrower’s and each Guarantor’s corporate power and has been duly authorized by all necessary corporate and shareholder action; (ii) does not contravene any provision of any Loan Party’s charter or bylaws or equivalent organizational or charter or other constituent documents; (iii) does not violate any law or regulation, or any order or decree of any court or Governmental Authority; (iv) does not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which any Loan Party is a party or by which any Loan Party or any of its property is bound; (v) does not result in the creation or imposition of any Lien upon any of the property of any Loan Party other than those in favor of Agent, on behalf of itself and the Lenders, pursuant to the Loan Documents; and (vi) does not require the consent or approval of any Governmental Authority or any other Person.

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          (b) This Consent has been duly executed and delivered by or on behalf of Borrower and each Guarantor.

          (c) This Consent constitutes a legal, valid and binding obligation of Borrower and each Guarantor enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

          (d) No Default or Event of Default has occurred and is continuing after giving effect to this Consent.

          (e) No action, claim or proceeding is now pending or, to the knowledge of any Loan Party signatory hereto, threatened against such Loan Party, at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators, which challenges such Loan Party’s right, power, or competence to enter into this Consent or, to the extent applicable, perform any of its obligations under this Consent, the Credit Agreement or any other Loan Document, or the validity or enforceability of this Consent, the Credit Agreement or any other Loan Document or any action taken under this Consent, the Credit Agreement or any other Loan Document or which if determined adversely could have or result in a Material Adverse Effect. To the knowledge of each Loan Party, there does not exist a state of facts which is reasonably likely to give rise to such proceedings.

          (f) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents (other than Section 3.9 of the Credit Agreement to the extent set forth in Section 2(c) above) are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date.

     5. Remedies. This Consent shall constitute a Loan Document. The breach by any Loan Party of any representation, warranty, covenant or agreement in this Consent shall constitute an immediate Event of Default hereunder and under the other Loan Documents.

     6. No Other Consents. The Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, this Consent shall not be deemed a waiver of any term or condition of any Loan Document by the Agent or the Lenders with respect to any right or remedy which the Agent or the Lenders may now or in the future have under the Loan Documents, at law or in equity or otherwise or be deemed to prejudice any rights or remedies which the Agent or the Lenders may now have or may have in the future under or in connection with any Loan Document or under or in connection with any Default or Event of Default which may now exist or which may occur after the date

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hereof. The Credit Agreement and all other Loan Documents are hereby in all respects ratified and confirmed.

     7. Waiver of Claims. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Indemnified Person which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Consent Effective Date.

     8. Expenses. Borrower hereby reconfirms its obligations pursuant to Section 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Consent and all other documents and instruments delivered in connection herewith.

     9. Effectiveness. This Consent shall become effective as of June 15, 2004 (the “Consent Effective Date”) only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to June 15, 2004:

     (a) Consent. Agent shall have received facsimile copies (promptly followed by eight (8) original copies) of this Consent duly executed and delivered by Agent, Required Lenders and Borrower and acknowledged by ASL.

     (b) Representations and Warranties. All representations and warranties contained in this Consent shall be true and correct on and as of the Consent Effective Date.

     10. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     11. Counterparts. This Consent may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

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     IN WITNESS WHEREOF, the parties hereto have caused this Consent to be duly executed and delivered as of the day and year first above written.

         
    BORROWER:
 
        
    DICK’S SPORTING GOODS, INC.
 
        
  By:   /s/ Michael F. Hines
     
 
    Name: Michael F. Hines
    Title: Chief Financial Officer
 
        
    AGENT:
 
        
    GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
 
        
  By:   /s/ Charles Chiodo
     
 
    Name: Charles Chiodo
    Its: Duly Authorized Signatory
 
        
    LENDERS:
 
        
    GENERAL ELECTRIC CAPITAL
CORPORATION
 
        
  By:   /s/ Charles Chiodo
     
 
    Name: Charles Chiodo
    Its: Duly Authorized Signatory

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    PNC BUSINESS CREDIT
 
        
  By:   /s/ Stephen W. Boyd
     
 
    Name: Stephen W. Boyd
    Title: Vice President
 
        
    FLEET RETAIL GROUP, INC.
 
        
  By:   /s/ James R. Dore
     
 
    Name: James R. Dore
    Title: Managing Director
 
        
    NATIONAL CITY BANK OF PENNSYLVANIA
 
        
  By:   /s/ Richard M. Beaty II
     
 
    Name: Richard M. Beaty II
    Title: Assistant Vice President
 
        
    WACHOVIA BANK, NATIONAL ASSOCIATION
 
        
  By:    
     
 
    Name:
    Title:
 
        
    CITIZEN’S BANK OF PENNSYLVANIA
 
        
  By:   /s/ Don Cmar
     
 
    Name: Don Cmar
    Title: Vice President

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The undersigned Guarantor hereby (i) acknowledges to each of the waivers and consent effected by this Consent and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Consent.

ACKNOWLEDGED, CONSENTED and
AGREED to as of the date first written
above.

AMERICAN SPORTS LICENSING, INC.

         
By:
  /s/ Michael F. Hines    
 
 		    
Name: Michael F. Hines    
Title: President    

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EX-5 6 j0833601exv5.txt EXHIBIT 5 Exhibit 5 ================================================================================ AMENDED AND RESTATED CREDIT AGREEMENT Dated as of July 26, 2000 among DICK'S SPORTING GOODS, INC. as Borrower and THE LENDERS PARTY HERETO and GENERAL ELECTRIC CAPITAL CORPORATION, as Agent ================================================================================ TABLE OF CONTENTS Page ---- 1. AMOUNT AND TERMS OF CREDIT ...................................... 2 1.1 Revolving Credit Advances .............................. 2 1.2 Repayment; Termination of Commitment ................... 4 1.4 Interest on Revolving Credit Advances .................. 5 1.5 Eligible Inventory ..................................... 7 1.6 Fees ................................................... 7 1.7 Cash Management System ................................. 7 1.8 Receipt of Payments .................................... 7 1.9 Proportionate Shares ................................... 8 1.10 Application and Allocation of Payments ................. 8 1.11 Non-Receipt of Funds by Agent .......................... 8 1.12 Sharing of Payments, Etc ............................... 9 1.13 Settlement Procedures .................................. 10 1.14 Accounting ............................................. 11 1.15 Indemnity .............................................. 12 1.16 Access ................................................. 13 1.17 Taxes .................................................. 14 1.18 Letters of Credit ...................................... 15 1.19 Capital Adequacy ....................................... 15 1.20 Increased Costs ........................................ 16 1.21 Illegality ............................................. 16 1.22 Replacement of Lender in Respect of Increased Costs .... 17 2. CONDITIONS PRECEDENT ............................................... 17 -i- TABLE OF CONTENTS cont'd ------------------------ Page ---- 2.1 Conditions to Effectiveness ........................... 17 2.2 Further Conditions to Each Revolving Credit Advance and Each Letter of Credit Obligation .................. 19 3. REPRESENTATIONS AND WARRANTIES ................................. 20 3.1 Corporate Existence; Compliance with Law .............. 20 3.2 Executive Offices; Corporate or Other Names ........... 20 3.3 Corporate Power; Authorization; Enforceable Obligations ........................................... 20 3.4 Financial Statements and Projections .................. 21 3.5 Material Adverse Change ............................... 21 3.6 Ownership of Property; Liens .......................... 21 3.7 Restrictions; No Default .............................. 22 3.8 Labor Matters ......................................... 22 3.9 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness ................................ 22 3.10 Government Regulation ................................. 23 3.11 Margin Regulations .................................... 23 3.12 Taxes ................................................. 23 3.13 ERISA ................................................. 24 3.14 No Litigation ......................................... 24 3.15 Brokers ............................................... 25 3.16 Intellectual Property ................................. 25 3.17 Full Disclosure ....................................... 25 3.18 Hazardous Materials ................................... 26 3.19 Insurance Policies .................................... 26 -ii- TABLE OF CONTENTS cont'd ------------------------ Page ---- 3.20 Deposit and Disbursement Accounts ..................... 26 3.21 Solvency .............................................. 26 4. FINANCIAL STATEMENTS AND INFORMATION ........................... 26 4.1 Reports and Notices ................................... 26 4.2 Communication with Accountants ........................ 27 5. AFFIRMATIVE COVENANTS .......................................... 27 5.1 Maintenance of Existence and Conduct of Business ...... 27 5.2 Payment of Charges and Claims ......................... 28 5.3 Books and Records ..................................... 28 5.4 Litigation ............................................ 28 5.5 Insurance ............................................. 28 5.6 Compliance with Laws .................................. 29 5.7 Agreements; Leases .................................... 29 5.8 Supplemental Disclosure ............................... 30 5.9 Environmental Matters ................................. 30 5.10 Application of Proceeds ............................... 31 5.11 Fiscal Year ........................................... 31 5.12 Landlord's Waiver and Other Agreements ................ 31 5.13 Certain Obligations Respecting Subsidiaries ........... 31 5.14 Further Assurances .................................... 31 5.15 Appraisals ............................................ 31 6. NEGATIVE COVENANTS ............................................. 31 -iii- TABLE OF CONTENTS cont'd ------------------------ Page ---- 6.1 Mergers, Subsidiaries, Etc .................................. 32 6.2 Investments ................................................. 32 6.3 Indebtedness ................................................ 33 6.4 Affiliate and Employee Transactions ......................... 33 6.5 Capital Structure and Business .............................. 34 6.6 Guaranteed Indebtedness ..................................... 35 6.7 Liens ....................................................... 35 6.8 Sale of Assets .............................................. 35 6.9 ERISA ....................................................... 36 6.10 Financial Covenant .......................................... 37 6.11 Restricted Payments ......................................... 37 6.12 Hazardous Materials ......................................... 37 6.13 Sale-Leasebacks ............................................. 38 6.14 Cancellation of Indebtedness ................................ 38 6.15 Bank Accounts ............................................... 38 6.16 No Speculative Investments .................................. 38 6.17 Margin Regulations .......................................... 38 6.18 Limitation on Negative Pledge Clauses ....................... 38 6.19 Material Contracts .......................................... 38 6.20 Leases ...................................................... 38 6.21 Limitations on Modifications of Subordinated Note and Preferred Stock Subordinated Notes .......................... 39 6.22 Limitations on Modifications of E-Commerce Transaction Documents ................................................... 39 -iv- TABLE OF CONTENTS cont'd ------------------------ Page ---- 7. TERM..............................................................39 7.1 Duration.................................................39 7.2 Survival of Obligations..................................39 8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES............................40 8.1 Events of Default........................................40 8.2 Remedies.................................................42 8.3 Waivers by Borrower......................................42 9. AGENT.............................................................42 9.1 Appointment, Powers and Immunities.......................42 9.2 Reliance by Agent........................................43 9.3 Defaults.................................................43 9.4 Rights as a Lender.......................................43 9.5 Indemnification..........................................44 9.6 Non-Reliance on Agent and Other Lenders..................44 9.7 Failure to Act...........................................44 9.8 Resignation of Agent.....................................45 9.9 Consents under Loan Documents............................45 9.10 Collateral Matters.......................................45 10. SUCCESSORS AND ASSIGNS............................................46 10.1 Successors and Assigns...................................46 10.2 Assignments and Participations...........................46 11. MISCELLANEOUS.....................................................49 -v- TABLE OF CONTENTS cont'd ------------------------ Page ---- 11.1 Complete Agreement; Modification of Agreement....................49 11.2 Fees and Expenses................................................50 11.3 No Waiver........................................................51 11.4 Remedies.........................................................51 11.5 Severability.....................................................51 11.6 Conflict of Terms................................................51 11.7 Right of Setoff..................................................51 11.8 Authorized Signature.............................................52 11.9 Notices..........................................................52 11.10 Section Titles...................................................53 11.11 Counterparts.....................................................53 11.12 Time of the Essence..............................................53 11.13 GOVERNING LAW....................................................53 11.14 WAIVER OF JURY TRIAL.............................................54 11.15 Publicity........................................................54 11.16 Collateral Documents.............................................55 11.17 Dating...........................................................55 -vi- INDEX OF ANNEXES, SCHEDULES AND EXHIBITS Appendix 1 - Revolving Credit Commitments and Lender Information Annex A - Definitions; Rules of Construction Annex B - Cash Management System Annex C - Schedule of Closing Documents Annex D - Financial Statements and Notices Annex E - Insurance Requirements Annex F - Letters of Credit Schedule 3.2 - Executive Offices; Trade Names Schedule 3.4 - Financial Statements and Projections Schedule 3.5 - Restricted Payments Schedule 3.6 - Real Estate and Leases Schedule 3.8 - Labor Matters Schedule 3.9 - Ventures, Subsidiaries and Affiliates; Outstanding Stock Schedule 3.12 - Tax Matters Schedule 3.13 - ERISA Plans Schedule 3.14 - Litigation Schedule 3.16 - Patents, Trademarks, Copyrights and Licenses Schedule 3.19 - Insurance Policies Schedule 3.20 - Disbursement and Deposit Accounts Schedule 6.2 - Investments Schedule 6.3 - Indebtedness Schedule 6.4 - Loans to and Transactions with Employees Schedule 6.7 - Liens Schedule 6.19 - Material Contracts Schedule 11.8 - Authorized Signatures Exhibit A-1 - Form of Notice of Revolving Credit Advance Exhibit A-2 - Form of Notice of Conversion/Continuation Exhibit B - Form of Borrowing Base Certificate Exhibit C - Form of Revolving Credit Note Exhibit D - Security Agreement Exhibit E - Form of Intercreditor Agreement Exhibit F - Pledge Agreement Exhibit G - Form of Assignment and Acceptance Exhibit H - Second Amended and Restated Stockholder's Agreement Exhibit I - Second Amended and Restated Registration Rights Agreement -vii- AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 26, 2000, among DICK'S SPORTING GOODS, INC., a Delaware Corporation ("BORROWER"), the lenders listed on the signature pages hereof or which pursuant to SECTION 10.2 shall become a "LENDER" hereunder (each individually a "LENDER" and collectively "LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent hereunder for Lenders (in such capacity, together with its successors in such capacity, "AGENT"). RECITALS A. The Borrower, the lenders parties thereto (the "EXISTING LENDERS") and General Electric Capital Corporation, as agent for the Existing Lenders, are parties to an Amended and Restated Credit Agreement, dated as of July 15, 1997, as amended by the First Amendment, dated as of July 23, 1997, the Second Amendment, dated as of October 13, 1998, the Third Amendment, dated as of January 27, 1999, the Fourth Amendment, dated as of April 16, 1999, the Fifth Amendment, dated as of October 29, 1999, the Sixth Amendment, dated as of April 26, 2000 and the Seventh Amendment, dated as of May 30, 2000 (as so amended, the "EXISTING CREDIT AGREEMENT"). B. Pursuant to the Existing Credit Agreement, the Existing Lenders agreed to make certain revolving credit loans and/or certain other financial accommodations to Borrower of up to $140,000,000 upon the terms and conditions set forth therein. C. Each of the parties hereto wishes to and agrees to amend and restate the Existing Credit Agreement on the terms and conditions set forth herein. D. It is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities existing under the Existing Credit Agreement or evidence payment of all or any of such obligations and liabilities, that this Agreement amend and restate in its entirety the Existing Credit Agreement, and that from and after the date hereof, the Existing Credit Agreement be of no further force and effect except as to evidence the incurrence of the "Obligations" thereunder and the representations and warranties made thereunder. E. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings ascribed to them in ANNEX A and, for purposes of this Agreement and the other Loan Documents, the rules of construction set forth in ANNEX A shall govern. Unless otherwise indicated, all references in this Agreement to sections, subsections, schedules, exhibits, and attachments shall refer to the corresponding sections, subsections, schedules, exhibits, and attachments of or to this Agreement. All schedules, annexes, exhibits and attachments hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together, shall constitute but a single agreement. Unless otherwise expressly set forth herein, or in a written amendment referring to such schedules and annexes, all schedules and annexes referred to herein shall mean the schedules and annexes as in effect as of the Closing Date. These Recitals shall be construed as part of this Agreement. -1- NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree that, effective on the Closing Date, the Existing Credit Agreement shall be and hereby is amended and restated in its entirety to read as follows: 1. AMOUNT AND TERMS OF CREDIT 1.1 Revolving Credit Advances. -------------------------- (a) Upon and subject to the terms and conditions hereof; each Lender severally agrees to make available (and continue outstanding any such advances outstanding pursuant to the terms of the Existing Credit Agreement), from time to time, until the Commitment Termination Date, for Borrower's use and upon the request of Borrower therefor to Agent, advances (each, including any such advances outstanding pursuant to the terms of the Existing Credit Agreement, together with any payments made in respect of any Letter of Credit Obligations which are automatically deemed to constitute Revolving Credit Advances pursuant to paragraph 2 of ANNEX F, a "REVOLVING CREDIT ADVANCE") in an aggregate principal amount at any time outstanding up to but not exceeding the Revolving Credit Commitment of such Lender, provided that in no event shall the principal amount of the Revolving Credit Loan exceed the Availability. Borrower may from time to time borrow, repay and reborrow Revolving Credit Advances under this SECTION 1.1; provided that Borrower shall give Agent notice of each such borrowing as provided in SECTION 1.1(b). (b) Each Revolving Credit Advance shall be made on notice by Borrower to Agent at its address at 800 Connecticut Avenue, Two North, Norwalk, CT 06854, Attention: Dick's Account Manager, Telephone No. (203) 852-3600, Telecopy No. (203) 852-3640. Those notices must be given no later than (I) 12:00 noon (New York time) on the Business Day of the proposed Revolving Credit Advance, in the case of an Index Rate Loan, or (2)12:00 noon (New York time) on the date which is three (3) Business Days prior to the proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice (a "NOTICE OF REVOLVING CREDIT ADVANCE") must be given in writing (by telecopy or overnight courier) substantially in the form of EXHIBIT A-1, and shall include the information required in such Exhibit and such other information as may be required by Agent. Subject to SECTION 1.13, Agent shall promptly (and in any event prior to 2:00 p.m. (New York City time) on any day it receives a Notice of Revolving Credit Advance if the applicable borrowing is to occur on such day or prior to 5:00 p.m. (New York City time) on such day otherwise) notify each Lender thereof and on or prior to 3:00 p.m. on the date specified for such borrowing each Lender shall make available the amount of the Revolving Credit Advance(s) to be made by it on such date to Agent to such account of Agent as Agent may designate, in immediately available funds, for the account of Borrower. Notwithstanding anything to the contrary contained herein, if Borrower desires to have the Revolving Credit Advances bear interest by reference to a LIBOR Rate, it must comply with SECTION 1.1(c). (c) So long as no Default or Event of Default shall have occurred and be continuing, and subject to the additional conditions precedent set forth in SECTION 2.2, Borrower shall have the option to (i) request that any Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding Loans from Index Rate -2- Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in accordance with SECTION 1.15(c) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all or any portion of any Loan as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on the last day of the LIBOR Period of the Loan to be continued. Any Loan to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of $1,500,000 and integral multiples of $500,000 in excess of such amount. Any such election must be made by 12:00 noon (New York time) on the third Business Day prior to (1) the date of any proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in such election. If no election is received with respect to a LIBOR Loan by 12:00 noon (New York time) on the third Business Day prior to the end of the LIBOR Period with respect thereto (or if a Default or an Event of Default shall have occurred and be continuing or the additional conditions precedent set forth in SECTION 2.2 shall not have been satisfied), that LIBOR Loan shall be converted to an Index Rate Loan at the end of its LIBOR Period. Borrower must make such election by notice to Agent in writing, by telecopy or overnight courier. In the case of any conversion or continuation, such election must be made pursuant to a written notice (a "NOTICE OF CONVERSION/CONTINUATION") in the form of EXHIBIT A-2. Agent and Lenders shall be entitled to rely upon and shall be fully protected under this Agreement in relying upon any Notice of Revolving Credit Advance or Notice of Conversion/Continuation reasonably believed by Agent to be genuine and to assume that the persons executing and delivering the same were duly authorized unless the responsible individual acting thereon for Agent shall have actual knowledge to the contrary. (d) The Revolving Credit Advances made by each Lender (including any such advances made pursuant to the terms of the Existing Credit Agreement) shall be evidenced by a single promissory note of Borrower for each Lender substantially in the form of EXHIBIT C, dated the Closing Date, payable to such Lender in a principal amount equal to the amount of its Revolving Credit Commitment as in effect on the Closing Date and otherwise duly completed. The date and amount of each Revolving Credit Advance made by such Lender to Borrower and the date and amount of each payment or prepayment of principal thereof shall be recorded on the books and records of such Lender, which books and records shall constitute PRIMA FACIE evidence of the accuracy of the information therein recorded, provided that the failure of such Lender to make any such recordation or endorsement shall not affect the obligations of Borrower to make a payment when due of any amount owing hereunder or under such Lender's Revolving Credit Note. Subject to the terms and conditions hereof, each Lender agrees on the Closing Date to exchange its Revolving Credit Note (as defined in the Existing Credit Agreement) for such Lender's Revolving Credit Note issued pursuant to the terms hereof. (e) Borrower shall furnish to Agent and each Lender a Borrowing Base Certificate completed and signed by an Executive Officer of Borrower, which sets forth a calculation of the Borrowing Base at the times and for the periods set forth in ANNEX D. Upon request of Agent, Borrower shall furnish to Agent and each Lender a more frequent Borrowing Base Certificate including on a daily basis prepared as of the end of each Business Day before the end of the next Business Day. Agent shall provide Borrower with no less than two Business Days' prior notice of a request for a more frequent Borrowing Base -3- Certificate. Borrower agrees that in making any Revolving Credit Advance hereunder Agent and each Lender shall be entitled to rely upon the most recent Borrowing Base Certificate delivered to Agent by Borrower. Borrower further agrees that if Borrower shall have failed to deliver a Borrowing Base Certificate to Agent within the specified period Lenders shall be under no obligation to make any further Revolving Credit Advances or incur Letter of Credit Obligations until such time as such Certificate is delivered to Agent and Lenders. (f) The failure of any Lender (such Lender until such failure has been cured by such Lender, a "NON-FUNDING LENDER") to make any Revolving Credit Advance to be made by it on the date specified therefor shall not relieve any other Lender (each such other Lender, an "OTHER LENDER") of its obligation to make its Revolving Credit Advance on such date, but neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make a Revolving Credit Advance to be made by such Non-Funding Lender, and no Non-Funding Lender shall have any obligation to Agent or any Other Lender for the failure by such Non-Funding Lender. Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a "Lender" (or be included in the calculation of "Required Lenders" hereunder) for any voting or consent rights under or with respect to any Loan Document. Anything in this Agreement to the contrary notwithstanding, each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or enforce its rights arising out of this Agreement or the Revolving Credit Notes (including exercising any rights of off-set) without first obtaining the prior written consent of Agent or Required Lenders, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Revolving Credit Notes shall be taken in concert and at the direction or with the consent of Agent or Required Lenders and not individually by a single Lender. (g) To the extent any amounts are due and owing from Borrower on account of the Obligations, Agent may make Revolving Credit Advances for Borrower's account pursuant to SECTION 1.10. 1.2 Repayment: Termination of Commitment. ------------------------------------- (a) Borrower hereby promises to pay to Agent for account of each Lender the entire outstanding principal amount of the Revolving Credit Loan and all other outstanding Obligations (including any Revolving Credit Advances made pursuant to the terms of the Existing Credit Agreement), and the Revolving Credit Loan and all other outstanding Obligations shall mature, on the Commitment Termination Date. (b) In the event that the outstanding principal amount of the Revolving Credit Loan shall, at any time, exceed the Borrowing Availability, Borrower shall immediately repay the Revolving Credit Loan in the amount of such excess. In the event that, at any time, no Revolving Credit Advances are outstanding and the Letter of Credit Obligations exceed the Borrowing Base then in effect, Borrower shall make arrangements, as provided in paragraph 5 of ANNEX F, for satisfaction of Letter of Credit Obligations in the amount of such excess. (e) Borrower shall have the right at any time upon ten (10) days' prior written notice to Agent to voluntarily terminate the Aggregate Revolving Credit Commitment -4- (in whole but not in part) without premium or penalty. Upon such termination, Borrower's right to receive Revolving Credit Advances and the benefit of Letter of Credit Obligations and Borrower's obligation to pay the Non-use Fee shall simultaneously terminate, and, notwithstanding anything to the contrary contained herein or in any Loan Document, the entire outstanding balance of the Revolving Credit Loan and all other Obligations shall be immediately due and payable. On the date of such termination, Borrower shall pay to Agent in immediately available funds all of the Obligations, and any accrued and unpaid interest thereon, and make arrangements, in accordance with paragraph 5 of ANNEX F, for satisfaction of any outstanding Letter of Credit Obligations. 1.3 USE OF PROCEEDS. Borrower shall use the proceeds of the Revolving Credit Loan only (a) for payment of Fees, expenses and other costs incurred in connection with this Agreement, (b) for the financing of Borrower's ordinary working capital needs and Capital Expenditures permitted by the terms of this Agreement and the other Loan Documents, (c) for a preferred equity investment in DSG Holdings in an amount not in excess of $ 10,000,000 less the non-cash investment by Borrower in the preferred equity capital of DSG Holdings contemplated by Section 6.2(g), PROVIDED that such non-cash investment shall not be less than $5,000,000, (d) to repurchase up to 59.8% of the common stock of Borrower issued upon the conversion of the Preferred Stock as contemplated by the Information Statement; PROVIDED, that (i) such conversion and repurchase shall be consummated on substantially the terms set forth in the Information Statement and, in any event, on or prior to June 29, 2000 and (ii) without limiting the foregoing, the aggregate consideration paid in cash by Borrower in connection with such repurchase shall not exceed $45,000,000, and (e) for payments due under the Preferred Stock Subordinated Notes in accordance with the terms thereof and SECTION 6.11. 1.4 INTEREST ON REVOLVING CREDIT ADVANCES. (a) Borrower shall pay interest on the Revolving Credit Loan to Agent for the account of each Lender, (i) in the case of Index Rate Loans, in arrears for the preceding calendar month, on the second Business Day of each calendar month commencing on July 5, 2000, (ii) in the case of LIBOR Loans, in arrears, on the last day of each LIBOR Period therefor, (iii) on the Commitment Termination Date, and (iv) if any interest accrues or remains payable after the Commitment Termination Date, upon demand. If any interest or other payment under this Agreement becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (b) Borrower shall be obligated to pay interest to Agent for the account of each Lender on the outstanding balance of the Revolving Credit Loan (i) with respect to Index Rate Loans at a floating rate equal to the Index Rate (as in effect from time to time) plus the Applicable Margin, and (ii) with respect to LIBOR Loans, for each LIBOR Period relating thereto, the LIBOR Rate for such Loan for such LIBOR Period plus the Applicable Margin. All computations of interest shall be made by Agent and on the basis of a three hundred and sixty (360) day year, in each case for the actual number of days occurring in the period for which such interest is payable. Each determination by Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error or bad faith. -5- (c) Upon the occurrence and during the continuance of any Default, (i) any outstanding LIBOR Loan may be converted by the Agent (in its discretion) to an Index Rate Loan, and (ii) the Required Lenders may in their discretion, by giving notice to Borrower of their intention to do so, increase as of the date of such notice the interest rate applicable to all of the Obligations, including the Revolving Credit Loan, to the Default Rate and increase the rate for calculation of Letter of Credit Fees by two percent (2%) per annum above the rate otherwise applicable; provided, however, that upon the occurrence of an Event of Default specified in SECTION 8.1(f), (g) OR (h), the interest rate applicable to all of the Obligations and the rate for calculation of Letter of Credit Fees shall be increased automatically as provided above without the necessity of any action on the part of Required Lenders. (d) Notwithstanding anything to the contrary set forth in this SECTION 1.4, if, at any time until the Termination Date, the rate of interest payable to any Lender hereunder exceeds the highest rate of interest permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto(the "Maximum Lawful Rate"), then in such event and so long as the MAXIMUM LAWFUL RATE would be so exceeded, the rate of interest payable hereunder to such Lender shall be equal to the Maximum Lawful Rate; PROVIDED, however, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder to such Lender at the Maximum Lawful Rate until such time as the total interest received by such Lender from the making of Revolving Credit Advances hereunder is equal to the total interest which such Lender would have received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, the interest rate payable to such Lender hereunder shall be the rate of interest provided in SECTIONS 1.4 (b) THROUGH (c) of this Agreement, unless and until the rate of interest again exceeds the Maximum Lawful Rate, in which event this paragraph shall again apply. In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount which such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. In the event the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. In the event that a court of competent jurisdiction, notwithstanding the provisions of this SECTION 1.4(d), shall make a final determination that a Lender has received interest hereunder or under any of the Loan Documents in excess of the Maximum Lawful Rate, such Lender shall, to the extent permitted by applicable law, promptly apply such excess first to any lawful interest due and not yet paid hereunder, then to the outstanding principal of the Obligations, then to Fees and any other unpaid Obligations and thereafter shall refund any excess to Borrower or as a court of competent jurisdiction may otherwise order. 1.5 ELIGIBLE INVENTORY. Based on the most recent Borrowing Base Certificate delivered by Borrower to Agent and on other information available to Agent, Agent shall determine which Inventory shall be deemed Eligible Inventory for purposes of determining the amounts, if any, to be advanced to Borrower under the Revolving Credit Loan. 1.6 FEES. -6- (a) Borrower agrees to pay to Agent for the account of Lenders an unused facility fee (the "NON-USE FEE") equal to one quarter of one percent (0.25%) per annum on the average unused daily balance of the Lenders' Revolving Credit Commitments, payable in arrears (a) for the preceding calendar month, on the second Business Day of the succeeding calendar month commencing on the second Business Day of the calendar month immediately succeeding the Closing Date, and (b) on the Commitment Termination Date. All computations of the foregoing fee shall be made by Agent on the basis of a three hundred sixty (360) day year, and for the actual number of days occurring in the period for which such fee is payable. (b) (Intentionally Omitted.) (c) Borrower agrees to pay to Agent for the account of Lenders a Letter of Credit fee (the "LETTER OF CREDIT FEE") equal to one and one quarter of one percent (1.25%) of the face amount of outstanding Letters of Credit, payable in arrears for the preceding calendar month, on the second Business Day of the succeeding calendar month commencing on the second Business Day of the calendar month immediately succeeding the Closing Date. All computations of the foregoing fee shall be made by Agent and on the basis of a three hundred sixty (360) day year, in each case for the actual number of days occurring in the period for which such fee is payable. (d) Borrower agrees to pay to Agent for its own account and the Lenders' account, as the case may be, such other fees and charges as are set forth in the separate fee letters between Borrower and Agent. 1.7 CASH MANAGEMENT SYSTEM. On or prior to the Closing Date, Borrower will establish and maintain until the Termination Date the cash management system described in Annex B. 1.8 RECEIPT OF PAYMENTS. Borrower shall make each payment under this Agreement not later than 2:00 p.m. (New York City time) on the day when due in Dollars in immediately available funds to the Collection Account. For purposes of computing interest and Fees and receipt of payments (a) all payments (including cash sweeps) consisting of cash, wire, or electronic transfers in immediately available funds shall be deemed received by Agent upon deposit no later than 2:00 p.m. (New York City time) in the Collection Account in accordance with the Concentration Account Agreement and (b) all payments consisting of checks, drafts, or similar non-cash items shall be deemed received two (2) Business Days following deposit in the Collection Account (together with notice to Agent of such deposit). For purposes of determining the Borrowing Availability: (a) all payments (including cash sweeps) consisting of cash, wire, or electronic transfers in immediately available funds shall be deemed received by Agent upon deposit in the Collection Account in accordance with the Concentration Account Agreement; and (b) all payments consisting of checks, drafts, or similar non-cash items shall be deemed received upon deposit in the Collection Account (together with notice to Agent of such deposit). Subject to SECTION 1.13, each payment received by Agent under this Agreement or any Revolving Credit Note or any other Loan Documents for the account of the Lenders shall be paid by Agent promptly to the Lenders, in the same funds received, for application to the Revolving Credit Advances or other Obligations in respect of which such payment is made. -7- 1.9 PROPORTIONATE SHARES. Except to the extent otherwise provided herein and subject to Section 1.13: (i) each borrowing of the Revolving Credit Loan from Lenders shall be incurred and made by the Lenders according to their respective Proportionate Shares; and (ii) each payment or prepayment of principal of the Revolving Credit Loan by Borrower shall be made for the account of the relevant Lenders in accordance with their respective Proportionate Shares; and (iii) each payment of interest on the Revolving Credit Loan, Non- use Fees and Letter of Credit Fees by Borrower shall be made for the account of the Lenders in accordance with their Proportionate Shares. 1.10 APPLICATION AND ALLOCATION OF PAYMENTS. Borrower irrevocably waives the right to direct the application of any and all payments at any time or times hereafter received from or on behalf of Borrower, and Borrower irrevocably agrees that Agent shall have the continuing exclusive right to apply any and all such payments against the then due and payable Obligations and in repayment of the Revolving Credit Loan, Letter of Credit Obligations and other Obligations as Agent may deem advisable. Notwithstanding the foregoing, in the absence of a specific determination by Agent with respect thereto or if an Event of Default shall have occurred and be continuing, the same shall be applied in the following order: (a) the principal of any Revolving Credit Advances made by Agent under SECTION 1.13(a); (b) then due and payable Fees, expenses and other Obligations owing to Agent; (c) then due and payable Fees and expenses of Lenders; (d) then due and payable interest payments on the Revolving Credit Loan in accordance with SECTION 1.13(d); (e) Obligations to Lenders other than Fees, expenses and interest and principal payments; (f) principal of the Revolving Credit Loan; and (g) to the extent there are no other Obligations then due and payable, to Borrower or its successors or assigns or as a court of competent jurisdiction may direct. Agent on behalf of Lenders is authorized to, and at its option may, make or cause to be made Revolving Credit Advances by Lenders on behalf of Borrower for payment of all Fees, expenses, charges, costs, principal, interest or other Obligations then due and payable by Borrower under this Agreement or any of the Loan Documents (including any payments made by Agent under SECTION 5.5(a) or any costs or expenses payable by Borrower under SECTION 11.2), even if the conditions precedent in SECTION 2.2 have not been satisfied with respect to such Revolving Credit Advance, including if the making of such Revolving Credit Advances causes the outstanding balance of the Revolving Credit Loan to exceed the Borrowing Availability. 1.11 NON-RECEIPT OF FUNDS BY AGENT. Unless Agent shall have been notified by a Lender or Borrower ("PAYOR") prior to the date on which (i) such Lender is to make payment to Agent of the proceeds of a Revolving Credit Advance to be made by such Lender hereunder or (ii) Borrower is to make payment to Agent for account of one or more of Lenders hereunder (such payment being herein called the "REQUIRED PAYMENT"), which notice shall be effective upon receipt, that Payor does not intend to make the Required Payment to Agent, Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient(s) on such date; and, if Payor has not in fact made the Required Payment to Agent, the recipient(s) of such payment shall, on demand, repay to Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by Agent until the date Agent recovers such amount at a rate per annum equal to the Index Rate for such period. Nothing in this SECTION 1.11 or elsewhere in this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any -8- Lender from its obligation to fulfill its Revolving Credit Commitment hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by such Lender hereunder. 1.12 SHARING OF PAYMENTS, ETC. (a) Borrower agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as between Lenders, to the provisions of the last sentence of SECTION 1.1(f)), to offset balances held by it for the account of Borrower at any of its offices, in Dollars or in any other Currency, against any principal of or interest on any of such Lender's Revolving Credit Advances or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to Borrower), in which case it shall promptly notify Borrower and Agent thereof, provided that such Lender's failure to give such notice shall not affect the validity thereof. (b) If any Lender (including Agent) shall obtain from Borrower payment of any principal of or interest on any Revolving Credit Advance owing to it or payment of any other amount under this Agreement or any Revolving Credit Note held by it or any other Loan Document through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a result of such payment, such Lender shall have received more than its Proportionate Share of the principal of or interest on the Revolving Credit Advances or such other amounts then due hereunder or thereunder by Borrower to such Lender than the percentage received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in (or, if and to the extent specified by such Lender, direct interests in) the Revolving Credit Advances or such other amounts, respectively, owing to such other Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance with their respective Proportionate Shares. Amounts received by Agent under this paragraph shall be treated as a payment received by Borrower under SECTION 1.10. To such end all Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) Borrower agrees that any Lender so purchasing such a participation (or direct interest) may exercise, in a manner consistent with SECTION 1.12(a), all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Revolving Credit Advances or other amounts (as the case may be) owing to such Lender in the amount of such participation. (d) Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this SECTION 1.12 applies, such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in any event, exercise -9- its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section 1.12 to share in the benefits of any recovery on such secured claim. 1.13 SETTLEMENT PROCEDURES. (a) In order to administer the Revolving Credit Loan in an efficient manner and to minimize the transfer of funds between Agent and Lenders, so long as the conditions precedent set forth in SECTION 2.1 and SECTION 2.2, as the case may be, remain satisfied, Agent may, in its discretion, subject to the following paragraphs (b), (c) and (d), make available, on behalf of Lenders, the full amount of the Revolving Credit Advances in an amount of up to $10,000,000 outstanding on any day (after application of payments received on such day) requested or deemed requested by Borrower pursuant to SECTION 1.1(b) and SECTION 1.1(g), without notice to Lenders of the proposed Revolving Credit Advance pursuant to SECTION 1.1(b). (b) If Agent shall have made one or more Revolving Credit Advances on behalf of Lenders as provided in this SECTION 1.13(b), the amount of each Lender's Proportionate Share of the outstanding Revolving Credit Advances (for purposes of this SECTION 1.1 3(b)) shall be computed weekly rather than daily and shall be adjusted upward or downward on the basis of the amount of the outstanding Revolving Credit Advances as of 5:00 P.M. (New York City time) on the Business Day immediately preceding the date of each computation; PROVIDED, that Agent retains the absolute right at any time or from time to time to make the above described adjustments at intervals more frequent than weekly. Agent shall deliver to each of the Lenders after the end of each week, or such lesser period or periods as Agent shall determine, a summary statement of the amount of outstanding Revolving Credit Advances for such period (such week or lesser period or periods being hereafter referred to as a "SETTLEMENT PERIOD"). If the summary statement is sent by Agent and received by a Lender prior to 12:00 Noon (New York City time) then such Lender shall make the transfers described in the next succeeding sentence no later than 2:00 P.M. (New York City time) on the day such summary statement was sent, and if such summary statement is sent by Agent and received by a Lender after 12:00 Noon (New York City time), such Lender shall make such transfers no later than 2:00 P.M. (New York City time) on the next succeeding Business Day. If, in any Settlement Period, the amount of a Lender's Proportionate Share of the outstanding Revolving Credit Advances is more than such Lender's Proportionate Share of the outstanding Revolving Credit Advances for the previous Settlement Period, then such Lender shall forthwith (but in no event later than the time set forth in the next preceding sentence) transfer to Agent by wire transfer in immediately available funds the amount of the increase; and on the other hand, if the amount of a Lender's Proportionate Share of the outstanding Revolving Credit Advances in any Settlement Period is less than the amount of such Lender's Proportionate Share of the outstanding Revolving Credit Advances for the previous Settlement Period, Agent shall forthwith transfer to such Lender by wire transfer in immediately available funds the amount of the decrease. The obligation of each of the Lenders to transfer such funds shall be irrevocable and unconditional and without recourse to or warranty by Agent. Each of Agent and Lenders agrees to mark its books and records at the end of each Settlement Period to show at all times the Dollar amount of its Proportionate Share of the outstanding Revolving Credit Advances. -10- (c) To the extent that Agent has made any such amounts available and the settlement described above shall not yet have occurred, upon repayment of any Revolving Credit Advances by Borrower, Agent may apply such amounts repaid directly to any amounts made available by Agent pursuant to SECTION 1.13(a). (d) Because Agent, on behalf of Lenders, may be advancing or may be repaid Revolving Credit Advances prior to the time when Lenders will actually advance or be repaid Revolving Credit Advances, interest, Non-use Fees and Letter of Credit Fees with respect to the outstanding Revolving Credit Advances shall be allocated by Agent to each Lender (including Agent), and the amount of each Lender's (including Agent's) Proportionate Share shall be computed daily, in accordance with the amount of the outstanding Revolving Credit Advances actually advanced by and repaid to each Lender (including Agent) on each day during each Settlement Period and shall accrue from and including the date such Revolving Credit Advances are advanced by Agent to but excluding the date such Revolving Credit Advances are repaid by Borrower in accordance with SECTION 1.2 or actually settled by the applicable Lender as described in this SECTION 1.13. On the second Business Day of each calendar month (an "INTEREST SETTLEMENT DATE"), Agent will advise each Lender by telephone, telex or telecopy of the amount of such Lender's Proportionate Share of interest paid and Non-use Fees and Letter of Credit Fees paid for the benefit of Lenders on the Revolving Credit Loan as of such Interest Settlement Date. Provided that such Lender has made all payments required to be made by it under this Agreement and the other Loan Documents, Agent will pay to such Lender, by wire transfer to such Lender not later than 12:00 noon (New York time) on the next Business Day following the Interest Settlement Date, such Lender's Proportionate Share of interest paid and Non-use Fees and Letter of Credit Fees paid for the benefit of Lenders on the Revolving Credit Loan. 1.14 ACCOUNTING. Agent will provide a monthly accounting of transactions under the Revolving Credit Loan to Borrower. Each and every such accounting shall (absent manifest error) be deemed final, binding and conclusive upon Borrower in all respects as to all matters reflected therein, unless Borrower, within thirty (30) days after the date any such accounting is rendered, shall notify Agent in writing of any objection which Borrower may have to any such accounting, describing the basis for such objection with specificity. In that event, only those items expressly objected to in such notice shall be deemed to be disputed by Borrower. Agent's determination, based upon the facts available, of any disputed item shall (absent manifest error) be final, binding and conclusive on Borrower. 1.15 INDEMNITY. (a) Borrower shall indemnify and hold Agent, each Lender and their respective Affiliates, and each of their respective officers, directors, employees and their respective attorneys and agents (each, an "INDEMNIFIED PERSON"), harmless from and against any and all suits, actions, costs, fines, deficiencies, penalties, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other costs of investigations or defense, including those incurred upon any appeal) (each, a "Claim") which may be instituted or asserted against or incurred by such Indemnified Person as the result of credit having been extended under this Agreement or any other Loan Document or otherwise arising in connection with the transactions contemplated hereunder and thereunder, including any and all Environmental Liabilities and Costs and regardless of whether the Indemnified Person is a party to such Claim, PROVIDED, that Borrower shall not -11- be liable for any indemnification to such Indemnified Person with respect to any portion of any such Claim which results solely from such Indemnified Person's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. The foregoing indemnity obligations of Borrower shall be in addition to, and not in limitation of, any other liability or obligations that Borrower or any other Person may have to any Indemnified Person, by contract, at common law or otherwise, included but not limited to any right of contribution. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED THEREBY. In any suit proceeding or action brought by Agent or Lenders relating to any Collateral for any sum owing in respect thereof or to enforce any provision of any Collateral, Borrower shall save, indemnify and keep Agent and Lenders harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder arising out of a breach by Borrower of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from Borrower, all such obligations of Borrower shall be and remain enforceable against, and only against, Borrower and shall not be enforceable against Agent or Lenders. (b) Borrower hereby acknowledges and agrees that neither Agent nor any Lender (as of the date hereof) is now or has ever been in control of any of the Subject Property or the affairs of any Loan Party. (c) To induce Lenders to provide the LIBOR Rate option on the terms provided herein, if(i) any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or is the result of acceleration, by operation of law or otherwise); (ii) Borrower shall default in payment when due of the principal amount of or interest on any LIBOR Loan; (iii) Borrower shall default in making any borrowing of, conversion into or continuation of LIBOR Loans after Borrower has given notice requesting the same in accordance herewith; or (iv) Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower has given a notice thereof in accordance herewith, Borrower shall indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing. Such indemnification shall include any loss (including loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained. For the purpose of calculating amounts payable to a Lender under this Section, each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a maturity comparable to the relevant Interest Period; PROVIDED, HOWEVER, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section. This covenant shall survive the termination of this Agreement -12- and the payment of the Revolving Credit Notes and all other amounts payable hereunder. As promptly as practicable under the circumstances, each Lender shall provide Borrower with its written calculation of all amounts payable pursuant to this SECTION 1.15(c), and such calculation shall be binding on the parties hereto unless Borrower shall object in writing within thirty (30) Business Days of receipt thereof, specifying the basis for such objection in detail. 1.16 ACCESS. Borrower shall: (a) provide access during normal business hours to Agent and any of its officers, employees and agents as frequently as Agent determines to be appropriate upon reasonable advance notice to Borrower (unless a Default shall have occurred and be continuing, in which event no such notice shall be required and such access shall be at any and all times) to the properties and facilities of Borrower or any of its Subsidiaries; (b) permit Agent and any of its officers, employees and agents, as frequently as Agent determines to be appropriate, to inspect, audit and make extracts from all of Borrower's records, files and books of account; and (c) permit Agent and any of its officers, employees and agents, as frequently as Agent determines to be appropriate, upon reasonable advance notice to Borrower (unless a Default shall have occurred and be continuing, in which event no such notice shall be required and such access shall be at any and all times) to conduct audits to inspect, review and evaluate the Collateral, and Borrower agrees to render to Agent at Borrower's cost and expense such clerical and other assistance as may be reasonably requested with regard thereto. Borrower shall make available to Agent and each Lender and their respective counsel, as quickly as practicable under the circumstances, originals or copies of all books, records, board minutes, contracts, insurance policies, environmental audits, business plans, files, financial statements (actual and pro forma), filings with federal, state and local regulatory agencies, and other instruments and documents in Borrower's custody or control or otherwise belonging to or property of Borrower which Agent or any Lender may reasonably request. Borrower shall deliver any document or instrument reasonably necessary for Agent, as it may from time to time request, to obtain records from any service bureau or other Person which maintains records for Borrower, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by Borrower. Borrower shall make available to Agent upon its reasonable request information and records prepared by its certified public accountants and its banking and other financial institutions. Notwithstanding the foregoing, nothing in this SECTION 1.16 or otherwise in any Loan Document shall require Borrower to disclose to Agent, any Lender, or any of their respective officers, employees or agents, any documents, instruments or other information protected by the attorney-client privilege if (i) in the opinion of counsel reasonably acceptable to Agent such privilege has not previously been waived or lost, (ii) in the opinion of counsel reasonably acceptable to Agent such disclosure could reasonably be expected to cause Borrower to waive the benefit of such privilege and (iii) losing the benefit of such privilege would be materially detrimental to Borrower. 1.17 TAXES. (a) Any and all payments by or on behalf of Borrower hereunder or under the Revolving Credit Note, or any other Loan Document, shall be made, in accordance with this SECTION 1.17, free and clear of and without deduction for any and all present or future Taxes. If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Revolving Credit Note or any other Loan Document to Agent or any Lender, (i) the sum payable shall be increased as may be necessary so that after -13- making all required deductions (including deductions applicable to additional sums payable under this SECTION 1.17) Agent or such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Notwithstanding the foregoing, Borrower shall not be required to increase any such sum payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (f) of this Section. (b) In addition, Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement excluding taxes, charges or similar levies that are imposed on or measured by the net income of any Lender by the United States of America, the jurisdiction under the laws of which such Lender is organized or the jurisdiction in which such Lender's applicable lending office is located or, in each case any political subdivision thereof (hereinafter referred to as "OTHER TAXES"). (c) Borrower shall indemnify and pay, within ten (10) days of demand therefor, Agent and each Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this SECTION 1.17) paid by Agent or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. (d) Within thirty (30) days after the date of any such payment of Taxes or Other Taxes described in SECTION 1.1 7(a), (b) OR (c), Borrower shall furnish to Agent or such Lender, the original or a certified copy of a receipt evidencing payment thereof. (e) If any Lender subsequently receives from a taxing authority a refund of any Tax or Other Tax previously paid by Borrower and for which Borrower has indemnified Lender pursuant to this SECTION 1.17, such Lender shall within thirty (30) days after receipt of such refund, and to the extent permitted by applicable law, pay to Borrower the net amount of any such refund after deducting taxes and expenses attributable thereto and any taxes which such Lender is required to withhold from the payment to Borrower. (f) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (i) deliver to Borrower and Agent two duly completed copies of United States Internal Revenue Service Form W-8ECI or Form W-8BEN, or successor applicable form, as the case may be; (ii) deliver to Borrower and Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to Borrower; and -14- (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by Borrower or Agent; PROVIDED that no event (including any change in treaty, law or regulation or the official interpretation thereof) has occurred prior to the date on which any such delivery would otherwise be required which renders a form inapplicable or which prevents such Lender from duly completing and delivering any such form with respect to it and such Lender so advises Borrower and Agent. Subject to the foregoing proviso, such Lender shall certify that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. Each Person that shall become a Lender or a Participant pursuant to SECTION 10.2 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this Section, provided that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased. 1.18 LETTERS OF CREDIT. Subject to the terms and conditions of this Agreement including Annex F, Borrower shall have the right to request, and each Lender agrees to incur, the Letter of Credit Obligations (and Revolving Credit Advances and other obligations in respect thereof) in accordance with the terms and conditions set forth in ANNEX F. 1.19 CAPITAL ADEQUACY. Borrower shall pay directly to each Lender from time to time on request such amounts as such Lender may reasonably determine to be necessary to compensate such Lender for any costs that it reasonably determines are attributable to the maintenance by such Lender, pursuant to any law or regulation or any interpretation, directive or request (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) of any Governmental Authority (a) following any Regulatory Change or (b) implementing after the date hereof any risk-based capital guideline or other capital requirement (whether or not having the force of law and whether or not the failure to comply therewith would be unlawful) heretofore or hereafter issued by any Governmental Authority, of capital in respect of such Lender's Revolving Credit Commitment, Revolving Credit Advances and/or Letter of Credit Obligations hereunder (such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Lender to a level below that which such Lender could have achieved but for such law, regulation, interpretation, directive or request). Each Lender shall notify Borrower of any event occurring after the date of this Agreement entitling such Lender to compensation under this SECTION 1.19 as promptly as practicable, but in any event within 90 days, after such Lender obtains actual knowledge thereof; PROVIDED that if any Lender fails to give such notice within 90 days after it obtains actual knowledge of such an event, such Lender shall, with respect to compensation payable pursuant to this SECTION 1.19 in respect of any costs resulting from such event, only be entitled to payment under this SECTION 1.19 for costs incurred from and after the date 90 days prior to the date that such Lender does give such notice. Each Lender will furnish to Borrower a certificate setting forth the basis and amount of each request by such Lender for compensation under this SECTION 1.19. Determinations and allocations by any Lender for purposes of this SECTION 1.19 of the effect of any Regulatory Change pursuant to or of capital maintained pursuant to this SECTION 1.19, on its costs or rate of return of maintaining Revolving Credit Advances or its Revolving Credit Commitment and of the amounts required to compensate such Lender under this SECTION 1.19, shall be conclusive absent manifest error. -15- 1.20 INCREASED COSTS. If, due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loan, then Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to Agent), pay to Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower and to Agent by such Lender, shall be conclusive and binding on Borrower for all purposes, absent manifest error. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender's internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrower pursuant to this SECTION 1.20. 1.21 ILLEGALITY. Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law or regulation (or any change in the interpretation thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any LIBOR Loan, then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan at another branch or office of that Lender without, in that Lender's opinion, adversely affecting it or its Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower through Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans shall terminate and (ii) Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing to such Lender, together with interest accrued thereon, unless Borrower, within five (5) Business Days after the delivery of such notice and demand, converts all such Loans into a Loan bearing interest based on the Index Rate. 1.22 REPLACEMENT OF LENDER IN RESPECT OF INCREASED COSTS. Within fifteen (15) days after receipt by Borrower of written notice and demand from any Lender (an "AFFECTED LENDER") for payment of additional amounts or increased costs as provided in SECTION 1.17(a), 1.19 or 1.20 Borrower may, at its option, notify Agent and such Affected Lender of its intention to replace the Affected Lender. So long as no Default or Event of Default shall have occurred and be continuing, Borrower, with the consent of Agent, may obtain, at Borrower's expense, a replacement Lender ("REPLACEMENT LENDER") for the Affected Lender, which Replacement Lender must be satisfactory to Agent. If Borrower obtains a Replacement Lender within ninety (90) days following notice of its intention to do so, the Affected Lender must sell and assign its Loans and Commitments to such Replacement Lender for an amount equal to the principal balance of all Loans held by the Affected Lender and all accrued interest and Fees with respect thereto through the date of such sale, PROVIDED that Borrower shall have reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment. -16- Notwithstanding the foregoing, Borrower shall not have the right to obtain a Replacement Lender if the Affected Lender rescinds its demand for increased costs or additional amounts within fifteen (15) days following its receipt of Borrower's notice of intention to replace such Affected Lender. Furthermore, if Borrower gives a notice of intention to replace and does not so replace such Affected Lender within ninety (90) days thereafter, Borrower's rights under this SECTION 1.22 shall terminate and Borrower shall promptly pay all increased costs or additional amounts demanded by such Affected Lender pursuant to SECTIONS 1.17(a), 1.19 AND 1.20. 2. CONDITIONS PRECEDENT 2.1 Conditions to Effectiveness. Notwithstanding any other provision of this Agreement and without affecting in any manner the rights of Agent or any Lender hereunder, the effectiveness of this Agreement and the obligation of Agent and Lenders to make and/or continue any Revolving Credit Advances hereunder, to incur any Letter of Credit Obligations, or to take, fulfill, or perform any other action hereunder, are subject to the fulfillment of the following conditions to the satisfaction of Agent (and to the extent specified below, of Lenders): (a) This Agreement or counterparts thereof shall have been duly executed by Borrower and delivered to Agent and each Lender. (b) Agent and Lenders shall have received such documents, instruments, certificates, opinions and agreements as Agent shall reasonably request in connection with the transactions contemplated by this Agreement, including all documents, instruments, agreements and other materials listed in the Schedule of Documents each in form and substance satisfactory to Agent and each Lender. (c) Evidence satisfactory to Agent that Borrower has obtained consents and acknowledgments of all Persons whose consents and acknowledgments may be required, including, but not limited to, all requisite Governmental Authorities, to the terms and to the execution and delivery, of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby. (d) Evidence satisfactory to Agent that the insurance policies provided for in SECTION 3.19 and ANNEX E are in full force and effect, together with appropriate evidence showing a loss payable and/or additional insured clauses or endorsements, as appropriate, in favor of Agent and Lenders and in form and substance satisfactory to Agent. (e) Payment by Borrower to Agent (i) for its account and the account of Lenders, as the case may be, of all Fees, costs, and expenses of closing (including fees and expenses of consultants and counsel to Agent presented as of the Closing Date), and (ii) for the account of the Existing Lenders, all interest, letter of credit fees and unused line fees under the Existing Credit Agreement accrued through, but not including, the Closing Date, plus any and all reimbursable expenses or other charges payable by Borrower under the Existing Credit Agreement accrued through the Closing Date, whether or not then due and payable. -17- (f) No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain or prohibit, or to obtain damages in respect of, or which is related to or arises out of this Agreement or any of the other Loan Documents or the consummation of the transactions contemplated hereby and thereby and which, in Agent's sole judgment, would make it inadvisable to consummate the transactions contemplated by this Agreement or any of the other Loan Documents. (g) Borrower will have no Subsidiaries, other than DAMC (provided DAMC owns no Inventory and its condition (financial and other), operations, business, liabilities, assets, properties and other activities are satisfactory to Agent). (h) Since January 29, 2000, other than as disclosed in the Borrower's internally prepared unaudited financial statements for the three-month period ended approximately April 29, 2000 delivered to Agent by Borrower, none of the following shall have occurred and be continuing: (i) a Material Adverse Effect; (ii) a material increase in liabilities, liquidated or contingent, or a material decrease in assets of Borrower; (iii) any litigation or other proceeding is pending or threatened which if successful could, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect; or (iv) any material adverse change in the leveraged finance bank market. (i) Each Lender shall be satisfied, in its reasonable judgment, with (i) the corporate, capital, tax, legal and management structure of each Loan Party; (ii) the nature and status of all contractual obligations, securities, labor, tax, ERISA, employee benefit, environmental, health and safety matters, in each case, involving or affecting any Loan Party; and (iii) the terms of Borrower's Subordinated Note and other Indebtedness and Borrower's Preferred Stock, stockholders' agreements (including the Preferred Stock Agreements), voting trust agreements, stock redemption agreements, and other agreements with shareholders (including payments, covenants, defaults and remedies thereunder) and any earnout or deferred compensation arrangements with management of Borrower). (j) Agent and Lenders shall have received for the three-month period ended April 29, 2000 a balance sheet and statements of operations and cash flows of Borrower and its Subsidiaries certified by the Chief Financial Officer of Borrower and in form and substance satisfactory to Agent. (k) Agent and Lenders shall have received as of the Closing Date the Projections in form and substance satisfactory to Agent. (l) Agent and Lenders shall have received as of the Closing Date the acknowledgment and agreement of DAMC that from and after the Closing Date (i) each Collateral Document to which it is a party shall continue without any diminution thereof and shall remain in full force and effect and (ii) each reference in such Collateral Documents to the "Agent", "Lenders", "Credit Agreement", and "Obligations" shall be references to, respectively, the Agent, the Lenders, this Agreement, and the Obligations defined in this Agreement. -18- The execution of this Agreement by each Lender shall be an acknowledgment by such Lender that the conditions set forth in this SECTION 2.1 have been satisfied or provided for in a manner satisfactory to such Lender. 2.2 FURTHER CONDITIONS TO EACH REVOLVING CREDIT ADVANCE AND EACH LETTER OF CREDIT OBLIGATION. No Lender shall be obligated to fund any Loan, convert or continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation unless the following conditions have been fulfilled: (a) Each Loan Party's representations and warranties contained herein or in any of the Loan Documents shall be true and correct on and as of the Closing Date and the date on which such Revolving Credit Advance is made or such Letter of Credit Obligations are incurred, as the case may be, as though made on or incurred on and as of such date, except to the extent that any such representation or warranty expressly relates solely to an earlier date and except for changes therein permitted or contemplated by this Agreement. (b) No event shall have occurred and be continuing, or would result from the making of such Revolving Credit Advance or the incurrence of such Letter of Credit Obligation, as the case may be, which constitutes or would constitute a Default. (c) After giving effect to such Revolving Credit Advance or the incurrence of such Letter of Credit Obligation, the aggregate principal amount of the Revolving Credit Loan shall not exceed the Borrowing Availability. The request and acceptance by Borrower of the proceeds of any Revolving Credit Advance, the incurrence of any Letter of Credit Obligation or the conversion or continuation of any Loan into, or as, a LIBOR Loan, as the case may be, shall be deemed to constitute, as of the date of such request or acceptance, (i) a representation and warranty by Borrower that the conditions in SECTION 2.1 and this SECTION 2.2 have been satisfied and (ii) a confirmation by Borrower of the granting and continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents. 3. REPRESENTATIONS AND WARRANTIES To induce Agent and Lenders to enter into this Agreement, make the Revolving Credit Loans and incur the Letter of Credit Obligations, Borrower represents and warrants to Agent and Lenders that: 3.1 CORPORATE EXISTENCE: COMPLIANCE WITH LAW. Each Loan Party: (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified to do business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification and the failure to so qualify, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect; (b) has the requisite corporate power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates -19- under lease, and to conduct its business as now, heretofore and proposed to be conducted; (c) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all material notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct, except to the extent any failure to obtain any such license, permit, consent or approval or make any such filing or give any such notice, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect; (d) is in compliance with its certificate or articles of incorporation and by-laws; and (e) is in compliance in all respects with all applicable provisions of law except to the extent that such non-compliance, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect. 3.2 EXECUTIVE OFFICES; CORPORATE OR OTHER NAMES. The current locations of each Loan Party's executive offices, principal place of business, corporate offices, all warehouses and premises within which any Collateral is stored or located, and the locations of all Borrower's records concerning the Collateral are set forth in SCHEDULE 3.2 and, except as set forth in SCHEDULE 3.2, such locations have not changed during the preceding 12 months. During the prior five (5) years, except as set forth in SCHEDULE 3.2, no Loan Party has been known as or used any corporate, fictitious or trade name. 3.3 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party and all other instruments and documents to be delivered by such Loan Party hereunder and thereunder to the extent it is a party thereto and the creation of all Liens provided for herein and therein: (a) are within such Loan Party's corporate power; (b) have been duly authorized by all necessary corporate and, if any, shareholder action; (c) are not in contravention of any provision of such Loan Party's certificates or articles of incorporation or by-laws or other organizational documents; (d) will not violate any law or regulation, or any order or decree of any court or governmental instrumentality; (e) will not conflict with or result in the breach or termination of, constitute a default under or accelerate any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which any Loan Party is a party or by which any Loan Party or any of its property is bound; (f) will not result in the creation or imposition of any Lien upon any of the property of any Loan Party other than those in favor of Agent or Lenders, all pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in SECTION 2.1(c), all of which will have been duly obtained, made or complied with prior to the Closing Date and which are in full force and effect. At or prior to the Closing Date, each of the Loan Documents shall have been duly executed and delivered for the benefit of or on behalf of each Loan Party which is a party thereto and each shall then constitute a legal, valid and binding obligation of such Loan Party to the extent it is a party thereto, enforceable against such Loan Party in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights and to equitable principles of general applicability. 3.4 FINANCIAL STATEMENTS AND PROJECTIONS. Borrower has delivered the Financial Statements and Projections identified in SCHEDULE 3.4, and each of such Financial Statements and Projections complies with the description thereof contained in SCHEDULE 3.4. 3.5 MATERIAL ADVERSE CHANGE. Except as set forth in SCHEDULE 3.5, neither Borrower nor any of its Subsidiaries has any material obligations, contingent liabilities, or -20- liabilities for Charges, long-term leases or unusual forward or long-term commitments which are not reflected in the audited January 29, 2000 consolidated balance sheet of Borrower, which, individually or in the aggregate could reasonably be expected to have or result in a Material Adverse Effect. As of the date hereof, there has been no material deviation from the Projections provided to Agent and Lenders. Except as otherwise permitted hereunder or as set forth in SCHEDULE 3.5, no Restricted Payment has been made since February 25, 1995, and no shares of Stock of Borrower have been, or are now required to be, redeemed, retired, purchased or otherwise acquired for value by Borrower. Other than as disclosed in Borrower's internally prepared unaudited financial statements for the three-month period ended approximately April 29, 2000 delivered to Agent by Borrower, since January 29,2000, no event or events have occurred or are continuing which, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect. 3.6 OWNERSHIP OF PROPERTY; LIENS. Except as described in SCHEDULE 3.6, the real estate listed in SCHEDULE 3.6 constitutes all of the real property owned, leased, or used in its business by each Loan Party. Each Loan Party holds (a) good and marketable fee simple title to all of its owned real estate, (b) valid and marketable leasehold interests in all of such Loan Party's Leases and (c) good and marketable title to all of its other properties and assets. None of the properties and assets of any Loan Party are subject to any Liens, except (x) Permitted Encumbrances and (y) from and after the Closing Date, the Lien in favor of Agent and Lenders pursuant to the Collateral Documents. Each Loan Party has received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Loan Party's right, title and interest in and to all such real estate and other assets or property. Except as described in SCHEDULE 3.6, (i) no Loan Party and, to Borrower's knowledge, no other party to any Lease is in default of its obligations thereunder or has delivered or received any notice of default under any such Lease, and no event has occurred which, to Borrower's knowledge, with the giving of notice, the passage of time, or both, would constitute a default under any such Lease, (ii) no Loan Party owns or holds, or is obligated under or a party to, any option, right of first refusal or any other contractual right to purchase, acquire, sell, assign or dispose of any real property owned or leased by such Loan Party except as set forth in SCHEDULE 3.6, and (iii) no material portion of any real property owned or leased by any Loan Party has suffered any material damage by fire or other casualty loss which has not heretofore been completely repaired and restored to its original condition. All permits required to have been issued or appropriate to enable the real property owned or leased by any Loan Party to be lawfully occupied and used for all of the purposes for which they are currently occupied and used, have been lawfully issued and are, as of the date hereof, in full force and effect, except to the extent that the failure to have any such permit or permits, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect. 3.7 RESTRICTIONS; NO DEFAULT. No Contract, lease, agreement, instrument or other document to which any Loan Party is a party or by which it or any of its properties or assets is bound or affected and no provision of any charter, corporate restriction, applicable law or governmental regulation, individually or in the aggregate, has had or resulted in or could reasonably be expected to have or result in a Material Adverse Effect. No Loan Party is in default and, to Borrower's knowledge, no third party is in default, under or with respect to any Contract, lease, agreement, instrument or other documents to which any Loan Party is a party, which default or defaults, individually or in the aggregate, could reasonably be -21- expected to have or result in a Material Adverse Effect. No Default has occurred and is continuing. 3.8 LABOR MATTERS. There are no strikes or other material labor disputes against any Loan Party that are pending or, to Borrower's knowledge, threatened. Hours worked by and payment made to employees of each Loan Party have not been in violation of the Fair Labor Standards Act or any other applicable laws dealing with such matters which individually, or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect. All material payments due from any Loan Party on account of employee health and welfare insurance have been paid or accrued as a liability on the books of such Loan Party. Except as set forth in SCHEDULE 3.8, no Loan Party has any obligation under any collective bargaining agreement, management agreement, or any employment agreement, and a correct and complete copy of each agreement listed in SCHEDULE 3.8 has been provided to Agent. There is no organizing activity involving any Loan Party pending or, to Borrower's knowledge, threatened by any labor union or group of employees. Except as set forth in SCHEDULE 3.14, there are no representation proceedings pending or, to Borrower's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Loan Party has made a pending demand for recognition, and, there are no complaints or charges against any Loan Party pending or threatened to be filed with any federal, state, local or foreign court, governmental agency or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by any Loan Party of any individual. 3.9 VENTURES; SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND INDEBTEDNESS. Except for DAMC, Borrower has no Subsidiaries. DAMC engages in no business, operations or other activities and owns no property or assets and has no liabilities other than to the extent contemplated and permitted by SECTION 6.5. Borrower is not engaged in any joint venture or partnership with, or, except as set forth in SCHEDULE 3.9 an Affiliate of, another Person. Except as set forth in SCHEDULE 3.9, there are no outstanding rights to purchase options, warrants or similar rights or agreements pursuant to which any Loan Party may be required to issue, sell or purchase any Stock or other equity security. SCHEDULE 3.9 lists all outstanding Stock of each Loan Party and the percentage of ownership and voting interests of the owners thereof as of the Closing Date. SCHEDULE 6.3 lists all Indebtedness of each Loan Party as of the Closing Date. 3.10 GOVERNMENT REGULATION. No Loan Party is (a) an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940 as amended; or (b) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or any other federal or state statute that restricts or limits such Loan Party's ability to incur Indebtedness, pledge its assets, or to perform its obligations hereunder, or under any other Loan Document; and the making of the Revolving Credit Advances and the incurrence of the Letter of Credit Obligations, in each case by Lenders, the application of the proceeds and repayment thereof by Borrower, and the consummation of the transactions contemplated by this Agreement and the other Loan Documents, will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission. -22- 3.11 MARGIN REGULATIONS. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock and no proceeds of any Revolving Credit Advance will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. Borrower will not take any action which might cause any Loan Document or any document or instrument delivered pursuant hereto or thereto to violate any regulation of the Board of Governors of the Federal Reserve Board. 3.12 TAXES. Except as set forth in SCHEDULE 3.12, all federal, state, local and foreign tax returns, reports and statements, including information returns required to be filed by each Loan Party, have been filed with the appropriate Governmental Authority and all Charges and other impositions shown thereon to be due and payable have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof, or any such fine, penalty, interest, late charge or loss has been paid. Except as set forth in SCHEDULE 3.12, each Loan Party has paid when due and payable all material Charges required to be paid by it. Proper and accurate amounts have been withheld by each Loan Party from its employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities. SCHEDULE 3.12 sets forth those taxable years for which any of the tax returns of each Loan Party are currently being audited by the IRS or any other applicable Governmental Authority; and any assessments or threatened assessments in connection with such audit or otherwise currently outstanding. Except as described in SCHEDULE 3.12, no Loan Party has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. None of the property owned by any Loan Party is property which it is required to treat as being owned by any other Person pursuant to the provisions of IRC Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, and in effect immediately prior to the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property" within the meaning of IRC Section 168(h). No Loan Party has agreed or been requested to make any adjustment under IRC Section 481(a) by reason of a change in accounting method or otherwise. No Loan Party has any obligation under any tax sharing agreement or arrangement except as described in SCHEDULE 3.12. 3.13 ERISA. SCHEDULE 3.13 lists all Plans maintained or contributed to by any Loan Party and all Qualified Plans, unfunded Pension Plans, or Welfare Plans maintained or contributed to by any ERISA Affiliate. Neither any Loan Party nor any current or former ERISA Affiliate sponsors (or has sponsored), contributes to (or has contributed to), or is (or was) required to contribute to any Title IV Plan, any Plan subject to IRC Section 412 or ERISA Section 302, or any Retiree Welfare Plan. IRS determination letters regarding the qualified status under IRC Section 401 of each Qualified Plan have been received as of the dates listed in SCHEDULE 3.13. Each of the Qualified Plans has been amended to comply with the Tax Reform Act of 1986 and to make other changes required under the IRC or ERISA, and if such required amendments are not subject to the determination letters described in the previous sentence, each Qualified Plan so amended will be submitted to the IRS for a determination letter as to the ongoing qualified status of the Plan under the IRC within the applicable IRC Section 401(b) remedial amendment period; and each such Plan shall be amended, including retroactive amendments, as required during such determination letter process to maintain the qualified status of such Plans. To the knowledge of Borrower, the -23- Qualified Plans as amended continue to qualify under Section 401 of the IRC, the trusts created thereunder continue to be exempt from tax under the provisions of IRC Section 501(a), and nothing has occurred which would cause the loss of such qualification or tax-exempt status. To the knowledge of Borrower, each Plan is in compliance in all material respects with the applicable provisions of ERISA and the IRC, including the filing of all reports required under the IRC or ERISA which are true and correct as of the date filed, and all required contributions and benefits have been paid in accordance with the provisions of each such Plan. No Loan Party has engaged in a prohibited transaction, as defined in IRC Section 4975 or Section 406 of ERISA, in connection with any Plan which would subject any such Person (after giving effect to any exemption) to a material tax on prohibited transactions imposed by IRC Section 4975 or any other material liability. Except as set forth in SCHEDULE 3.13: (i) there are no pending, or to the knowledge of Borrower, threatened claims, actions or lawsuits (other than claims for benefits in the normal course), asserted or instituted against (x) any Plan or its assets, (y) any fiduciary with respect to any Plan or (z) any Loan Party or any ERISA Affiliate with respect to any Plan; (ii) each Loan Party and each ERISA Affiliate has complied with the notice and continuation coverage requirements of IRC Section 4980B and the proposed or final regulations thereunder; and (iii) no liability under any Plan has been funded, nor has such obligation been satisfied with, the purchase of a contract from an insurance company that is not rated AAA by Standard & Poor's Corporation and the equivalent by each other nationally recognized rating agency. 3.14 NO LITIGATION. Except as set forth in SCHEDULE 3.14, no litigation, action, suit, claim, arbitration, investigation or other proceeding is now pending or, to the knowledge of Borrower, threatened against any Loan Party, at law, in equity or otherwise, (a) which challenges any such Person's right, power, or competence to enter into or perform any of its obligations under the Loan Documents, or the validity or enforceability of any Loan Document or any action taken thereunder or any Liens granted to Agent, on behalf of itself and each of Lenders, or (b) which if determined adversely, individually or in the aggregate, could have or result in a Material Adverse Effect. To the knowledge of Borrower, there does not exist a state of facts which could reasonably be expected to give rise to any such litigation, action, suit, claim, arbitration, investigation or other proceeding. 3.15 BROKERS. No broker or finder acting on behalf of Borrower brought about the obtaining, making or closing of the credit extended pursuant to this Agreement or the transactions contemplated by the Loan Documents and Borrower has no obligation to any Person in respect of any finder's or brokerage fees in connection therewith. 3.16 INTELLECTUAL PROPERTY. Except where the failure to own any such Intellectual Property right, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect, each Loan Party owns all Intellectual Property which is necessary to continue to conduct its business as heretofore conducted by it, now conducted by it and, to Borrower's knowledge, proposed to be conducted by it, each of which is listed, together with United States Patent and Trademark Office application or registration numbers, where applicable, in SCHEDULE 3.16. Each Loan Party conducts business without infringement or claim of infringement of any Intellectual Property right of others, except where such infringement or claim of infringement, individually or in the aggregate, could not reasonably be expected have or result in a Material Adverse Effect. Except as set forth in SCHEDULE 3.16, to Borrower's knowledge, there is no infringement or claim of infringement by others of any Intellectual Property of any Loan Party, except where such infringement or -24- claim of infringement, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect. 3.17 FULL DISCLOSURE. No information contained in this Agreement, the other Loan Documents, the Financial Statements or any written statement furnished by or on behalf of Borrower or any Affiliate thereof pursuant to the terms of this Agreement or any other Loan Document, which has previously been delivered to Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made; PROVIDED, that except as provided in the next two sentences, Borrower makes no representation or warranty regarding business plans, forecasts or projections, including without limitation, the Projections. With respect to such Projections referred to in paragraph 2 of SCHEDULE 3.4 (a) all facts that formed the basis of such Projections were (and are as of the Closing Date) true and complete in all material respects and no material fact was omitted from such Projections at the time such Projections were prepared and as of the Closing Date, (b) all assumptions of facts and opinions as to future events on which such Projections were based were reasonable under the circumstances at the time such Projections were prepared and as of the Closing Date and are disclosed therein, and (c) such Projections are reasonably based on those facts and assumptions. With respect to any business plans, forecasts or projections (including the Projections other than the Projections referred to in paragraph 2 of SCHEDULE 3.4) made available to Agent or any Lender after the Closing Date, the foregoing clauses (a) through (c) shall be true and correct in all respects as of the date of such business plans, projections or forecasts and as of the date delivered to Agent or any Lender. Notwithstanding anything to the contrary contained herein, Borrower does not assure or guarantee the attainment of any Projections. 3.18 HAZARDOUS MATERIALS. Except for routine operations in the ordinary course of business in compliance with applicable permits issued by a Governmental Authority, the Subject Property is free of any Hazardous Material and no Loan Party has caused or suffered to occur any Release at, under, above or within any Subject Property. There are no existing or potential Environmental Liabilities and Costs of each Loan Party of which Borrower, after due inquiry, has knowledge, which, individually or in the aggregate, could have or result in a Material Adverse Effect. No Loan Party is involved in operations which could lead to the imposition of any material Environmental Liabilities and Costs on it, or any owner of any premises which it occupies, or any Lien securing the same under any Environmental Law. 3.19 INSURANCE POLICIES. SCHEDULE 3.19 lists all insurance of any nature maintained for current occurrences by each Loan Party, as well as a summary of the terms of such insurance. Such insurance complies with and shall at all times comply with the standards set forth in ANNEX E. 3.20 DEPOSIT AND DISBURSEMENT ACCOUNTS. SCHEDULE 3.20 lists all banks and other financial institutions at which each Loan Party maintains deposits and/or other accounts and/or post office lock boxes, including the Disbursement Accounts, the Concentration Account and the Blocked Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number. Borrower has delivered to Agent true, correct and complete copies of all agreements, instruments and other -25- documents relating to any credit card programs, arrangements or agreements to which it is a party. 3.21 SOLVENCY. After giving effect to (a) any Revolving Credit Advances, if any, to be made on the Closing Date or on such other date as Revolving Credit Advances requested hereunder are to be made and/or Letter of Credit Obligations to be incurred on the Closing Date or on such other date as Letter of Credit Obligations requested hereunder are to be incurred, (b) the disbursement of the proceeds of any such Revolving Credit Advances and/or Letter of Credit Obligations pursuant to Borrower's instructions, and (c) the payment and accrual of all transaction costs in connection with the foregoing, Borrower is Solvent and Borrower and its Subsidiaries taken as a whole are Solvent. 4. FINANCIAL STATEMENTS AND INFORMATION 4.1 REPORTS AND NOTICES. Borrower covenants and agrees that from and after the Closing Date and until the Termination Date, it shall deliver to each Lender the Financial Statements, Projections and notices at the times and in the manner set forth in ANNEX D. Concurrently with the delivery of such annual audited financial statements, Borrower shall cause to be delivered to each Lender a certificate of Borrower's independent certified public accountants certifying that during the course of performing their audit of Borrower they did not become aware of any Default under the Loan Documents or specifying each Default of which they became aware. 4.2 COMMUNICATION WITH ACCOUNTANTS. Borrower authorizes Agent to communicate directly with its independent certified public accountants and tax advisors and authorizes those accountants and advisors to disclose to Agent any and all work papers and financial statements and other supporting financial documents and schedules, including copies of any management letter with respect to the business, financial condition and other affairs of Borrower and its Subsidiaries; PROVIDED, that Agent shall give Borrower prior notice of any such communications and Borrower shall be invited to be present during any such communications(but such presence shall not be a prerequisite of such communications). At or before the Closing Date and on each anniversary of the Closing Date, Borrower shall send a letter to such accountants and tax advisors, and deliver a copy thereof to Agent, instructing them to make available to Agent such information and records as Agent may reasonably request and to otherwise comply with the provisions of this SECTION 4. In addition, at or before the Closing Date and on each date the annual audited consolidated financial statements are delivered to Agent as required by ANNEX D such accountants and tax advisors shall deliver a letter to Agent stating that (a) Agent and Lenders are entitled to rely upon any such accountant's certification of Borrower's audited financial statements delivered after the Closing Date and (b) such accountants and tax advisors shall otherwise comply with this SECTION 4 (including making available such information and records as Agent may reasonably request). 5. AFFIRMATIVE COVENANTS -26- Borrower covenants and agrees that, unless Required Lenders shall otherwise consent in writing, from and after the date hereof and until the Termination Date, Borrower shall, and shall cause each other Loan Party to, comply with the following affirmative covenants: 5.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Loan Party shall: (a) except as permitted by SECTION 6.1, do or cause to be done all things necessary to preserve and keep in full force and effect its statutory existence and partnership or corporate, as the case may be, franchises; (b) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; (c) at all times maintain, preserve and protect all of its material Intellectual Property, and preserve all the remainder of its material property, in use or useful in the conduct of its business and keep the same in good repair, working order and condition (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices, so that the business carried on in connection therewith may be properly and advantageously conducted at all times, PROVIDED that nothing in this SECTION 5.1(c) shall prevent any Loan Party from discontinuing the use or operation of any property if such discontinuance, in the judgment of Borrower's Board of Directors, is desirable in the conduct of its business but in no event shall more than two of Borrower's stores cease operations in any Fiscal Year; and (d) transact business only under the names set forth in SCHEDULE 3.2. 5.2 PAYMENT OF CHARGES AND CLAIMS. Each Loan Party shall pay and discharge, or cause to be paid and discharged in accordance with the terms thereof, (a) all Charges imposed upon it or its income and profits, or any of its property (real, personal or mixed) prior to the date on which penalties attach thereto, and (b) all lawful claims for labor, materials, supplies and services or otherwise, which if unpaid might or could become a Lien on its property; PROVIDED, that such Loan Party shall not be required to pay any such Charge or claim which is being contested in good faith by proper legal actions or proceedings, so long as at the time of commencement of any such action or proceeding and during the pendency thereof(i) adequate reserves with respect thereto are established and are maintained in accordance with GAAP, (ii) such contest operates to suspend collection of the contested Charges or claims and is maintained and prosecuted continuously with diligence, (iii) none of the Collateral would be subject to forfeiture or loss by reason of the institution or prosecution of such contest, (iv) no Liens securing an aggregate amount in excess of $100,000 shall exist for such Charges or claims during such action or proceeding (excluding Liens securing obligations fully covered by insurance or otherwise bonded to the satisfaction of Agent), (v) if such contest is terminated or discontinued adversely to such Loan Party, such Loan Party shall promptly pay or discharge such contested Charges and all additional charges, interest penalties and expenses, if any, and shall deliver to Agent evidence reasonably acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to such Loan Party, and (vi) Agent has not advised Borrower in writing that Agent believes that nonpayment or nondischarge thereof, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect. 5.3 BOOKS AND RECORDS. Each Loan Party shall keep adequate records and books of account with respect to its business activities, in which proper entries, reflecting all of its consolidated and consolidating financial transactions, are made in accordance with GAAP and on a basis consistent with the Financial Statements. -27- 5.4 LITIGATION. Borrower shall notify Agent in writing, promptly upon learning thereof, of any litigation, action, suit, claim, investigation, arbitration or other proceeding commenced or threatened, at law, in equity or otherwise against any Loan Party, and of the institution against any Loan Party of any suit or administrative proceeding which (a) may involve an amount in excess of $150,000 individually or $300,000 in the aggregate or (b) if adversely determined, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect. 5.5 INSURANCE. (a) Each Loan Party shall, at its sole cost and expense, maintain or cause to be maintained, the policies of insurance in such amounts and as otherwise described in ANNEX E and with insurers recognized as adequate by Agent. Borrower shall notify Agent promptly of any occurrence causing a material loss or decline in value of any real or personal property and the estimated (or actual, if available) amount of such loss or decline, except as specified otherwise in ANNEX E. Each Loan Party hereby directs all present and future insurers under its "All Risk" policies of insurance to pay all proceeds payable thereunder directly to Agent, other than proceeds relating to the loss or damage to property which secures Indebtedness permitted under clause (c) of SECTION 6.3 which is required by the terms of such Indebtedness to be paid to the holder thereof ("EXCLUDED PROCEEDS"). Each Loan Party irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent) as its true and lawful agent and attorney in-fact for the purpose of, upon the occurrence and during the continuance of a Default, making, settling and adjusting claims under the "All Risk" policies of insurance, endorsing the name of such Person on any check, draft, instrument or other item of payment for the proceeds of such "All Risk" policies of insurance (other than excluded proceeds), and for making all determinations and decisions with respect to such "All Risk" policies of insurance. In the event any Loan Party at any time or times hereafter shall fail to obtain or maintain (or fail to cause to be obtained or maintained) any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, Agent, without waiving or releasing any Obligations or Default hereunder, may at any time or times thereafter (but shall not be obligated to) obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto which Agent deems advisable. All sums so disbursed, including reasonable attorneys' fees, court costs and other charges related thereto, shall be payable, on demand, by Borrower to Agent and shall be additional Obligations hereunder secured by the Collateral. (b) Agent reserves the right at any time, upon review of any Loan Party's risk profile, to reasonably require additional forms and limits of insurance to adequately protect Agent's and Lenders' interests. Each Loan Party shall, if so requested by Agent, deliver to Agent and each Lender, as often as Agent may reasonably request, a report of a reputable insurance broker reasonably satisfactory to Agent with respect to its insurance policies. (c) Each Loan Party shall deliver to Agent endorsements to all of its (i) "All Risk" and business interruption insurance naming Agent as loss payee to the extent provided in SECTION 5.5(a), and (ii) general liability and other liability policies naming Agent and each Lender as an additional insured. -28- 5.6 COMPLIANCE WITH LAWS. Each Loan Party shall comply with all federal, state and local laws, permits and regulations applicable to it, including those relating to licensing, environmental, ERISA and labor matters, except to the extent any failure or failures to so comply, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect. 5.7 AGREEMENTS; LEASES. (a) Each Loan Party shall perform, within all required time periods (after giving effect to any applicable grace periods), all of its obligations and enforce all of its rights under each Contract or other document or instrument to which it is a party, except where such failure or failures to so perform and enforce, individually or in the aggregate, could not reasonably be expected to have or result in a Material Adverse Effect. Each Loan Party shall perform and comply in all material respects with all obligations in respect of Chattel Paper, Instruments, Contracts, Licenses, and Documents and all other agreements constituting or giving rise to Collateral. (b) Without limiting the foregoing paragraph (a), each Loan Party shall pay within five days of the due date thereof (without giving effect to any grace periods) any amount in excess of $250,000 in the aggregate owing under the Leases. 5.8 SUPPLEMENTAL DISCLOSURE. Within thirty (30) days after the end of each Fiscal Quarter (or, if a Default has occurred and is continuing, at such other times as Agent may require upon no less than ten (10) days prior notice) and, with respect to SCHEDULES 3.6 and 3.20 only, promptly and in any event within five (5) Business Days of any change in the information set forth in such Schedules, Borrower will supplement (or cause to be supplemented) each Schedule hereto, (or SCHEDULE 3.6 and 3.20, as applicable) or representation herein or in any other Loan Document with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedule or as an exception to such representation or which is necessary to correct any information in such Schedule or representation which has been rendered inaccurate thereby; PROVIDED, that such supplement to such Schedules or representations (except for any supplement to SCHEDULE 3.2, SCHEDULE 3.6 (solely relating to such Schedule's identification of real property owned, leased or used in each Loan Party's business), SCHEDULE 3.9 (solely relating to such Schedule's identification of Affiliates of Borrower and, without limiting SECTION 8.1(1), the Stock ownership of Borrower and the voting interests of the owners thereof), SCHEDULE 3.12 (solely relating to the audits and extensions referred to in the fourth and fifth sentences of SECTION 3.12) or SCHEDULE 3.19, in each case solely to the extent such supplement reflects actions in conformity with and not otherwise prohibited by the terms of the Loan Documents) shall not be deemed an amendment thereof unless expressly consented to in writing by Agent and Required Lenders, and no such amendments, except as the same may be consented to in a writing which expressly includes a waiver, shall be or be deemed a waiver by Agent or Lenders of any Default disclosed therein. Borrower shall, if so requested by Agent or Required Lenders, finish to Agent and each Lender as often as it reasonably requests, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Agent or Required Lenders may reasonably request, all in reasonable detail, and, Borrower shall advise Agent and each Lender promptly, -29- in reasonable detail, of(a) any Lien, other than as permitted pursuant to SECTION 6.7, attaching to or asserted against any of the Collateral, (b) any material change in the composition of the Collateral, and (c) the occurrence of any other event or events which, individually or in the aggregate, could have or result in a Material Adverse Effect upon the Collateral and/or Agent's Lien thereon. 5.9 ENVIRONMENTAL MATTERS. Each Loan Party shall (a) comply with all Environmental Laws and permits applicable to it where the failure to so comply, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect, (b) notify Agent and each Lender promptly after such Loan Party becomes aware of any Release upon any Subject Property which, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect, and (c) promptly forward to Agent and each Lender a copy of any order, notice, permit, application, or any communication or report received by such Loan Party in connection with any such Release or any other matter relating to the Environmental Laws that may affect any Subject Property or any Loan Party. The provisions of this SECTION 5.9 shall apply whether or not the Environmental Protection Agency, any other federal agency or any state or local environmental agency has taken or threatened any action in connection with any Release or the presence of any Hazardous Materials. 5.10 APPLICATION OF PROCEEDS. Borrower shall use the proceeds of the Revolving Credit Loan as provided in SECTION 1.3. 5.11 FISCAL YEAR. Each Loan Party shall maintain as its Fiscal Year the 52 or 53-week period ending on the Saturday closest to the end of January of each year. 5.12 LANDLORD'S WAIVER AND OTHER AGREEMENTS. Except as otherwise agreed to in writing by Agent, each Loan Party shall obtain (a) a Landlord's Waiver in form and substance acceptable to Agent from the landlord of any present or future leased premises of any Loan Party where Inventory is located; and (b) a waiver and license agreement in form and substance acceptable to Agent from any Person (other than Borrower) which owns, operates or manages a warehouse or other location not owned by Borrower where Inventory is located. 5.13 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES. Borrower will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that each of its Subsidiaries is a wholly-owned Subsidiary. Borrower will not permit any of its Subsidiaries to enter into, after the Closing Date, any indenture, agreement (other than this Agreement and the other Loan Documents), instrument or other arrangement that, directly or indirectly, prohibits or restrains, or has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, the incurrence or payment of Indebtedness, the granting of Liens, the declaration or payment of dividends or other Restricted Payments, the making of loans, advances or Investments or the sale, assignment, transfer or other disposition of any property or assets. 5.14 FURTHER ASSURANCES. Each Loan Party shall at its cost and expense, upon request of Agent, duly execute and deliver, or cause to be duly executed and delivered, to Agent such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Agent to carry out more effectually the provisions and purposes of this Agreement or any other Loan Document. -30- 5.15 APPRAISALS. Borrower shall allow Agent and its designees from time to time as Agent shall direct, to perform, and shall assist Agent and its designees in performing, appraisals of the Borrower's Inventory. So long as no Default has occurred and is continuing, Agent agrees to provide to Borrower upon the request of Borrower any such appraisal prepared by a third party unaffiliated with Agent which has consented to Agent so providing such appraisal. In furtherance of the foregoing, Agent agrees to use reasonable efforts to obtain any such consent. Borrower shall pay all out-of-pocket costs and expenses incurred by Agent in connection with such appraisals, provided that unless a Default shall be continuing only one such appraisal in any Fiscal Year shall be at the expense of Borrower. 6. NEGATIVE COVENANTS Borrower covenants and agrees that, unless Required Lenders shall otherwise consent in writing, from and after the date hereof and until the Termination Date, Borrower shall, and shall cause each other Loan Party to, comply with the following negative covenants: 6.1 MERGERS, SUBSIDIARIES, ETC. No Loan Party shall, directly or indirectly, by operation of law or otherwise, merge, consolidate or otherwise combine with any Person or acquire or hold all or substantially all of the assets or capital stock of any Person or form, acquire or hold any Subsidiary, except that (a) Borrower may hold any portion of the stock of DSG Holdings and/or all of the Stock of DAMC and so long as no Default has occurred and is continuing DAMC may merge with and into Borrower so long as Borrower is the surviving entity of such merger and (b) Borrower (so long as no Default has occurred and is continuing or would occur as a result of such merger) may merge with and into a wholly-owned Subsidiary of Borrower with such Subsidiary as the surviving corporation; provided that (i) such Subsidiary is a Delaware corporation which is organized immediately prior to such merger and prior to such merger does not engage in any business, transactions or other activities or incur or assume any obligations or liabilities (except in connection with its organization), (ii) the sole purpose and result of such merger is Borrower or its successor in interest becoming a Delaware corporation, (iii) upon such merger, such Subsidiary by operation of law shall assume all Borrower's assets, rights, obligations, liabilities and duties and such Subsidiary shall be the Borrower for all purposes hereof and the other Loan Documents and shall assume pursuant to documentation satisfactory to Agent all the Obligations, (iv) the certificate of incorporation and by-laws of such surviving Person shall be identical to Borrower's before giving effect to such merger except for such changes thereto required by Delaware corporate law, provided that in any event the provisions of such certificate of incorporation and by-laws relating to the Stock of such surviving Person shall be identical to Borrower's before giving effect to such merger, (v) such merger shall not violate any agreements, contracts, instruments, leases or other documents to which Borrower is a party or by which its property is bound, except any violation which has been disclosed to Agent and which Agent has determined in its discretion to be non material, (vi) the surviving Person of such merger shall be named Dick's Sporting Goods, Inc., (vii) in connection with any such merger, Agent shall have received an opinion in form and substance satisfactory to Agent from counsel satisfactory to Agent, and (viii) such merger shall otherwise be satisfactory to Agent. -31- 6.2 INVESTMENTS. No Loan Party shall, directly or indirectly, make or maintain any Investment except: (a) Investments permitted by SECTION 6.3 or 6.4 (b) Investments outstanding on the date hereof and listed in SCHEDULE 6.2;(c) Investments in Cash Equivalents at any time during which no Revolving Credit Advances are outstanding and which are subject to a first priority perfected Lien of Agent for the benefit of Lenders; (d) Investments representing stock or obligations issued to any Loan Party in settlement of claims against any other Person by reason of a composition or readjustment of debt or reorganization of any debtor of any Loan Party; (e) Investments represented by deposits into the Concentration Account, the Blocked Accounts, the Disbursement Accounts and other bank accounts of such Loan Party to the extent permitted hereunder; (f) the Investment by Borrower in DSG Holdings contemplated by Section 1.2 of the DSG Holdings Contribution Agreement; (g) a non-cash investment by Borrower in the preferred equity capital of DSG Holdings, the consideration for which shall be the exchange of outstanding trade Accounts owed from DSG Holdings to Borrower in an amount not to exceed $6,000,000 and otherwise on terms and conditions satisfactory to Agent, PROVIDED, that such exchange of debt to equity has been completed no later than May 31, 2000; (h) an intercompany loan or advance made by Borrower to DSG Holdings at any one time after October 29, 1999 in a principal amount not to exceed $5,000,000, PROVIDED that (i) DSG Holdings shall have received a capital contribution commitment, in form and substance satisfactory to Agent, in an amount (net of expenses) sufficient (without giving consideration to any other sources of funds available to DSG Holdings) to enable DSG Holdings to repay such intercompany loan or advance by the time required hereunder, (ii) such intercompany loan or advance shall be payable no later than the earlier of (A) 90 days after the making thereof and (B) an initial public offering of the Stock of dsports.com and shall be evidenced by a promissory note in form and substance satisfactory to Agent, (iii) such promissory note shall be pledged and delivered to Agent pursuant to the Security Agreement, (iv) if DSG Holdings shall issue any Stock on or after the date on which the intercompany loan or advance referred to in clause (h) above is made, no later than the Business Day following the date of receipt of the proceeds thereof, DSG Holdings shall repay to the extent outstanding such intercompany loan or advance in an amount equal to all such proceeds (net of underwriting discounts and commissions and other reasonable costs paid to non-Affiliates in connection therewith) and (v) Borrower shall have Net Borrowing Availability (with trade payables being paid currently, and expenses and liabilities being paid in the ordinary course of business and without acceleration of sale) of not less than $15,000,000 after giving effect to such intercompany loan or advance and (i) the Investment by Borrower in DSG Holdings contemplated by SECTION 1.3(c) hereof. 6.3 INDEBTEDNESS. No Loan Party shall create, incur, assume or permit to exist any Indebtedness, except: (a) the Obligations; (b) Deferred Taxes; (c) Capital Lease Obligations and Indebtedness secured by purchase money Liens permitted under clause (c) of SECTION 6.7 (including any such Capital Lease Obligations and Indebtedness set forth in SCHEDULE 6.3 or any extensions, renewals, replacements or modifications thereof) in a maximum outstanding aggregate amount at any time not to exceed $5,000,000; (d) Indebtedness evidenced by the Subordinated Note; (e) Guaranteed Indebtedness permitted under SECTION 6.6 (f) Indebtedness evidenced by the Preferred Stock Subordinated Notes; (g) all loans and advances made by DAMC to Borrower which are evidenced by a subordinated demand promissory note, in form and substance satisfactory to Agent, and do not exceed in the aggregate an amount equal to the amount of all royalty fees previously paid by Borrower to DAMC pursuant to the Licensing Agreement, dated as of March 1, 1998, between Borrower and DAMC, plus interest thereon at a rate per annum not to exceed the Index Rate; and (h) -32- Indebtedness existing on the Closing Date and set forth in SCHEDULE 6.3 and all extensions, renewals, replacements and modifications of such Indebtedness (other than the Subordinated Note and the Preferred Stock Subordinated Notes) on terms and conditions which shall in any event be on terms no less favorable to Borrower, Agent or any Lender, as determined by Agent than the terms of the Indebtedness being extended, renewed, replaced or modified, including, without limitation, with respect to amount, maturity, amortization, interest rate, premiums, fees, indemnities, covenants, events of default and remedies. 6.4 AFFILIATE AND EMPLOYEE TRANSACTIONS. Except as set forth in SCHEDULE 6.4 or as otherwise expressly permitted hereunder, no Loan Party shall enter into or be party to any lending, borrowing or other commercial transaction or arrangement with any of its Subsidiaries, Affiliates, officers, directors or employees, including payment of any management, consulting, advisory, service or similar fee or any deferred compensation (excluding salaries, bonuses and other compensation to its officers, directors and employees in the ordinary course of business consistent with past practices); PROVIDED, that (a) Borrower may extend loans to its officers, directors and employees in a maximum aggregate principal amount outstanding at any time for all officers, directors and employees of $500,000; (b) [Borrower may pay $4,000 per month to Martin Stack under an Agreement dated August 28, 1990 as in effect on the date hereof;] (c) Borrower and DAMC may enter into the transactions contemplated by the E-commerce Transaction Documents (other than the exercise of the subscription rights set forth in Section 3.2 of the DSG Holdings Limited Liability Company Agreement), PROVIDED, that (i) Accounts owing by DSG Holdings and dsports.com to Borrower and DAMC in connection therewith shall in no event exceed in the aggregate more than $3,000,000 at any time and (ii) DSG Holdings and/or dsports.com, as applicable, shall pay Borrower or DAMC, as applicable, for the full amount of such Accounts within 31 days of the creation thereof; (d) Borrower may enter into transactions with its Affiliates in the ordinary course of business consistent with past practices upon fair and reasonable terms no less favorable to Borrower than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate provided that Borrower shall have informed Agent of any such transaction involving aggregate payments or consideration in excess of $250,000 and provided Agent with such information and documentation with respect thereto as Agent may request. Set forth in SCHEDULE 6.4 is a list of all such lending, borrowing or other commercial transactions and arrangements existing or outstanding as of the Closing Date. 6.5 CAPITAL STRUCTURE AND BUSINESS. No Loan Party shall: (a) make any changes in its business objectives, purposes or operations which, individually or in the aggregate, could in any way adversely affect the repayment of the Obligations or reasonably be expected to have or result in a Material Adverse Effect; (b) make any change in its capital structure or issue any Stock (other than a Permitted Stock Issuance or any Stock issued in accordance with the terms of the Preferred Stock Subordinated Notes) or make any revision of the terms of its outstanding Stock or amend or modify any partners, shareholders, voting or similar agreement to which it is a party or enter into any such agreement, except that Borrower may (i) enter into the DSG Holdings Limited Liability Company Agreement, (ii) form a wholly-owned Subsidiary ("NEWCO") for the sole purpose of acquiring any Stock held by Borrower in DSG Holdings, (iii) repurchase the common stock of Borrower to the extent contemplated by SECTION 1.3(c), (iv) enter into that certain Second Amended and Restated Stockholders' Agreement in substantially the form of EXHIBIT H attached hereto, (v) enter into that certain Second Amended and Restated Registration Rights Agreement in substantially the form of EXHIBIT I attached hereto, (vi) relinquish the October 2000 Warrants as described in the -33- Information Statement and (vii) terminate the purchase agreements under which the Preferred Stock was issued; (c) amend its articles or certificate of incorporation, charter, by-laws or other organizational documents; or (d) engage in any business other than the retail sale of clothing and sporting goods. Borrower shall not permit Newco to, directly or indirectly, engage in any business or activities other than acquiring and holding Borrower's Stock in DSG Holdings. Prior to giving effect to any such acquisition, Borrower will give Agent fifteen (15) days' advance notice of such acquisition and copies of all the acquisition and related documents and all such documents shall be in form and substance satisfactory to Agent. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, Newco shall not incur or suffer to exist any Indebtedness, liabilities or other obligations or enter into any contract, document or instrument other than the acquisition agreements and other documents referred to in the preceding sentence. Borrower shall not permit DAMC to, directly or indirectly, engage in any business or activities other than (i) subject to the next succeeding sentence, acquiring Borrower's Intellectual Property and (ii) licensing the right to use such Intellectual Property to (A) Borrower pursuant to the Licensing Agreement, dated as of March 1, 1998, between DAMC and Borrower and (B) dsports.com pursuant to the dsports.com Trademark Agreement. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, DAMC shall not incur or suffer to exist any Indebtedness, liabilities or other obligations (other than operating expenses incurred in the ordinary course of business) or enter into any contract, document or instrument other than (i) the acquisition agreements, royalty and licensing agreements, guarantee and security documents referred to in the preceding sentence,(ii) the dsports.com Trademark Agreement, (iii) any agreements for accounting, legal or other professional services (including,without limitation, agreements for appraisals of the Trademarks held by DAMC) and (iv) the lease for the premises located at 300 Delaware Avenue, Suite 548, Wilmington. Delaware; PROVIDED that the aggregate amount of operating expenses and other obligations incurred by DAMC shall not exceed $50,000 in any Fiscal Year. 6.6 GUARANTEED INDEBTEDNESS. No Loan Party shall create, incur, assume or permit to exist any Guaranteed Indebtedness except for: (a) endorsements of instruments or items of payment for deposit to a bank account of such Loan Party; (b) performance bonds, indemnities entered into in the ordinary course of business consistent with past practices and indemnities provided under the E-commerce Transaction Documents; and (c) Guaranteed Indebtedness outstanding on the Closing Date and listed in SCHEDULE 6.3 and all extensions, renewals, replacements and modifications of such Guaranteed Indebtedness on terms and conditions which shall in any event be on terms no less favorable to Borrower, Agent or any Lender, as determined by Agent than the terms of the Guaranteed Indebtedness being extended, renewed, replaced or modified, including, without limitation, with respect to amount, premiums, fees, indemnities, covenants, events of default and remedies. 6.7 LIENS. No Loan Party shall create or permit to exist any Lien on any of its properties or assets except for: (a) presently existing or hereafter created Liens in favor of Agent or Lenders to secure the Obligations; (b) Permitted Encumbrances; (c) purchase money Liens or purchase money security interests upon or in Equipment acquired by any Loan Party in the ordinary course of business to secure the purchase price of such Equipment -34- or to secure Capital Lease Obligations, in each case, permitted under clause (c) of SECTION 6.3 incurred solely for the purpose of financing the acquisition of such Equipment; and (d) extensions, renewals and replacements of Liens referred to in clause (c) above, provided that any such extension, renewal or replacement Lien is limited to the property or assets covered by the Lien extended, renewed or replaced and does not secure Indebtedness in an amount greater than the amount of the outstanding Indebtedness secured thereby immediately prior to such extension, renewal or replacement; PROVIDED that Borrower shall not create or permit any Lien to exist on any Collateral (other than Liens described in clauses (a) and (b) above). 6.8 SALE OF ASSETS. No Loan Party shall sell, transfer, convey, assign or otherwise dispose of any of its assets or properties, including any Collateral; PROVIDED, that the foregoing shall not prohibit (a) the sale of Inventory in the ordinary course of business, (b) the sale or disposition for fair consideration in any Fiscal Year of any assets in the ordinary course of business which have become obsolete or surplus to the business of such Loan Party having a fair market value of not greater than $250,000 in the aggregate for the Loan Parties during such Fiscal Year, (c) the contribution by Borrower to the capital of DSG Holdings of the "Contributed Assets" (as defined in the DSG Holdings Contribution Agreement), (d) the contribution by Borrower of any of its Stock in DSG Holdings to the capital of Newco in accordance with SECTION 6.5 and (e) the sale or disposition by Borrower of any Stock in DSG Holdings for fair consideration. In addition, Agent and each Lender agree that Borrower may sell and leaseback or enter into a Deemed Sale/Leaseback Transaction related to Fixtures and Equipment related to Borrower's stores in a transaction or series of transactions in which Borrower receives fair consideration for each such sale (or Deemed Sale/Leaseback Transaction); PROVIDED, that (a) Borrower gives Agent no less than ten (10) Business Days prior notice of any such sale (or Deemed Sale/Leaseback Transaction) together with copies of all documents and instruments relating thereto and such documents and instruments (without limiting any other provision hereof, including the definition of "Deemed Sale/Leaseback Transaction") are reasonably satisfactory in form and substance to Agent; (b) no Default has occurred and is continuing or would occur as a result of such transfer; (c) such Net Proceeds (including such fair consideration) are immediately deposited into the Collection Account for application to the Obligations; (d) with respect to a sale and leaseback of such Fixtures and Equipment (including a Deemed Sale/Leaseback Transaction), the purchaser(s) thereof (or the "lessor" in a Deemed Sale Leaseback Transaction) executes and delivers to Agent an Intercreditor Agreement, (e) with respect to all sales and leasebacks of such Fixtures and Equipment (including Deemed Sale Leaseback Transactions), the aggregate fair market value of such Fixtures and Equipment does not exceed $12,000,000, and (f) with respect to a sale and leaseback (including a Deemed Sale/Leaseback Transaction) of such Fixtures and Equipment, the lease pertaining to such Fixtures and Equipment shall be an Operating Lease. 6.9 ERISA. No Loan Party or any ERISA Affiliate shall acquire any new ERISA Affiliate that maintains or has an obligation to contribute to a Pension Plan that has either an "accumulated funding deficiency," as defined in Section 302 of ERISA, or any "unfunded vested benefits," as defined in Section 4006(a)(3)(E)(iii) of ERISA in the case of any Pension Plan other than a Multiemployer Plan and in Section 4211 of ERISA in the case of a Multiemployer Plan. Additionally, no Loan Party or any ERISA Affiliate shall: (a) permit or suffer any condition set forth in SECTION 3.13 to cease to be met and satisfied at any time, other than permitting an ERISA Affiliate acquired after the Closing Date to sponsor a Title IV Plan, a Plan subject to IRC Section 412 or ERISA Section 302, or a Retiree Welfare -35- Plan; (b) terminate any Title IV Plan where such termination could reasonably be anticipated to result in liability to such Loan Party; (c) permit any accumulated funding deficiency, as defined in Section 302(a)(2) of ERISA, to be incurred with respect to any Pension Plan; (d) fail to make any contributions or fail to pay any amounts due and owing as required by the terms of any Plan before such contributions or amounts become delinquent; (e) make a complete or partial withdrawal (within the meaning of Section 4201 of ERISA) from any Multiemployer Plan; (f) fail to provide Lender with copies of any Plan documents or governmental reports or filings, if reasonably requested by Lender; (g) fail to make any contribution or pay any amount due as required by IRC Section 412 or Section 302 of ERISA; (h) allow any ERISA Event or event described in Section 4062(e) of ERISA to occur with respect to any Title IV Plan; and (i) with respect to all Retiree Welfare Plans, allow the present value of future anticipated expenses to exceed $100,000 or fail to provide copies of such projections to Agent and each Lender. 6.10 FINANCIAL COVENANT. Borrower shall not breach or fail to comply with the following financial covenant, which shall be calculated in accordance with GAAP consistently applied (and based upon the financial statements delivered hereunder): FIXED CHARGE COVERAGE RATIO. Borrower shall maintain a Fixed Charge Coverage Ratio for each four Fiscal Quarter period, commencing with the four Fiscal Quarter period ending April 2000, of not less than 1.0 to 1.0. 6.11 RESTRICTED PAYMENTS. No Loan Party shall make any Restricted Payment to any Person except that: (a) any Subsidiary of Borrower may make Restricted Payments to Borrower; (b) subject to the terms of the Subordination Agreement, Borrower may make regularly scheduled payments of principal and interest on the Subordinated Note; (c) Borrower may make regularly scheduled payments of principal and interest on the Richard T. Stack Notes, as in effect on the date hereof; (d) Borrower may make the payments to Martin Stack contemplated by SECTION 6.4(b); (e) Borrower may make payments to Stack Associates, L.P. and EWS Development Corp. in accordance with the terms of those two leases as in effect on the date hereof referred to in items 6 and 7 of SCHEDULE 6.4; (f) Borrower may make capital contributions to DSG Holdings in accordance with Section 1.2 of the DSG Holdings Contribution Agreement and as contemplated by SECTION 1.3(c) hereof; (g) Borrower may repurchase its common stock as contemplated by SECTION 1.3(d) hereof and the Information Memorandum; and (h) Borrower may make payments on or after September 9, 2001 of the Indebtedness evidenced by the Preferred Stock Subordinated Notes, together with interest thereon, in accordance with the terms thereof, to the extent that (1) both before and after giving effect to any such payment no actual or pro-forma Default or Event of Default shall have occurred and be continuing, including without limitation under SECTION 6.10 hereof, and assuming for purposes of this clause (1) that any such payment had occurred on the first day of the most recently ended four Fiscal Quarter period, (2) after giving effect to such payment, Borrower, based on the pro-forma Projections acceptable to Agent, previously provided to Agent and assuming for purposes of this clause (2) that such payment was made on the first day of the first four Fiscal Quarter period to be tested under SECTION 6.10 after the proposed date of such payment, shall be in compliance with SECTION 6.10, (3) all accounts payable of Borrower are current, or being paid according to historical practice and with normal trade terms, and (4) after giving effect to such payment Excess Borrowing Availability shall not be less than $15,000,000 for a minimum of thirty (30) days following such payment as determined by -36- Agent based on the pro-forma Projections referred to in clause (2) above, provided that Borrower prior to making any such payment shall have delivered to Agent a certificate from a financial officer of Borrower and in form and substance satisfactory to Agent demonstrating compliance with the foregoing. 6.12 HAZARDOUS MATERIALS. No Loan Party shall, nor shall it permit any Person within its control: (a) to cause or permit a Release of Hazardous Material on, under, in or about any Subject Property which, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect; (b) to use, store, generate, treat or dispose of Hazardous Materials, except in compliance in all material respects with the Environmental Laws; or (c) to transport any Hazardous Materials to or from any Subject Property, except in compliance in all material respects with the Environmental Laws. 6.13 SALE-LEASEBACKS. No Loan Party shall engage in any sale-leaseback (including any Deemed Sale/Leaseback Transaction), synthetic lease or similar transaction involving any of its property or assets except with respect to certain Fixtures and Equipment in each case as provided in SECTION 6.8. 6.14 CANCELLATION OF INDEBTEDNESS. No Loan Party shall cancel any claim or Indebtedness owing to it, except for adequate consideration negotiated in an arms length transaction and in the ordinary course of its business consistent with past practices. 6.15 BANK ACCOUNTS. No Loan Party shall maintain any deposit, operating or other bank accounts except for those accounts identified in SCHEDULE 3.20. 6.16 NO SPECULATIVE INVESTMENTS. No Loan Party shall engage in any speculative investment or any investment involving commodity options or futures contracts. 6.17 MARGIN REGULATIONS. Borrower shall not, directly or indirectly, use the proceeds of any Revolving Credit Advance or Letter of Credit Obligation to purchase or carry any Margin Stock or any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934. 6.18 LIMITATION ON NEGATIVE PLEDGE CLAUSES. No Loan Party shall directly or indirectly, enter into any agreement (other than the Loan Documents), with any Person which prohibits or limits the ability of any Loan Party to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than in connection with any Indebtedness permitted under clause (c) of SECTION 6.3 secured by a Lien permitted hereunder on assets of the Loan Parties so long as such prohibition or limitation in any documentation governing or relating to such Indebtedness extends only to such assets securing such Indebtedness. 6.19 MATERIAL CONTRACTS. No Loan Party shall cancel or terminate any Material Contract. No Loan Party shall waive any default or breach any Material Contract, or amend or otherwise modify any Material Contract or take (or omit to take) any other action in connection with any Material Contract that, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect. -37- 6.20 LEASES. No Loan Party shall (a) renew (by amendment, modification or otherwise) any lease of real property or similar agreements other than renewals of existing leases of real property upon substantially the same terms as are in effect on the Closing Date, or (b) enter into any new lease of real property or similar agreements unless the owner of such real property has (to the extent Inventory is located or to be located at such property) entered into a Landlord's Waiver and other documentation deemed appropriate by Agent in each case in form and substance satisfactory to Agent. No Loan Party shall without the prior written consent of Agent amend, supplement or otherwise modify any provision of any Lease pursuant to which the landlord has waived or subordinated any landlord's lien, right of distraint or other lien or encumbrance upon such Loan Party's property securing the performance of such Loan Party's obligations under such Lease. 6.21 LIMITATIONS ON MODIFICATIONS OF SUBORDINATED NOTE AND PREFERRED STOCK SUBORDINATED NOTES. Borrower shall not amend, modify or change, or consent or agree to any amendment, modification or change to, any of the terms or provisions of the Subordinated Note or any Preferred Stock Subordinated Note or any documents relating thereto (other than any such amendment, modification or change which would only extend the maturity or reduce the amount of any payment of principal thereof or premium thereon or which would reduce the rate or extend the date for payment of interest thereon). 6.22 LIMITATIONS ON MODIFICATIONS OF E-COMMERCE TRANSACTION DOCUMENTS. No Loan Party shall amend, modify or change, or consent or agree to any amendment, modification or change to, any of the terms or provisions of the E-commerce Transaction Documents if such amendment, modification or change (a) could reasonably be expected to adversely affect the interests of the Lenders or any Loan Party or (b) imposes additional obligations on a Loan Party for which such Loan Party receives compensation in an amount less than its cost therefor. Notwithstanding the foregoing but not in limitation thereof, in no event will any such amendment, modification or change fundamentally alter Borrower's role as a provider of services to, and procurer of Inventory on behalf of, DSG Holdings and dsports.com; PROVIDED, HOWEVER, that the foregoing shall in no way restrict the ability of any Loan Party to terminate any E-commerce Transaction Document to which it is a party. Promptly following any amendment, modification or change to any E-Commerce Transaction Document, Borrower shall provide Agent with a copy thereof. 7. TERM 7.1 DURATION. The financing arrangement contemplated hereby shall be in effect until the Commitment Termination Date. On the Commitment Termination Date, the Aggregate Revolving Credit Commitment shall terminate and the Revolving Credit Loan and all other Obligations shall immediately become due and payable in full, in cash and Borrower shall make arrangements, as provided in paragraph 5 of ANNEX F, for satisfaction of any outstanding Letter of Credit Obligations. 7.2 SURVIVAL OF OBLIGATIONS. Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the Obligations, duties, indemnities, and liabilities of any Loan Party, or the rights of Agent or any Lender relating to any Obligations, due or not due, liquidated, contingent or unliquidated or any transaction or event occurring prior to such termination, or any transaction or event, -38- the performance of which is not required until after the Commitment Termination Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and representations of or binding upon any Loan Party, and all rights of Agent and each Lender, all as contained in the Loan Documents shall not terminate or expire, but rather shall survive such termination or cancellation and shall continue in full force and effect until the Termination Date. 8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES 8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an "EVENT OF DEFAULT" hereunder: (a) Borrower shall fail to make any payment in respect of any Obligations hereunder or under any of the other Loan Documents when due and payable or declared due and payable, including any payment of principal of, or interest on, the Revolving Credit Loan. (b) Borrower shall fail or neglect to perform, keep or observe any of the provisions of SECTION 1.7, SECTION 4.1, SECTION 5.2 (solely insofar as such Section requires and the Loan Parties fail to pay Claims for sales and use taxes and payroll withholding taxes in accordance with the terms of such Section in an aggregate amount in excess of $250,000), SECTION 5.5, SECTION 5.7(b), SECTION 5.11 or SECTION 6, including any of the provisions set forth in ANNEX B or ANNEX E. (c) Any Loan Party shall fail or neglect to perform, keep or observe any term or provision of this Agreement (other than any such term or provision referred to in paragraph (a) or (b) above) or of any of the other Loan Documents, and the same shall remain unremedied for a period ending on the first to occur of twenty (20) days after Borrower shall receive written notice of any such failure from Agent or any Lender or twenty (20) days after any Loan Party shall become aware thereof. (d) A default shall occur under any other agreement, document or instrument to which any Loan Party is a party or by which any such Loan Party or its property is bound, and such default (i) involves the failure to make any payment (after expiration of any applicable grace period), whether of principal, interest or otherwise, due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) in respect of any Indebtedness of such Loan Party in an aggregate amount exceeding $500,000 or (ii) causes (or permits any holder of such Indebtedness or a trustee to cause) such Indebtedness, or a portion thereof in an aggregate amount exceeding $500,000, to become due prior to its stated maturity or prior to its regularly scheduled dates of payment. (e) Any representation or warranty herein or in any Loan Document or in any written statement pursuant thereto or hereto, any report, financial statement or certificate made or delivered to Agent or any Lender by any Loan Party shall be untrue or incorrect in any respect as of the date when made or deemed made (including those made or deemed made pursuant to SECTION 2.2). -39- (f) Any of the assets of any Loan Party having a value of greater than $250,000 in the aggregate shall be attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of such Loan Party and shall remain unstayed or undismissed for thirty (30) consecutive days; or any Person other than a Loan Party shall apply for the appointment of a receiver, trustee or custodian for any Loan Party's assets and shall remain unstayed or undismissed for thirty (30) consecutive days; or any Loan Party shall have concealed, removed or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them or made or suffered a transfer of any of its property or the incurring of an obligation which may be fraudulent under any bankruptcy, fraudulent conveyance or other similar law. (g) A case or proceeding shall have been commenced against any Loan Party in a court having competent jurisdiction seeking a decree or order (i) under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) of such Loan Party or of any substantial part of its properties, or (iii) ordering the winding up or liquidation of the affairs of such Loan Party and such case or proceeding shall remain undismissed or unstayed for thirty (30) consecutive days or such court shall enter a decree or order granting the relief sought in such case or proceeding. (h) Any Loan Party shall (i) file a petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) of such Loan Party or of any substantial part of such Loan Party's properties, (iii) fail generally to pay its debts as such debts become due, or (iv) take any corporate action in furtherance of any such action. (i) Final judgment or judgments (after the expiration of all times to appeal therefrom) for the payment of money in excess of $250,000 in the aggregate shall be rendered against any Loan Party, unless the same shall be vacated, stayed, bonded, paid or discharged within a period of twenty (20) days from the date of such judgment. (j) There shall occur any Material Adverse Effect since January 29,2000. (k) Any material provision of any Loan Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms or any Loan Party or other Person shall so state in writing; or any Lien created under any Collateral Document shall cease to be a valid and perfected Lien on any Collateral having the priority in such Collateral contemplated hereby. (l) There shall occur a Change of Control. (m) There shall occur any default or event of default under the Subordinated Note or any Preferred Stock Subordinated Note. -40- (n) An event or condition specified in SECTION 6.9 hereof shall occur or exist with respect to any Plan or Multiemployer Plan and, as a result of such event or condition, together with all other such events or conditions, Borrower, any Subsidiary thereof or any ERISA Affiliate shall incur or in the opinion of Required Lenders shall be reasonably likely to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing) in excess of $250,000 in the aggregate. 8.2. REMEDIES. If any Event of Default shall have occurred and be continuing, the rate of interest applicable to the Revolving Credit Loan and the other Obligations and the rate used in the calculation of Letter of Credit Fees may, in the Required Lenders' discretion, by giving notice to Borrower of their intention to do so, be increased as of the date of such notice as provided in SECTION 1.4(c). If any Event of Default shall have occurred and be continuing Agent shall upon request of Required Lenders, or may with the consent of Required Lenders, without notice, take any one or more of the following actions: (a) terminate the Aggregate Revolving Credit Commitment whereupon Lenders' obligation to make further Revolving Credit Advances and to incur additional Letter of Credit Obligations shall terminate; or (b) require that all Letter of Credit Obligations be satisfied as provided in paragraph 5 of ANNEX F and declare all or any portion of the Obligations to be forthwith due and payable whereupon such Obligations shall become and be due and payable; or (c) exercise any rights and remedies provided to Agent or Lenders under the Loan Documents and/or at law or equity, including all remedies provided under the Code; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default specified in SECTION 8.1 (f) (g) or (h), the Aggregate Revolving Credit Commitment shall immediately terminate, the Obligations shall become immediately due and payable, all Letter of Credit Obligations shall be fully satisfied as provided in paragraph 5 of ANNEX F, and the rate of interest applicable to all Obligations and the rate used in the calculation of Letter of Credit Fees shall be increased as provided in SECTION 1.4(c), in each case, automatically without declaration, notice or demand by any Person. 8.3 WAIVERS BY BORROWER. Except as otherwise provided for in this Agreement and applicable law to the full extent permitted by applicable law Borrower waives (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Loan Documents, notes, commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent or any Lender on which Borrower may in any way be liable, and Borrower hereby ratifies and confirms whatever Agent or any Lender may do in this regard, (b) all rights to notice and a hearing prior to Agent's or Lenders' taking possession or control of, or to Agent's or Lenders' replevy, attachment or levy upon, the Collateral or any bond or security which might be required by any court prior to allowing Agent or Lenders to exercise any of their remedies, and (c) the benefit of any right of redemption and all valuation, appraisal and exemption laws. Borrower acknowledges that it has been advised by counsel of its choice with respect to this Agreement, the other Loan Documents and the transactions contemplated by this Agreement and the other Loan Documents. 9. AGENT -41- 9.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby irrevocably appoints and authorizes GE Capital to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Loan Documents, together with such other powers as are reasonably incidental thereto. Agent (which term as used in this sentence and in SECTION 9.5 and the first sentence of SECTION 9.6 hereof shall include reference to its affiliates (including GECMG) and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee or fiduciary for any Lender; (b) shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Loan Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by any Loan Party or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Lenders for any action taken or omitted to be taken by it hereunder or under any other Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Agent may deem and treat the payee of any Revolving Credit Note as the holder thereof for all purposes hereof unless and until a notice of the assignment or transfer thereof shall have been filed with Agent. 9.2 RELIANCE BY AGENT. Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by Required Lenders or all of Lenders as is required in such circumstance, and such instructions of such Lenders and any action taken or failure to act pursuant thereto shall be binding on all Lenders. 9.3 DEFAULTS. Agent shall not be deemed to have knowledge or notice of the occurrence of a Default (other than the non-payment of principal of or interest on Revolving Credit Advances or of Fees) unless Agent has received notice from a Lender or Borrower specifying such Default and stating that such notice is a "Notice of Default". In the event that Agent receives such a notice of the occurrence of a Default, Agent shall give prompt notice thereof to Lenders (and shall give each Lender prompt notice of each such non-payment). Agent shall (subject to SECTION 9.7) take such action with respect to such Default as shall be directed by Required Lenders or, PROVIDED that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of Lenders except to the extent that this Agreement expressly requires that such action be -42- taken, or not be taken, only with the consent or upon the authorization of Required Lenders or all Lenders as is required in such circumstance. 9.4 RIGHTS AS A LENDER. With respect to its Revolving Credit Commitment and the Revolving Credit Advances made by it, GE Capital (and any successor acting as Agent) in the event it shall become a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include Agent in its individual capacity. GE Capital (and any successor acting as Agent) and its affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with the Loan Parties (and any of their Subsidiaries or Affiliates) as if it were not acting as Agent, and GE Capital and its affiliates may accept fees and other consideration from the Loan Parties for services in connection with this Agreement or otherwise without having to account for the same to Lenders. 9.5 INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent not reimbursed by Borrower hereunder and without limiting the obligations of Borrower hereunder) ratably in accordance with their Proportionate Shares, for any and all Claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Borrower is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, PROVIDED that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified as determined by a final judgment of a court of competent jurisdiction. 9.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it has, independently and without reliance on Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Loan Parties and decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. Agent shall not be required to keep itself informed as to the performance or observance by any Loan Party of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of any Loan Party. Agent will use reasonable efforts to provide Lenders with any information received by Agent from Borrower which is required to be provided to Lenders hereunder, with any notice of a Default received by Agent from Borrower and with any notice of a Default delivered by Agent to Borrower; PROVIDED, HOWEVER, that Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of Borrower or any of its -43- Subsidiaries (or any of their affiliates) that may come into the possession of Agent or any of its affiliates. 9.7 FAILURE TO ACT. Except for action expressly required of Agent hereunder and under the other Loan Documents, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders of their indemnification obligations under SECTION 9.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. 9.8 RESIGNATION OF AGENT. Subject to the appointment and acceptance of a successor Agent as provided below, Agent may resign at any time by giving notice thereof to Lenders and Borrower. Upon any such resignation Required Lenders shall have the right to appoint a successor Agent with the consent of Borrower, which consent shall not be unreasonably withheld. If no successor Agent shall have been so appointed by Required Lenders, so consented to by Borrower and shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of Lenders, appoint (without the consent of Borrower) a successor Agent, that shall be a financial institution with a combined capital and surplus or net worth of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent in accordance with the terms hereof, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this SECTION 9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 9.9 CONSENTS UNDER LOAN DOCUMENTS. Except as otherwise provided in SECTION 11.1 with respect to this Agreement, Agent may, with the prior consent of Required Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Loan Documents, PROVIDED that, without the prior consent of each Lender, Agent shall not (except as provided herein or in the Collateral Documents) release any Collateral or otherwise terminate any Lien under any Collateral Document, or agree to additional obligations being secured by such Collateral, except that no such consent shall be required, and Agent is hereby authorized and instructed, to release any Lien covering Collateral (i) which is the subject of a disposition permitted hereunder, (ii) which is subject to a Lien permitted under SECTION 6.7 which secures Indebtedness permitted under SECTION 6.3, (iii) to which Required Lenders have consented (except as otherwise provided in SECTION 11.1) or (iv) the value of which does not exceed $1,000,000 in any Fiscal Year. 9.10 COLLATERAL MATTERS. (a) Except as otherwise expressly provided for in this Agreement, Agent shall have no obligation whatsoever to any Lender or any other Person to investigate, confirm or assure that the Collateral exists or is owned by any Loan Party (provided Agent agrees with Lenders to conduct at least one collateral audit in each Fiscal Year) or is cared for, protected or insured or has been encumbered, or that any particular items of Collateral meet the eligibility criteria applicable in respect of the Borrowing Base, or whether any particular reserves are appropriate, or that the Liens granted to Agent herein or pursuant hereto have -44- been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent's own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any other Lender, other than liability for its own gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. (b) Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Lenders' security interest in assets which, in accordance with Article 9 of the Code can be perfected only by possession. Should any Lender (other than Agent) obtain possession of any such Collateral, such Lender shall notify Agent thereof and, promptly upon Agent's request therefor, shall deliver such Collateral to Agent or in accordance with Agent's instructions. 10. SUCCESSORS AND ASSIGNS 10.1 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of Borrower, Agent, Lenders, and their respective successors and assigns, except as otherwise provided herein or therein. Borrower may not assign, delegate, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the Loan Documents without the prior express written consent of Agent and all Lenders. Any such purported assignment, transfer, hypothecation or other conveyance by Borrower without such prior express written consent shall be void. The terms and provisions of this Agreement and the other Loan Documents are for the purpose of defining the relative rights and obligations of Borrower, Agent and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Loan Documents. 10.2 ASSIGNMENTS AND PARTICIPATIONS. (a) Any Lender may, in the ordinary course of its commercial banking or finance business and in accordance with applicable law, at any time sell to one or more banks or other financial institutions ("PARTICIPANTS") participating interests in all or a portion of its rights and obligations under this Agreement or any other Loan Document (including all or a part of its Revolving Credit Advances, its Letter of Credit Obligations, its Revolving Credit Commitment and its Revolving Credit Note). In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such obligations for all purposes under this Agreement and the other Loan Documents, and Borrower and Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect -45- of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, PROVIDED that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in SECTION 1.12(b) as fully as if it were a Lender hereunder. Borrower also agrees that each Participant shall be entitled to the benefits of SECTIONS 1.17, 1.19 and 1.20 with respect to its participation in the Revolving Credit Commitments and the Revolving Credit Loan outstanding from time to time as if it was a Lender; PROVIDED that, in the case of SECTION 1.17, such Participant shall have complied with the requirements of said Section; and PROVIDED, FURTHER, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. Notwithstanding anything to the contrary contained herein, no Lender shall grant any participation under which the Participant shall have rights to approve any amendment to or waiver of this Agreement or the other Loan Documents, except to the extent such amendment or waiver would (i) extend the final maturity date for payment of any of the Obligations in which such Participant is participating; (ii) reduce the interest rate or the amount of principal or Fees applicable to the Revolving Credit Advances in which such Participant is participating; or (iii) release all or substantially all of the Collateral, except as expressly provided herein. In those cases in which a Lender grants rights to its Participants to approve any amendment to or waiver of this Agreement or the other Loan Documents respecting the matters described in the foregoing clauses (i) through (iii), the relevant participation agreements shall provide for a voting mechanism whereby a majority of the amount of the participating Lender's portion of the Obligations (irrespective of whether held by such Lender or such Participant) shall control the vote for all of such Lender's portion of the Revolving Credit Loan. (b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof or, with the consent of Agent (which shall not be unreasonably withheld), to an additional bank or financial institution ("an ASSIGNEE") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of EXHIBIT G, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an Affiliate thereof, by Agent) and delivered to Agent for its acceptance and recording in the Register, PROVIDED that (i) in the case of any such assignment to an additional bank or financial institution, any such partial assignment shall be in multiples of at least $5,000,000; (ii) the assigning Lender shall either have assigned all of its rights and obligations under this Agreement or retained at least $5,000,000 of the Revolving Credit Commitment; (iii) each such assignment shall be of a constant, and not a varying, percentage of the assigning Lender's rights and obligations under this Agreement and the assignment shall cover the same percentage of the assigning Lender's Revolving Credit Advances, Revolving Credit Commitment and Letter of Credit Obligations; and (iv) the Assignee shall be a financial institution (including a finance Subsidiary of a Person that is not a financial institution) or an institutional investor including any insurance company, pension fund or mutual fund which has an investment grade long term unsecured debt rating. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (A) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and -46- obligations of a Lender hereunder with a Revolving Credit Commitment as set forth therein, and (B) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). (c) Agent, on behalf of the Borrower, shall maintain at the address of Agent referred to in SECTION 11.9 a copy of each Assignment and Acceptance delivered to it and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Revolving Credit Commitments of, and principal amounts of the Revolving Credit Advances owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and Borrower, Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of a Revolving Credit Advance or other Obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by Agent) together with payment to Agent of a registration and processing fee of $3,500, Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and Borrower. On or prior to such effective date, Borrower, at its own expense, shall execute and deliver to Agent (in exchange for the Revolving Credit Note of the assigning Lender) a new Revolving Credit Note to the order of such Assignee in an amount equal to the Revolving Credit Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Revolving Credit Commitment hereunder, a new Revolving Credit Note to the order of the assigning Lender in an amount equal to the Revolving Credit Commitment retained by it hereunder. Such new Revolving Credit Notes shall be dated the Closing Date and shall otherwise be in the form of the Revolving Credit Note replaced thereby. The Revolving Credit Notes surrendered to Agent shall be returned by Agent to Borrower marked "cancelled". (e) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Revolving Credit Advances and Revolving Credit Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including any pledge or assignment by a Lender of any Revolving Credit Advance or Revolving Credit Note to any Federal Reserve Bank in accordance with applicable law. (f) Except as otherwise provided in this SECTION 10.2 no Lender shall, as between Borrower and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of Revolving Credit Advances or other Obligations owed to such Lender. Any Lender permitted to sell assignments and participations under this SECTION 10.2 may furnish any information concerning Borrower and its Subsidiaries and Affiliates in the possession of that -47- Lender from time to time to Assignees and Participants (including, subject to SECTION 10.2(g), prospective Assignees and Participants). (g) Borrower shall assist any Lender permitted to sell assignments or participations under this SECTION 10.2 in whatever manner reasonably necessary in order to enable or effect any such assignment or participation, including (but not limited to) the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and the delivery of informational materials, appraisals or other documents for, and the participation of relevant management in meetings and conference calls with, potential Assignees or Participants. Borrower shall certify the correctness, completeness and accuracy of all descriptions of Borrower and its affairs provided, prepared or reviewed by Borrower that are contained in any selling materials and all other information provided by it and included in such materials. No information shall be provided to any potential Assignee or Participant unless such potential Assignee or Participant has agreed in writing to use reasonable good faith efforts to maintain such information as confidential on the same basis as such Person maintains its own proprietary information which it desires not to disseminate. 11. MISCELLANEOUS 11.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. This Agreement and the other Loan Documents constitute the complete agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, commitments, understandings or inducements (oral or written, expressed or implied). Neither this Agreement nor any other Loan Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by Required Lenders; PROVIDED that no such change, waiver, discharge or termination shall, without the consent of each affected Lender and Agent, (a) extend the scheduled final maturity of any Revolving Credit Advance, or any portion thereof, or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereon or fees or reduce the principal amount thereof, or increase the Revolving Credit Commitment of such Lender over the amount thereof then in effect (it being understood that a waiver of any Default shall not constitute a change in the terms of any Revolving Credit Commitment of any Lender), (b) release all or substantially all of the Collateral (except as expressly permitted by the Loan Documents), (c) amend, modify or waive any provision of this SECTION 11.1, or SECTION 1.9. 1.12 or 9.5, (d) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders, (e) consent to the assignment or transfer by Borrower of any of its rights and obligations under this Agreement or (f) increase the advance rate above 65% for Eligible Inventory set forth in the definition of Borrowing Base. Any Lender which does not consent to an increase in the Aggregate Revolving Credit Commitment as contemplated by clause (a) above, agrees that any other Lender or Lenders shall have the right to purchase in accordance with SECTION 10.2(b) all of such non-consenting Lender's Revolving Credit Commitment, Revolving Credit Advances and Letter of Credit Obligations at their par value. No provision of SECTION 9 may be amended without the prior written consent of Agent. For avoidance of doubt, it is understood and agreed that no Lender will be required to participate in a debtor-in-possession financing without such Lender's consent. The foregoing is in no way meant to limit any Lender's obligation to make extensions of credit to Borrower (or its debtor-in- -48- possession successor) pursuant to a cash collateral order or stipulation to the extent otherwise required by the terms of this Agreement. 11.2 FEES AND EXPENSES. (a) Borrower shall pay on demand all out-of-pocket costs and expenses (including reasonable fees and expenses of counsel) of Agent in connection with the preparation, negotiation, approval, execution, delivery, administration, modification, amendment, waiver and enforcement (whether through negotiations, legal proceedings or otherwise) of the Loan Documents, and commitments relating thereto, and the other documents to be delivered hereunder or thereunder and the transactions contemplated hereby and thereby and the fulfillment or attempted fulfillment of conditions precedent hereunder, including: (i) any amendment, modification or waiver of, or consent with respect to, any of the Loan Documents or advice in connection with the administration of the advances made pursuant hereto or its rights hereunder or thereunder; (ii) any litigation, arbitration, contest, dispute, suit, proceeding or action (whether instituted by Agent, any Lender, Borrower or any other Person) in any way relating to the Collateral, any of the Loan Documents or any other agreements to be executed or delivered in connection therewith or herewith, whether as party, witness, or otherwise, including any litigation, arbitration, contest, dispute, suit, case proceeding or action, and any appeal or review thereof, in connection with a case commenced (A) in good faith by or against Borrower or any other Person that may be obligated to Agent and Lenders by virtue of the Loan Documents, or (B) under title 7 or 11 of the United States Code, as now constituted or hereafter amended, or any other applicable Federal, state or foreign bankruptcy or similar insolvency law, PROVIDED, that Borrower shall not be required to pay any out-of-pocket costs and expenses of Agent in any litigation, contest, dispute, suit, proceeding or action resulting solely from Agent's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction; (iii) any attempt to enforce any rights of Agent or Lenders against any Loan Party or any other Person that may be obligated to Agent or Lenders by virtue of any of the Loan Documents; (iv) any Default; or (v) subject to SECTION 5.15, any effort to (A) monitor the Revolving Credit Loan and the Loan Documents, (B) evaluate, observe, assess Borrower or its affairs, or (C) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the Collateral. (b) In addition, Borrower shall pay on demand all out-of-pocket costs and expenses (including reasonable fees and expenses of counsel) of Agent and each Lender in connection with any Event of Default and any enforcement or collection proceedings resulting therefrom or any amendment, modification or waiver of, or consent with respect to, any of the Loan Documents in connection with any Event of Default; PROVIDED that fees and expenses of counsel for Lenders shall be limited to counsel for all Lenders as a class and not separate counsel for each Lender. (c) Without limiting the generality of clauses (a) and (b) above (but subject to the proviso to clause (b) above), Borrower's obligation to reimburse Agent and/or any Lender for out-of-pocket costs and expenses shall include the reasonable fees and expenses of counsel (and local, foreign or special counsel, advisors, consultants and auditors retained by such counsel), as well as the reasonable fees and expenses of accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplicating expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; - 49- telegram charges; secretarial overtime charges; expenses for travel, lodging and food; and all other reasonable out-of-pocket costs and expenses of every type and nature paid or incurred in connection with the performance of such legal or other advisory services. 11.3 NO WAIVER. No failure on the part of Agent or Lenders, at any time or times, to require strict performance by any Loan Party, of any provision of this Agreement and any of the other Loan Documents shall waive, affect or diminish any right of Agent or Lenders thereafter to demand strict compliance and performance therewith. Any suspension or waiver of a Default shall not suspend, waive or affect any other Default whether the same is prior or subsequent thereto and whether of the same or of a different type. None of the undertakings, agreements, warranties, covenants and representations of any Loan Party contained in this Agreement or any of the other Loan Documents and no Default by any Loan Party shall be deemed to have been suspended or waived by Lenders, unless such waiver or suspension is by an instrument in writing signed by an officer of or other authorized employee of Agent and Required Lenders or all of Lenders if required hereunder and directed to Borrower specifying such suspension or waiver. 11.4 REMEDIES. The rights and remedies of Agent and Lenders under this Agreement shall be cumulative and nonexclusive of any other rights and remedies which Agent or any Lender may have under any other agreement, including the Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required. 11.5 SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 11.6 CONFLICT OF TERMS. Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in any of the other Loan Documents, the provisions contained in this Agreement shall govern and control. 11.7 RIGHT OF SETOFF. Subject to SECTION 1.1 (f), upon the occurrence and during the continuance of any Event of Default, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of Borrower against any and all of the Obligations now or hereafter existing irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such Obligations may be unmatured. Each Lender agrees promptly to notify Agent and Borrower after any such setoff and application made by such Lender; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to the other rights and remedies (including other rights of setoff) which such Lender may have. - 50- 11.8 AUTHORIZED SIGNATURE. Until Agent shall be notified by Borrower to the contrary, the signature upon any document or instrument delivered pursuant hereto and reasonably believed by Agent or any of Agent's officers, agents, or employees to be that of an officer or duly authorized representative of Borrower listed in SCHEDULE 11.8 shall bind Borrower and be deemed to be the act of Borrower affixed pursuant to and in accordance with resolutions duly adopted by Borrower's Board of Directors, and Agent and each Lender shall be entitled to assume the authority of each signature and authority of the Person whose signature it is or reasonably appears to be unless the Person acting in reliance on such signature shall have actual knowledge of the fact that such signature is false or the Person whose signature or purported signature is presented is without authority. 11.9 NOTICES. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon either of the parties by the other party, or whenever either of the parties desires to give or serve upon the other party any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three (3) days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this SECTION 11.9, (c) one Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated below (or with respect to Lenders as indicated on Appendix I hereto) or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower, Agent or any Lender) designated below to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. (e) If to Agent, as a Lender or as Agent, at: General Electric Capital Corporation 800 Connecticut Avenue- Two North Norwalk, Connecticut 06854 Attention: Dick's Sporting Goods Account Manager - Commercial Finance Telecopy No.: (203) 852-3640 With copies to: General Electric Capital Corporation 800 Connecticut Avenue- Two North Norwalk, Connecticut 06854 Attention: Commercial Finance- Legal Department Telecopy No.: (203) 852-3670 - 51- and Paul, Hastings, Janofsky & Walker LLP 1055 Washington Boulevard- 10th Floor Stamford, Connecticut 06901 Attention: Christopher H. Craig, Esq. Telecopy No.: (203) 359-3031 (f) If to Borrower, at: Dick's Sporting Goods, Inc. 200 Industry Drive RIDC Park West Pittsburgh, Pennsylvania 15275 Attention: Michael F. Hines Chief Financial Officer Telecopy No.: (412) 809-0724 With a copy to: Beveridge & Diamond, P.C. 1350 I Street, N.W., Suite 700 Washington, DC 20005 Attention: Dean H. Cannon, Esq. Telecopy No.: (202) 789-6190 11.10 SECTION TITLES. The Section titles and Table of Contents contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement. 11.11 COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which shall, collectively and separately, constitute one agreement. 11.12 TIME OF THE ESSENCE. Time is of the essence of this Agreement and each of the other Loan Documents. 11.13 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK CITY SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT - 52- LENDER AND BORROWER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK CITY AND, PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT OR ANY LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT OR ANY LENDER. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 11.9 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID AND RETURN RECEIPT REQUESTED. 11.14 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 11.15 PUBLICITY. Borrower will not, and will not permit any of its Affiliates to, disclose the name of Agent or any Lender or any of their respective Affiliates or refer to this Agreement or the other Loan Documents in any press release or other public disclosure or in any prospectus, proxy statement or other materials filed with any Governmental Authority without Agent's or such Lender's prior written consent unless Borrower or any of its Affiliates is required to do so under applicable law, and then, in any event, Borrower or such Affiliate will consult with Agent or such Lender prior to such disclosure. Borrower and each Lender consent to Agent publishing a tombstone or similar advertising material relating to the financing transaction contemplated by this Agreement. Agent and each Lender consent to Borrower's orally disclosing to its vendors, landlords and prospective landlords only the name of Agent and each Lender, the amount of the Aggregate Revolving Credit Commitment and the Commitment Termination Date. Any written materials of any type disclosing any - 53- information of the type referred to herein shall require the written approval of Agent prior to being disseminated to any Person. 11.16 COLLATERAL DOCUMENTS. Borrower acknowledges and agrees that from and after the Closing Date that (i) each Collateral Document shall continue without any diminution thereof and shall remain in full force and effect, and (ii) each reference in the Collateral Documents to the "Agent", "Lenders", "Credit Agreement" and "Obligations" shall be references to, respectively, the Agent, the Lenders, this Agreement and the Obligations as defined in this Agreement. 11.17 DATING. Although this Agreement is dated as of the date first written above for convenience, the actual dates of execution hereof by the parties hereto are respectively the dates set forth under the signatures hereto, and this Agreement shall be effective on the latest of such dates. - 54- IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above. DICK'S SPORTING GOODS, INC. By /s/ Jeffrey R. Hennion ----------------------------------- Name: Title: Date: July 26, 2000 GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By /s/ Charles Chiodo ----------------------------------- Name: Charles Chiodo Title: Authorized Signatory Date: July 26, 2000 Lenders: -------- GENERAL ELECTRIC CAPITAL CORPORATION By /s/ Charles Chiodo ----------------------------------- Name: Charles Chiodo Title: Authorized Signatory Date: July 26, 2000 BSB BANK & TRUST COMPANY By /s/ Edward P. Michalek ----------------------------------- Name: Edward P. Michalek Title: Vice President Date: July 26, 2000 NATIONAL BANK OF CANADA By /s/ Donald P. Haddad ------------------------------ Name: Donald P. Haddad Title: Vice President Date: July 26, 2000 By /s/ G. B. Knell ------------------------------ Name: G. B. Knell Title: Vice President Date: July 26, 2000 FLEET RETAIL FINANCE INC. By /s/ Robert DeAngelo ------------------------------ Name: Robert DeAngelo Title: Senior Vice President Date: July 26, 2000 CIT GROUP/BUSINESS CREDIT By /s/ Evelyn Kusold ------------------------------ Name: Evelyn Kusold Title: Assistant Vice President Date: July 26, 2000 NATIONAL CITY BANK OF PENNSYLVANIA By /s/ John L. Hayes IV ------------------------------ Name: John L. Hayes IV Title: Assistant Vice President Date: July 26, 2000 FIRST UNION NATIONAL BANK By: /s/ Irene Rosen Marks - -------------------------------- Name: Irene Rosen Marks Title: Vice President Date: July 26, 2000 APPENDIX 1 REVOLVING CREDIT COMMITMENTS AND LENDER INFORMATION - -------------------------------------------------------------------------------- REVOLVING CREDIT REVOLVING CREDIT LENDER COMMITMENT COMMITMENT PERCENTAGES - -------------------------------------------------------------------------------- GENERAL ELECTRIC $ 55,000,000.00 32.352941% CAPITAL CORPORATION 800 Connecticut Avenue, Two North Norwalk, CT 06854 Attn: Charles Chiodo Telephone: (203)852-3600 Telecopy: (203)852-3640 NATIONAL BANK OF $ 25,000,000.00 14.705882% CANADA One Oxford Centre 301 Grant Street Suite 3440 Pittsburgh, PA 15219 Attn: Donald P. Haddad Telephone: (412)281-4890 Telecopy: (412)281-4603 TYCO $ 17,500,000.00 10.294118% 1211 Avenue of the Americas New York, NY 10036 Attn: Evelyn Kusold Telephone: (212)536-1208 Telecopy: (212)536-1293 BSB BANK & TRUST $ 7,500,00.00 4.411765% COMPANY 68 Exchange Street Binghamton, NY 13902 Attn: Glenn Small Telephone: (607)779-2590 Telecopy: (607)772-6287 - -------------------------------------------------------------------------------- REVOLVING CREDIT REVOLVING CREDIT LENDER COMMITMENT COMMITMENT PERCENTAGES - -------------------------------------------------------------------------------- FLEET RETAIL FINANCE $ 30,000,000.00 17.647059% INC. 40 Broad Street, 10th Floor Boston, MA 02109 Attn: Jim Dore Telephone: (617)434-4184 Telecopy: (617)434-4312 NATIONAL CITY BANK OF $ 15,000,000.00 8.823529% PENNSYLVANIA 20 Stanwix Street, 19th Floor Pittsburgh, PA 15222 Attn: Vince Delie Telephone: (412)644-6056 Telecopy: (412)471-4883 FIRST UNION NATIONAL $ 20,000,000.00 11.764706% BANK One South Penn Square, 12th Floor Philadelphia, PA 19107 Attn: Susan Schwartz Telephone: (215)786-4369 Telecopy: (215)786-2877 =============== =========== $170,000,000.00 100.0% ANNEX A to AMENDED AND RESTATED CREDIT AGREEMENT Dated as of July 26, 2000 DEFINITIONS: RULES OF CONSTRUCTION 1. DEFINITIONS. Capitalized terms used in this Agreement shall have (unless otherwise provided elsewhere in this Agreement) the following respective meanings when used in this Agreement. "ACCOUNT DEBTOR" shall mean any Person who may become obligated to any Loan Party under, with respect to, or on account of, an Account, Chattel Paper or General Intangibles. "ACCOUNTS" shall mean, with respect to any Person, all "accounts" as such term is defined in the Code, now owned or hereafter acquired by such Person and, in any event, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by chattel paper, documents or instruments) now owned or hereafter received or acquired by or belonging or owing to such Loan Party, whether arising out of goods sold or services rendered by it or from any other transaction (including any such obligations which may be characterized as an account or contract right under the Code), (b) all of such Person's rights in, to and under all purchase orders or receipts now owned or hereafter acquired by it for goods or services, (c) all of such Person's rights to any goods represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all monies due or to become due to such Person under all purchase orders and contracts for the sale or lease of goods or the performance of services or both by such Person or in connection with any other transaction (whether or not yet earned by performance on the part of such Person) now or hereafter in existence, including the right to receive the proceeds of said purchase orders and contracts, and (e) all collateral security and guarantees of any kind, now or hereafter in existence, given by any Person with respect to any of the foregoing. "ADJUSTMENT DATE" shall mean, with respect to any four Fiscal Quarter period of Borrower, the date which is the 60th day after the end of such period. "ADJUSTMENT PERIOD" shall mean any period commencing on an Adjustment Date and ending on the next succeeding Adjustment Date. "AFFILIATE" shall mean, with respect to any Person, (a) each Person that, directly or indirectly, owns or Controls, whether beneficially, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that Controls, is Controlled by or is under common Control with such Person or (c) each of such Person's officers, directors,joint venturers and partners. "AGENT" shall have the meaning assigned to it in the first paragraph of this Agreement. "AGGREGATE REVOLVING CREDIT COMMITMENT" shall mean $140,000,000. "AGREEMENT" shall mean this Amended and Restated Credit Agreement to which this ANNEX A is attached and of which it forms a part including all Annexes, Schedules, and Exhibits attached or otherwise identified thereto, restatements and modifications and supplements hereto and any appendices, attachments, exhibits or schedules to any of the foregoing, and shall refer to this Agreement as the same may be in effect at the time such reference becomes operative, provided, however that any reference to the Schedules to this Agreement shall be deemed a reference to the Schedules as in effect on the Closing Date or in a written amendment thereto executed by Borrower, Agent and the Required Lenders. "APPLICABLE MARGIN" shall mean the rate per annum set forth below opposite the Interest Coverage Ratio for the four Fiscal Quarter period immediately preceding the applicable Adjustment Period, commencing with the four Fiscal Quarter period ending April 30, 2000. The Applicable Margin shall be determined on each Adjustment Date for the Adjustment Period commencing on such Adjustment Date and shall (subject to the proviso contained in this definition) be effective for such Adjustment Period. - --------------------------------------------------------------------------- INTEREST COVERAGE RATIO FOR INDEX RATE PREVIOUS FOUR FISCAL QUARTERS LIBOR LOANS LOANS - --------------------------------------------------------------------------- Less than 3.00 2.25% .25% Greater than or equal to 3.00 2.00% 0.00% and less than 4.00 Greater than or equal to 4.00 1.75% 0.00% and less than 5.00 Greater than or equal to 5.00 1.50% 0.00% and less than 6.00 Greater than or equal to 6.00 1.25% 0.00% For purposes of this definition, the Interest Coverage Ratio shall be determined by the financial information delivered by Borrower to Agent under PARAGRAPHS 3 AND 4 of ANNEX D and if Borrower shall fail to deliver to Agent such financial information for any four Fiscal Quarter period by the Adjustment Date for such period, the Interest Coverage Ratio for such period shall be deemed to be less than 3.00 to 1.00 regardless of the actual Interest Coverage Ratio for such period; PROVIDED, that once Borrower delivers to Agent such financial information the Interest Coverage Ratio for such period will be the actual Interest Coverage Ratio determined by such financial information and the Applicable Margin for the remaining portion of the applicable Adjustment Period shall be based on A-2 such actual Interest Coverage Ratio. Notwithstanding anything to the contrary herein, (i) if Excess Borrowing Availability is less than $20,000,000 for three consecutive Business Days during any Fiscal Month, then the Applicable Margin shall be 0.25% higher during that Fiscal Month than what is otherwise provided for above or in the following clause (ii), except, absent a Default having occurred, in no event shall the Applicable Margin be greater than 2.25% for LIBOR Loans and .25% for Index Rate Loans and (ii) in no event during the period from and including May 30, 2000 to and including May 31, 2001 shall the Applicable Margin with respect to LIBOR Loans and Index Rate Loans be less than 1.50% and 0.00%, respectively. "ASSIGNEE" shall have the meaning assigned to it in SECTION 10.2(b). "BLOCKED ACCOUNT" shall have the meaning assigned to it in ANNEX B. "BLOCKED ACCOUNT AGREEMENTS" shall have the meaning assigned to it in Annex B. "BORROWER" shall mean Dick's Sporting Goods, Inc., a Delaware corporation. "BORROWING AVAILABILITY" shall mean, at any time, the lesser at such time of (a) the Aggregate Revolving Credit Commitment and (b) the Borrowing Base, in each case, less the Letter of Credit Obligations. "BORROWING BASE" shall mean, at any time, an amount determined by Agent to be equal to the lesser of (i) seventy percent (70%) of Eligible Inventory on a cost basis, or (ii) eighty-five percent (85%) of inventory net realizable liquidation valuation, as determined by an appraisal acceptable to Agent, MINUS in either case (a) the Lease Payment Reserve and (b) the amount of any other reserves (including reserves for sales and use taxes and payroll withholding taxes) as Agent may deem necessary or appropriate from time to time in its discretion. "BORROWING BASE CERTIFICATE" shall mean the inventory borrowing base certificate in the form attached hereto as EXHIBIT B. "BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in New York City and in reference to LIBOR Loans shall mean any such day that is also a LIBOR Business Day. "CAPITAL EXPENDITURES" shall mean, with respect to any Person, all payments or accruals (including Capital Lease Obligations) of such Person for any assets or improvements or for replacements, substitutions or additions thereto, that are required to be capitalized under GAAP. "CAPITAL LEASE" shall mean, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, either would be required to be classified and accounted for as a capital lease on a balance sheet of such Person or otherwise be disclosed as such in a note to such balance sheet. A-3 "CAPITAL LEASE OBLIGATION" shall mean, with respect to any Person, the amount of the obligation of such Person as lessee under any Capital Lease that, in accordance with GAAP, would appear on a balance sheet of such Person in respect of such Capital Lease or otherwise be disclosed in a note to such balance sheet. "CASH COLLATERAL ACCOUNT" shall have the meaning assigned to it in ANNEX F. "CASH EQUIVALENTS" shall mean, (a) securities with maturities of 180 days or less from the date of acquisition issued or fully guaranteed or insured by the United States government or any agency thereof and backed by the full faith and credit of the United States, (b) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers acceptances of any domestic commercial bank having capital and surplus in excess of $500,000,000 having maturities of one year or less from the date of acquisition, and (c) commercial paper of an issuer rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Services, Inc., or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments, in each case, with maturities of not greater than sixty (60) days from the date acquired. "CHANGE OF CONTROL" shall mean (a) the failure of the Permitted Holders to directly own Stock of Borrower representing 51% or more of the voting capital stock of Borrower or to Control Borrower; or (b) the Permitted Holders shall cease to have the power to designate or elect a majority of Borrower's board of directors or a majority of Borrower's board of directors at any time in office are no longer designated or elected by the Permitted Holders. "CHARGES" shall mean, for each Loan Party, all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to PBGC at the time due and payable), levies, imposts, assessments, charges, Liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of such Loan Party, (d) such Loan Party's ownership or use of any of its assets, or (e) any other aspect of such Loan Party's business. "CHATTEL PAPER" shall mean all "chattel paper" as such term is defined in the Code. "CLAIM" shall have the meaning assigned to it in SECTION 1.15. "CLOSING DATE" shall mean the Business Day on which the conditions precedent set forth in SECTION 2 have been satisfied or waived in writing by Agent or Lenders, as applicable. "CODE" shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided in the event that, by reason of mandatory provisions of law, any or all of the attachment, or remedies with respect to, Agent's security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term "Code" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes A-4 of the provisions hereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. "COLLATERAL" shall mean the property covered by the Collateral Documents and any other property, real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of Agent or Lenders to secure the Obligations. "COLLATERAL DOCUMENTS" shall mean the Security Agreement, the DAMC Security Agreement, the DAMC Guaranty, the DAMC Trademark Security Agreement, the Pledge Agreement, the Blocked Account Agreements, the Concentration Account Agreement, the Disbursement Account Agreements, if any, the Landlord Waivers and all other instruments, waivers and agreements now or hereinafter securing in whole or in part the Obligations. "COLLECTION ACCOUNT" shall mean that certain account of Agent, account number 502-328-54 in the name of GECC/CAF Depository at Bankers Trust Company, 17 Wall Street, New York, New York, ABA number 021-001-033. "COMMITMENT TERMINATION DATE" shall mean the earliest of (a) May 30, 2003, (b) the date of termination of the Aggregate Revolving Credit Commitment pursuant to SECTION 8.2, and (c) the date of termination of the Aggregate Revolving Credit Commitment in accordance with the provisions of SECTION 1.2(d). "CONCENTRATION ACCOUNT" shall have the meaning assigned to it in ANNEX B. "CONCENTRATION ACCOUNT AGREEMENT" shall have the meaning assigned to it in ANNEX B. "CONTRACTS" shall mean, with respect to any Person, all the contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which such Person may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account. "CONTROL" shall mean, with respect to a Person, the possession, directly or indirectly, of the power to direct or cause the direction of such Person's management or policies, whether through the ownership of voting securities, by contract or otherwise, and "CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto. "COPYRIGHTS" shall mean, with respect to any Person, any United States copyright to which such Person now or hereafter has title, as well as any application for a United States copyright hereafter made by such Person. "DAMC" shall mean Dick's Asset Management Corp., a Delaware corporation and a wholly-owned Subsidiary of Borrower. "DAMC GUARANTY" shall mean a Guaranty, in form and substance satisfactory to Agent, made between DAMC and Agent. A-5 "DAMC SECURITY AGREEMENT" shall mean a Security Agreement, in form and substance satisfactory to Agent, made between DAMC and Agent. "DAMC TRADEMARK SECURITY AGREEMENT" shall mean a Trademark Security Agreement, in form and substance satisfactory to Agent, made by DAMC in favor of Agent. "DATA SHARING AGREEMENT" shall mean that certain Data Sharing/License Agreement, dated as of October 29, 1999, among Borrower, dsports.com and ONRP Services, LLC. "DEEMED SALE/LEASEBACK TRANSACTION" shall mean any transaction (a) as to which Borrower's independent certified public accountants have determined in a manner satisfactory to Agent constitutes an Operating Lease for purposes of GAAP, (b) related to Borrower's Equipment and/or Fixtures as to which Borrower has not transferred title to the "lessor" under, or in connection with, any such Operating Lease and (c) subject to documentation, and having terms and conditions, substantially similar to that certain Master Lease Purchase Agreement, dated July 16, 1997, between Borrower and MetLife Capital Corporation, or as otherwise acceptable to Agent in its sole discretion. "DEFAULT" shall mean any Event of Default or any event which, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default. "DEFAULT RATE" shall mean a rate per annum equal to 2% PLUS the Index Rate as in effect from time to time PLUS the Applicable Margin (provided that with respect to a LIBOR Loan, the "Default Rate" for such Loan shall be 2% plus the LIBOR Rate for such LIBOR Loan plus the Applicable Margin during the LIBOR Period relating thereto and, after such LIBOR Period or any earlier conversion of such LIBOR Loan to an Index Rate Loan pursuant to this Agreement, the rate provided for above in this definition). "DEFERRED TAXES" shall mean, with respect to any Person at any date, the amount of deferred taxes of such Person as shown on the balance sheet of such Person prepared in accordance with GAAP as of such date. "DISBURSEMENT ACCOUNT" shall have the meaning assigned to it in ANNEX B. "DISBURSEMENT ACCOUNT AGREEMENTS" shall have the meaning assigned to it in ANNEX B. "DMSI" shall mean Distribution & Marking Services, Inc., a Delaware corporation. "DMSI AGREEMENTS" shall mean that certain Merchandise Servicing Agreement dated January 11, 1995 between DMSI and Borrower and any other agreements entered into in connection therewith between Borrower and DMSI. A-6 "DOCUMENTS" shall mean any "documents" as such term is defined in the Code and, in any event, any bills of lading, dock warrants, dock receipts, warehouse receipts, or other documents of title. "DOLLARS" and "$" shall mean lawful money of the United States of America. "DOL" shall mean the United States Department of Labor or any successor thereto. "DSG HOLDINGS" shall mean DSG Holdings LLC, a Delaware limited liability company. "DSG HOLDINGS CONTRIBUTION AGREEMENT" shall mean that certain Contribution and Interest Purchase Agreement, dated as of October 29, 1999, among Borrower, ONRP, Oak Investment Partners VII Limited Partnership and DSG Holdings. "DSG HOLDINGS LIMITED LIABILITY COMPANY AGREEMENT" shall mean that certain Limited Liability Company Agreement of DSG Holdings, dated as of October 29, 1999, among Borrower, ONRP and Oak Investment Partners VII Limited Partnership. "dsports.com" shall mean dsports.com LLC, a Delaware limited liability company and wholly-owned subsidiary of DSG Holdings. "dsports.com SERVICES AGREEMENT" shall mean that certain Services Agreement, dated as of October 29, 1999, between Borrower and dsports.com. "dsports.com SUPPLY AGREEMENT" shall mean that certain Supply Agreement, dated as of October 29, 1999, between Borrower and dsports.com. "dsports.com TRADEMARK AGREEMENT" shall mean that certain Trademark License Agreement, dated as of October 29, 1999, between DAMC and dsports.com. "E-COMMERCE TRANSACTION DOCUMENTS" shall mean, collectively, the DSG Holdings Limited Liability Company Agreement, the DSG Holdings Contribution Agreement, the Web Site Agreement, the Data Sharing Agreement, the dsports.com Trademark Agreement, the dsports.com Supply Agreement and the dsports.com Services Agreement. "EBITDA" shall mean, for any period, the Net Income (Loss) for such period, PLUS Interest Expense, tax expense, depreciation expense, amortization expense, and extraordinary losses and other non-cash items, MINUS extraordinary gains, in each case, of Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP to the extent included in the determination of such Net Income (Loss). "ELIGIBLE INVENTORY" shall mean such Inventory of Borrower that is not ineligible as the basis for Revolving Credit Advances or Letter of Credit Obligations A-7 based on the criteria set forth below. In determining whether Inventory constitutes Eligible Inventory, Agent does not intend to include Inventory which: (a) is not owned by Borrower free and clear of all Liens and rights of others, except the Liens in favor of Agent and Lenders pursuant to the Collateral Documents; (b) is not located on premises owned or operated by Borrower referenced on SCHEDULE 3.6; (c) is Inventory in transit (other than Inventory in transit from one of Borrower's distribution centers, including the DMSI distribution center, to one of Borrower's stores provided that such Inventory is being shipped in the normal course of business and consistent with Borrower's past practice and Agent continues to maintain a first priority perfected security interest in such Inventory); (d) is Inventory held on or at leased premises where the landlord thereof has either not executed a Landlord Waiver in form and substance satisfactory to Agent or reserves (including, without limitation, a Lease Payment Reserve) related thereto satisfactory to Agent in its discretion have not been established against Borrowing Availability; (e) is in the possession or control of a bailee, warehouseman, processor, converter or other Person other than Borrower, unless Agent is in possession of such agreements, instruments and documents as Agent may require (each in form and content acceptable to Agent and duly executed, as appropriate by the bailee, warehouseman, processor, converter or other Person in possession or control of such Inventory, as applicable) including but not limited to warehouse receipts in Agent's name covering such Inventory; (f) is covered by a negotiable document of title unless such document has been delivered to Agent; (g) is not covered by insurance required by the terms of SECTION 5.5 and ANNEX E; (h) is obsolete, unsalable, shopworn, damaged, unfit for further processing, or is of substandard quality; (i) consists of display items or packing and shipping materials; (j) consists of discontinued or slow-moving items; (k) does not meet all standards imposed by any Governmental Authority; (l) is placed by Borrower on consignment or held by Borrower on consignment from another Person; A-8 (m) is not a type held for sale in the ordinary course of Borrower's business; (n) is Inventory produced in violation of the Fair Labor Standards Act and subject to the "hot goods" provisions contained in Title 29 U.S.C. Section 215 or any successor statute or section; (o) is Inventory which in any way fails to meet or violates any warranty, representation or covenant contained in this Agreement or any other Loan Document; or (p) is not otherwise acceptable in the discretion of Agent, based upon such credit and collateral considerations as Agent may deem appropriate from time to time. "ENVIRONMENTAL LAWS" shall mean all federal, state and local laws, statutes, ordinances, orders and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any applicable judicial or administrative interpretation thereof relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 ET SEQ.) ("CERCLA"); the Hazardous Material Transportation Act, as amended (49 U.S.C. Sections 1801 ET SEQ.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. Sections 136 ET SEQ.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901 ET SEQ.) ("RCRA"); the Toxic Substance Control Act, as amended (15 U.S.C. Sections 2601 ET SEQ.); the Clean Air Act, as amended (42 U.S.C. Sections 740 ET SEQ.); the Federal Water Pollution Control Act, as amended (33 U.S.C. Sections 1251 ET SEQ.); the Occupational Safety and Health Act, as amended (29 U.S.C. Sections 651 ET SEQ.) ("OSHA"); and the Safe Drinking Water Act, as amended (42 U.S.C. Sections 300(f) ET SEQ.), and any and all regulations promulgated thereunder, and all analogous state and local counterparts or equivalents and any transfer of ownership notification or approval statutes. "ENVIRONMENTAL LIABILITIES AND COSTS" shall mean all liabilities, obligations, responsibilities, remedial actions, removal costs, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim, suit, action or demand by any person or entity, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law (including any thereof arising under any Environmental Law, permit, order or agreement with any Governmental Authority) and which relate to any health or safety condition regulated under any Environmental Law or in connection with any other environmental matter or Release, threatened Release, or the presence of a Hazardous Material. "EQUIPMENT" shall mean any "equipment" as such term is defined in the Code and in any event shall include all machinery, equipment, furnishings, fixtures and A-9 vehicles and any and all additions, accessions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder. "ERISA AFFILIATE" shall mean any trade or business (whether or not incorporated) under common control with any Loan Party and which, together with such Loan Party, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the IRC. "ERISA EVENT" shall mean, with respect to any Loan Party or any ERISA Affiliate, (a) a Reportable Event with respect to a Title IV Plan or a Multiemployer Plan; (b) the withdrawal of any Loan Party or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a) (2) of ERISA; (c) the complete or partial withdrawal of any Loan Party or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceeding to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure to make required contributions to a Qualified Plan; or (g) any other event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA. "EVENT OF DEFAULT" shall have the meaning assigned to it in SECTION 8.1. "EXCESS BORROWING AVAILABILITY" shall mean, at any time, the amount by which Borrowing Availability exceeds the outstanding principal amount of the Revolving Credit Loan. "EXECUTIVE OFFICERS" shall mean the President, Chief Executive Officer, Chief Financial Officer, Treasurer and Controller of Borrower. "EXISTING CREDIT AGREEMENT" shall have the meaning assigned to it in the Recitals to this Agreement. "EXISTING LENDERS" shall have the meaning assigned to it in the Recitals to this Agreement. "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by Agent from three federal funds brokers of recognized standing selected by it. A-10 "FEES" shall mean the fees due to Agent and/or Lenders as set forth in SECTION 1.6 or otherwise pursuant to the Loan Documents. "FINANCIAL STATEMENTS" shall mean the financial statements referred to in paragraph 1 of SCHEDULE 3.4. "FISCAL QUARTER" shall mean the 12 or 13-week period ending on the Saturday closest to the end of each April, July, October and January of each year. "FISCAL YEAR" shall mean the 52 or 53-week fiscal year of Borrower and its Subsidiaries for financial accounting purposes, which in any event shall end on the last Saturday of January of each year. "FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any period, the ratio of the following for such period of Borrower and its Subsidiaries determined in accordance with GAAP: (a) EBITDA PLUS (i) the aggregate amount of Net Proceeds received during any such period by Borrower from the issuance of its equity securities after the Closing Date and (ii) the aggregate amount of Net Proceeds received during any such period by Borrower from a sale of Fixtures and Equipment (including the proceeds received by Borrower in a Deemed Sale/Leaseback Transaction), permitted under Section 6.8 of this Agreement; LESS Capital Expenditures which are not financed through Operating Leases to (b) the sum of Interest Expense PLUS principal paid on Indebtedness (including Capitalized Lease Obligations but excluding the principal of the Revolving Credit Loan) or required to be paid during such period PLUS taxes to the extent accrued or otherwise payable with respect to such period. "FIXTURES" shall, with respect to any Person, mean all "fixtures," as such term is defined in the Code, now or hereafter owned or acquired by such Person, wherever located, and, in any event, including all of the fixtures, systems, machinery, apparatus, equipment and fittings of every kind and nature whatsoever and all appurtenances and additions thereto and substitutions therefor or replacements thereof, now or hereafter attached or affixed to or constituting a part of, or located in or upon, real property wherever located (including all heating, electrical, mechanical, lighting, lifting, plumbing, ventilating, air-conditioning and air cooling, refrigerating, incinerating and power, loading and unloading, signs, escalators, elevators, boilers, communication, switchboards, sprinkler and other fire prevention and extinguishing fixtures, systems, machinery, apparatus and equipment, and all engines, motors, dynamos, machinery, pipes, pumps, tanks, conduits and ducts constituting a part of any of the foregoing, together with all extensions, improvements, betterments, renewals, substitutes, and replacements of, and all additions and appurtenances to any of the foregoing property). "GE CAPITAL" shall mean General Electric Capital Corporation, a New York corporation having an office at 800 Connecticut Avenue, Two North, Norwalk, Connecticut 06854. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time, consistently applied, except that, for purposes of SECTION 6.10, GAAP shall be determined on the basis of such principles in effect on March 1, 1997 and consistent with those used in the preparation of the Financial Statements referred to in SECTION 3.4. A-11 "GENERAL INTANGIBLES" shall mean, with respect to any Person, all "general intangibles" as such term is defined in the Code, now owned or hereafter acquired by such Person and, in any event, including all right, title and interest which such Person may now or hereafter have in or under any Contract, all customer lists, Intellectual Property, interests in partnerships, joint ventures and other business associations, permits, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Intellectual Property), all rights and claims in or under insurance policies, (including insurance for fire, damage, loss, and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man, and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, and other bank accounts (including with respect to each Loan Party the Blocked Accounts, the Concentration Account and the Disbursement Accounts), rights to receive tax refunds and other payments and rights of indemnification. "GECMG" shall mean GECC Capital Markets Group, Inc., a Delaware corporation. "GOODS" shall mean all "goods" as such term is defined in the Code, including movables, fixtures, Equipment, inventory, or other tangible personal property. "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof, and any agency, department, court, board, commission, or other entity exercising valid legal executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any manner including any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) to indemnify the owner of such primary obligation against loss in respect thereof. "HAZARDOUS MATERIAL" shall mean (a) any element, material, compound, mixture, solution, chemical, substance, or pollutant within the definition of "hazardous substance" under Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601(14); petroleum or any fraction, byproduct or distillation product thereof; asbestos, polychlorinated biphenyls, or any radioactive substances; and any material regulated as a hazardous substance by any jurisdiction in which any Loan Party owns or operates or has owned or operated a facility; or (b) any element, pollutant, contaminate or discarded material (including any radioactive material) within the definition of Section 103(6) of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6903(6); and any material regulated as a A-12 hazardous waste by any jurisdiction in which any Loan Party owns or operates or has owned or operated a facility, or to which any Loan Party sends material for treatment, storage or disposal as waste. "INDEBTEDNESS" of any Person shall mean (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (including reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured, but not including obligations to trade creditors incurred in the ordinary course of business that are not unpaid for more than 90 days past the stated due date therefor), (b) all obligations evidenced by notes, bonds, debentures or similar instruments (including, without limitation, the Subordinated Note), (c) all indebtedness created or arising under any conditional sale or other title retention agreements with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in an event of default may be limited to repossession or sale of such property), (d) all Capital Lease Obligations, (e) all Guaranteed Indebtedness, (f) all obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate option contract, foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap, commodity purchase or option agreements or other similar agreement or contract designed to protect such Person against fluctuations in interest rates, currency values or commodity prices, as the case may be, or other hedging or derivative agreements, (g) all Indebtedness referred to in clause (a), (b), (c), (d), (e) or (f) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, (h) the Obligations, and (i) all liabilities under Title IV of ERISA. "INDEMNIFIED PERSON" shall have the meaning assigned to it in SECTION 1.15. "INDEX RATE" shall mean, for any day, a floating rate equal to the highest of (a) the rate publicly quoted from time to time by THE WALL STREET JOURNAL as the "base rate on corporate loans at large U.S. money center commercial banks" (or, if THE WALL STREET JOURNAL ceases quoting a base rate of the type described, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Effective Rate as in effect for such day plus fifty (50) basis points per annum. Each change in any interest rate provided for in this Agreement based upon the Index Rate shall take effect at the time of such change in the Index Rate. "INDEX RATE LOAN" shall mean a Loan or portion thereof bearing interest by reference to the Index Rate. "INFORMATION STATEMENT" shall mean that certain Information Statement and Offer to Purchase Shares of the Borrower dated April 20, 2000 and supplemented on May 12, 2000 and May 19, 2000 attached as Exhibit C to the Seventh Amendment. A-13 "INSTRUMENTS" shall mean, for any Person, all "instruments" as such term is defined in the Code, now owned or hereafter acquired by such Person, wherever located and in any event all certificated securities, certificates of deposit and all notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. "INTELLECTUAL PROPERTY" shall mean, for any Person, collectively, all Trademarks, all Patents, all Copyrights and all Licenses now held or hereafter acquired by such Person, together with all franchises, tax refund claims, rights of indemnification, payments under insurance, indemnities, warranties and guarantees payable with respect to the foregoing. "INTERCREDITOR AGREEMENTS" shall mean the collective reference to the Intercreditor Agreements, each substantially in the form of EXHIBIT E or as otherwise approved by Agent, between Agent and any purchaser(s) of Fixtures and Equipment in a sale-leaseback transaction permitted pursuant to Section 6.8 of this Agreement. "INTEREST COVERAGE RATIO" shall mean, with respect to any period, the ratio of (a) EBITDA for such period to (b) Interest Expense for such period. "INTEREST EXPENSE" shall mean for any period the amount which would, in conformity with GAAP, be set forth opposite the caption "interest expense" or any like caption on a consolidated statement of operations of the Borrower and its Subsidiaries prepared on a consolidated basis in accordance with GAAP. "INTEREST SETTLEMENT DATE" shall have the meaning assigned to it in SECTION 1.13(d). "INVENTORY" shall mean, for any Person, all "inventory" as such term is defined in the Code, now or hereafter owned or acquired by, such Person, wherever located, and, in any event, including inventory, merchandise, goods and other personal property which are held by or on behalf of such Person for sale or lease or are furnished or are to be furnished under a contract of service or which constitute raw materials, work in process or materials used or consumed or to be used or consumed in such Person's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including other supplies, and all accessions and additions thereto and all documents of title covering any of the foregoing. "INVESTMENT" shall mean, for any Person (a) the acquisition (whether for cash, property, services or securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or any agreement to make any such acquisition; (b) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person); and (c) the entering into of any Guaranteed Indebtedness of, or other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person. "INVESTMENT PROPERTY" shall have the meaning ascribed thereto in Section A-14 9-115 of the Code in those jurisdictions in which such definition has been adopted and shall include (i) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of any Person, including the rights of such Person to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (iii) all securities accounts held by any Person; (iv) all commodity contracts held by any Person; and (v) all commodity accounts held by any Person. "IRC" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto. "IRS" shall mean the Internal Revenue Service, or any successor thereto. "LANDLORD'S WAIVER" shall mean a landlord's waiver and license agreement or other agreement executed and delivered by the landlord under any Lease in form and substance satisfactory to Agent. "LEASE PAYMENT RESERVE" shall mean a reserve against Borrowing Availability in an amount determined by Agent in its discretion including an amount equal to the aggregate amount of a number of months (as determined by Agent) rent and utility costs payable by Borrower with respect to each Lease of real property where Eligible Inventory is located and with respect to which Borrower has failed to obtain a Landlord's Waiver from the landlord thereof in form and substance satisfactory to Agent. The Lease Payment Reserve may, in Agent's discretion, be in addition to any other reserve against Borrowing Availability established by Agent. "LEASES" shall mean all of those leasehold estates in real property now owned or hereafter acquired by a Loan Party, as lessee. "LENDER" and "LENDERS" shall have the meaning provided in the first paragraph of this Agreement. "LETTER OF CREDIT" shall mean any commercial or standby letter of credit issued (including issued pursuant to the terms of the Existing Credit Agreement) at the request and for the account of Borrower for which Agent and/or Lenders have incurred Letter of Credit Obligations. "LETTER OF CREDIT FEE" shall have the meaning assigned to it in SECTION 1.6. "LETTER OF CREDIT OBLIGATIONS" shall mean all outstanding obligations incurred by Agent and/or Lenders at the request of Borrower, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance or guarantee, by Agent or any Lender of Letters of Credit. The amount of such Letter of Credit Obligations at any time shall equal the maximum amount which may be payable by Agent and/or Lenders under or pursuant to the outstanding Letters of Credit at such time. "LIBOR BUSINESS DAY" shall mean a Business Day on which banks in the city of London are generally open for interbank or foreign exchange transactions. A-15 "LIBOR LOAN" shall mean a Loan or any portion thereof bearing interest by reference to the LIBOR Rate. "LIBOR PERIOD" shall mean, with respect to any LIBOR Loan, each period commencing on a LIBOR Business Day selected by Borrower pursuant to the Agreement and ending one, two or three months thereafter, as selected by Borrower's irrevocable notice to Agent as set forth in SECTION 1.1(c); PROVIDED that the foregoing provision relating to LIBOR Periods is subject to the following: (a) if any LIBOR Period would otherwise end on a day that is not a LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such LIBOR Period into another calendar month in which event such LIBOR Period shall end on the immediately preceding LIBOR Business Day; (b) any LIBOR Period that would otherwise extend beyond the Commitment Termination Date shall end two (2) LIBOR Business Days prior to such date; (c) any LIBOR Period pertaining to a LIBOR Loan that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Period) shall end on the last LIBOR Business Day of a calendar month; (d) Borrower shall select LIBOR Periods so as not to require a payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and (e) Borrower shall select LIBOR Periods so that there shall be no more than seven (7) separate LIBOR Loans in existence at any one time. "LIBOR Rate" shall mean for each LIBOR Period, a rate of interest determined by Agent equal to: (a) the offered rate for deposits in United States Dollars for the applicable LIBOR Period which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the second full LIBOR Business Day next preceding the first day of each LIBOR Period (unless such date is not a Business Day, in which event the next succeeding Business Day will be used); divided by (b) a number equal to 1.0 MINUS the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day which is two (2) LIBOR Business Days prior to the beginning of such LIBOR Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve system or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of such Board) which are required to be maintained by a member bank of the Federal Reserve System (such rate to be adjusted to the nearest one sixteenth of one percent (1/16th of 1%) or, if there is not a nearest one sixteenth of one percent (1/16th of 1%), to the next highest one A-16 sixteenth of one percent (1/16th of 1%)). If such interest rates shall cease to be available from Telerate News Service, the LIBOR Rate shall be determined from such financial reporting service or other information as shall be mutually acceptable to Agent and Borrower. "LICENSE" shall mean, with respect to any Person, any Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by such Person. "LIEN" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction). "LOAN DOCUMENTS" shall mean this Agreement, the Revolving Credit Notes, the Subordination Agreement and the Collateral Documents. "LOAN PARTY" means each of Borrower and each Subsidiary of Borrower, including DAMC. "MARGIN STOCK" shall have the meaning specified in Regulation T, U or X of the Board of Governors of the Federal Reserve System, as in effect from time to time. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the business, assets, operations, prospects, or financial condition of Borrower and its Subsidiaries, taken as a whole, (b) any Loan Party's ability to pay or perform its Obligations in accordance with the terms of the Loan Documents, (c) the Collateral or Agent's Lien on the Collateral or the priority or perfection of any such Lien or (d) the rights and remedies of Agent and Lenders under this Agreement and the other Loan Documents. "MATERIAL CONTRACTS" shall mean the contracts listed on SCHEDULE 6.19 hereto and any other Contract of Borrower which, if cancelled or terminated, could reasonably be expected to have or result in a Material Adverse Effect. "MAXIMUM LAWFUL RATE" shall have the meaning assigned to it in SECTION 1.4(e). "MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA, and to which Borrower or any ERISA Affiliate is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "NET BORROWING AVAILABILITY" shall mean as of any date of determination, the lesser of (i) the Aggregate Revolving Credit Commitment and (ii) A-17 the Borrowing Base, in each case LESS the Revolving Credit Loan then outstanding. "NET INCOME (LOSS)" shall mean, for any period, the aggregate net income (or loss) after provision (benefit) for income taxes of Borrower and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "NET PROCEEDS" shall mean (a) with respect to any sale or disposition of assets (including by sale and leaseback) by any Person, the cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such sale or disposition net of (i) attorneys' fees, accountants' fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses, and brokerage, consultant and other customary fees actually incurred in connection therewith other than such amounts payable to an Affiliate of Borrower and (ii) taxes paid or payable as a result thereof; and (b) with respect to any issuance of equity securities or the incurrence of any Indebtedness by any Person subsequent to the Closing Date, the cash proceeds received by such Person from such issuance or incurrence net of investment banking fees, legal fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses and other reasonable costs and expenses actually incurred in connection therewith other than such amounts payable to an Affiliate of Borrower. "NET WORTH" shall mean, with respect to any Person at any date, the total assets minus the total liabilities, in each case, of such Person at such date determined in accordance with GAAP. "NON-FUNDING LENDER" shall have the meaning assigned to it in SECTION 1.1(f). "NON-USE FEE" shall have the meaning assigned to it in SECTION 1.6. "NOTICE OF CONVERSION/CONTINUATION" shall have the meaning assigned to it in SECTION 1.1(c). "NOTICE OF REVOLVING CREDIT ADVANCE" shall have the meaning assigned to it in SECTION 1.1(c). "OBLIGATIONS" shall mean all loans, advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable) owing by any Loan Party to Agent or any Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under any of the Loan Documents. This term includes (i) any Revolving Credit Advances made pursuant to the terms of the Existing Credit Agreement, and (ii) all principal and interest (including interest which accrues after the commencement of any case or proceeding referred to in SECTION 8.1(f), (g) or (h)), on the Revolving Credit Loan, all amounts payable in respect of Letters of Credit under SECTION 1.18 or ANNEX F, all Letter of Credit Obligations, all Fees, Charges, expenses, attorneys' fees and any other sum chargeable to A-18 any Loan Party under any of the Loan Documents. "OCTOBER 2000 WARRANTS" shall have the meaning ascribed to such term in Borrower's Certificate of Incorporation, as amended on April 26,1999. "ONRP" shall mean Online Retail Partners LLC, a Delaware limited liability company and its successors and assigns. "OPERATING LEASE" shall mean any lease of real or personal property, or mixed property, which is not a Capital Lease. "OTHER LENDER" shall have the meaning assigned to it in Section 1.1(f). "OTHER TAXES" shall have the meaning assigned to it in Section 1.17(b). "PARTICIPANTS" shall have the meaning assigned to it in Section 10.2(a). "PATENT LICENSE" shall mean, with respect to any Person, rights under any written agreement now owned or hereafter acquired by such Person granting any right with respect to any invention on which a Patent is in existence. "PATENTS" shall mean, with respect to any Person, all of the following in which such Person now holds or hereafter acquires any right, title or interest: (a) all letters patent of the United States of America or any other country, all registrations and recordings thereof, and all applications for letters patent of the United States of America or any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States of America, any State or Territory thereof, or any other country, and (b) all reissues, divisions, continuations, continuations-in-part or extensions thereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor thereto. "PENSION PLAN" shall mean an employee pension benefit plan, as defined in Section 3(2) of ERISA, which is not an individual account plan, as defined in Section 3(34) of ERISA, and which any Loan Party or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "PERMITTED ENCUMBRANCES" shall mean: (a) Liens for Charges provided payment thereof shall not at the time be required under SECTION 5.2; (b) deposits, Liens or pledges of cash collateral to secure obligations under workmen's compensation, unemployment insurance, social security or public liability laws or similar legislation or other public or statutory obligations arising in the ordinary course of business; (c) deposits, Liens or pledges of cash collateral to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), obligations of a tenant under an Operating Lease, or surety, stay or appeal bonds or similar obligations arising in the ordinary course of business; (d) workers', mechanics', suppliers', carriers', warehousemen's Liens or other similar Liens arising by operation of law in the ordinary course of business and securing sums which are not past due; (e) any attachment or A-19 judgment Lien which does not constitute a Default, unless the judgment it secures shall not, within 15 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 15 days after the expiration of any such stay; (f) zoning restrictions, easements, licenses, or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such real property, leases or leasehold estates; (g) Liens created by statute or common law in favor of landlords for unpaid rent and related amounts that are not more than fifteen days past due; (h) subject to the Concentration Account Agreement, the Blocked Account Agreements and the Disbursement Account Agreements, if any, Liens of a banking institution encumbering deposits (including setoff rights) held by such banking institution incurred in the ordinary course of business and which are within the general parameters customary in the banking industry; and (i) Liens listed in SCHEDULE 6.7 existing on the Closing Date. "PERMITTED HOLDERS" shall mean any member of the Stack Family; Bamse, N.V.; Daniel Bernard; FJLM Finance Ltd.; Fondation Appomattox; Fondation Breugelem; Fondation Consuelo; Fundacion Juan March Luxembourg, S.A.; Fourcar, B.V.; Oak Investment Partners V, Limited Partnership; Oak V Affiliates Fund, Limited Partnership; Oakwood Holdings, BVI; Yves Sisteron; Societe De Noyange; Vulcan Ventures, Inc.; Bessemer Venture Partners III L.P.; Brimstone Island Co. L.P.; BVP Special Situations L.P.; Northwood Capital Partners LLC; Omega Ventures II, L.P.; Crossover Fund II, L.P.; and US WEST Pension Trust. "PERMITTED STOCK ISSUANCE" shall mean and include the issuance of common equity interests by Borrower to any Person (i) so long as no Default has occurred and is continuing or would occur as a result of such issuance, in an initial public offering (x) which is underwritten by a nationally recognized investment banking firm or other Person satisfactory to Agent in its discretion, (y) in which such equity interests are distributed to at least 25 Persons (other than Persons listed on SCHEDULE 3.9), and (z) which is made pursuant to a registration statement on Form S-1, or any successor form thereto, relating to the registration of such common equity interests under the Securities Act of 1933, as amended, and other documents and agreements (including all underwriting or similar agreements and all documents filed with the Securities and Exchange Commission) in form and substance reasonably satisfactory to Agent, (ii) under the Dick's Clothing and Sporting Goods, Inc. Stock Option Plan as amended through September 19, 1995 as in effect on April 16, 1999 or (iii) upon the exercise of warrants listed on SCHEDULE 3.9 or warrants to purchase Series E Preferred Stock or common stock if the Series E Preferred Stock has previously been converted to common stock which warrants were issued in connection with the Series E, F and G Preferred Stock of Borrower in accordance with the applicable Preferred Stock Agreement. "PERSON" shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether Federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof). "PLAN" shall mean, with respect to Borrower or any ERISA Affiliate, at any time, an employee benefit plan, as defined in Section 3(3) of ERISA, which A-20 Borrower maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "PLEDGE AGREEMENT" shall mean the Pledge Agreement, dated as of February 1, 1996, attached hereto as Exhibit F, made by Borrower in favor of Agent for the benefit of Lenders. "PREFERRED STOCK" shall mean the Series A, B, C, D and E Preferred Stock of Borrower. "PREFERRED STOCK AGREEMENTS" shall mean any stock purchase or other agreements providing for or governing the terms or rights of holders of, or otherwise relating to, any Preferred Stock as in effect on the Closing Date. "PREFERRED STOCK SUBORDINATED NOTES" shall mean those certain Promissory Notes dated May __, 2000 and due August __, 2001 in substantially the form of Annex F to the Information Statement and in an aggregate amount (including principal and interest) not to exceed $15,000,000. "PROCEEDS" shall mean all "proceeds" as such term is defined in the Code and, in any event, shall include, with respect to any Person: (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to such Person from time to time with respect to any of its property or assets; (b) any and all payments (in any form whatsoever) made or due and payable to such Person from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of such Person's property or assets by any governmental body, authority, bureau or agency (or any person acting under color of governmental authority), (c) any claim of such Person against third parties (i) for past, present or future infringement of any Patent or Patent License or (ii) for past, present or future infringement or dilution of any Trademark or Trademark License or for injury to the goodwill associated with any Trademark, Trademark registration or Trademark licensed under any Trademark License; (d) any recoveries by such Person against third parties with respect to any litigation or dispute concerning any of such Person's property or assets; and (e) any and all other amounts from time to time paid or payable under or in connection with any of such Person's property or assets, upon disposition or otherwise. "PROJECTIONS" shall mean the projections referred to in paragraph 3 of Schedule 3.4 and as of any date the consolidated and consolidating balance sheet, statements of income and cash flow for Borrower and its Subsidiaries (including forecasted Capital Expenditures and Net Borrowing Availability) (i) by month for each of the Fiscal years ending 2000, 2001 and 2002 and (ii) any other projections required to be delivered by Borrower to Agent and Lenders under the Agreement. "PROPORTIONATE SHARE" shall mean, with respect to any Lender, the following: (a) for the purpose of repayment of principal, interest and Fees with respect to the Revolving Credit Loan and Letter of Credit Obligations, a fraction (expressed as a percentage), the numerator of which shall be the aggregate principal amount of Revolving Credit Advances held by such Lender (including Agent), and the denominator of which shall be the principal amount of the Revolving Credit Loan; and (b) for all other purposes, the fraction (expressed as a percentage), the numerator of which shall be the A-21 Revolving Credit Commitment of such Lender and the denominator of which shall be the Aggregate Revolving Credit Commitment. "QUALIFIED PLAN" shall mean, for any Loan Party, an employee pension benefit plan, as defined in Section 3(2) of ERISA, which is intended to be tax-qualified under IRC Section 401(a), and which such Loan Party or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "REGISTER" shall have the meaning assigned to it in Section 10.2(c). "REGULATORY CHANGE" shall mean, with respect to any Lender, any change after the date of this Agreement in federal, state or foreign law or regulations (including Regulation D) or the adoption or making after such date of any interpretation, directive or request applying to a class of lenders including such Lender of or under any Federal, state or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "RELEASE" shall mean, as to any Person, any release or any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration of a Hazardous Material into the indoor or outdoor environment by such Person (or by a person under such Person's direction or Control), including the movement of a Hazardous Material through or in the air, soil, surface water, ground water or property; but shall exclude any release, discharge, emission or disposal in material compliance with a then effective permit, order, rule regulation or law of a Governmental Authority. "REPORTABLE EVENT" shall mean any of the events described in Section 4043(b) (1), (2), (3), (5), (6), (8) or (9) of ERISA. "REQUIRED LENDERS" shall mean, at any time, Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the aggregate of the Revolving Credit Commitments of all Lenders at such time (or, at any time after which the Revolving Credit Commitments of all of Lenders shall have expired or terminated, Lender's holding sixty-six and two-thirds percent (66 2/3%) of the principal of the Revolving Credit Loan outstanding at such time). "REQUIRED PAYMENT" shall have the meaning assigned to it in Section 1.11. "RESTRICTED PAYMENT" shall mean, with respect to any Person, either directly or indirectly, (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of such Person's Stock, (b) any payment on account of the purchase, redemption, defeasance or other retirement, or to obtain the surrender of, such Person's Stock or any other payment or distribution made in respect thereof, (c) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder or Affiliate of such Person other than relating to salaries, bonuses and other compensation to such Person's officers, directors and employees in the ordinary course of business consistent with past practice, (d) any payment, purchase, redemption, retirement, or other A-22 acquisition for value or setting apart of any money for a sinking, or other analogous fund for the purchase, redemption, retirement or other acquisition of, or to obtain the surrender of, or any payment (scheduled, voluntary or other) of principal of or interest on, or any other amount owing in respect of any Subordinated Note or any other Subordinated Debt or (e) any payment of a claim for the recision of the purchase or sale of, or for material damages arising from the purchase or sale of any Stock of such Person, or of a claim for indemnification or contribution arising out of or relating to any such claim for damages or recision. "RETIREE WELFARE PLAN" shall refer to any Welfare Plan providing for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC and at the sole expense of the participant or the beneficiary of the participant. "REVOLVING CREDIT ADVANCE" shall have the meaning assigned to it in SECTION 1.1(a). "REVOLVING CREDIT COMMITMENT" shall mean, as to each Lender, the commitment of such Lender to make Revolving Credit Advances to Borrower pursuant to SECTION 1.1 and the other provisions hereof in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender's name on APPENDIX 1, as such amount may be reduced or modified pursuant to this Agreement. "REVOLVING CREDIT LOAN" shall mean the aggregate amount of Revolving Credit Advances of all Lenders (including Revolving Credit Advances made by Agent pursuant to SECTION 1.13 and Revolving Credit Advances made pursuant to the terms of the Existing Credit Agreement) outstanding at any time. "REVOLVING CREDIT NOTES" shall mean the promissory notes provided for by SECTION 1.1(d) and all promissory notes delivered in substitution or exchange therefor, in each case as the same shall be modified and supplemented and in effect from time to time. "RICHARD T. STACK NOTES" shall mean (a) the note dated December 31, 1992, in the aggregate principal amount of $302,036 as of December 30, 1995 issued by Borrower to Richard T. Stack and (b) the note dated November 16, 1992, in the aggregate principal amount of $70,450 as of December 30, 1995 issued by Borrower to Richard T. Stack. "SCHEDULE OF DOCUMENTS" shall mean the schedule attached hereto as Annex C, including all appendices, exhibits or schedules thereto, listing certain documents and information to be delivered in connection with the Loan Documents and the transactions contemplated thereunder. "SECURITY AGREEMENT" shall mean the Security Agreement, dated as of February 1, 1996, attached hereto as Exhibit D, between Agent and Borrower. "SETTLEMENT PERIOD" shall have the meaning assigned to it in SECTION 1.13. A-23 "SOLVENT" and "SOLVENCY" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "STACK FAMILY" shall mean Nancy and Richard Heichemer, Kim and Tim Myers, Donna and Richard J. Stack, Edward W. Stack, Karin Lea Stack, Martin J. Stack, Stacey A. Stack and Richard T. Stack. "STOCK" shall mean all shares, options, warrants, general or limited partnership interests, membership interests, participation or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended). "STOCKHOLDER" shall mean each holder of Stock of Borrower. "SUBJECT PROPERTY" shall mean all real property owned, leased or operated by any Loan Party. "SUBORDINATED DEBT" shall mean the Indebtedness evidenced by the Subordinated Note and any other Indebtedness of Borrower which is subordinated in right of payment to the Obligations. "SUBORDINATED NOTE" shall mean the 12% Subordinated Debenture dated May 1, 1986, in the aggregate principal amount of $976,381 as of December 30, 1995 issued by Borrower (as the successor in interest to Dick's Acquisition Corp.) to Richard J. Stack, in form and substance satisfactory to Agent. "SUBORDINATION AGREEMENT" shall mean the Subordination Agreement among Borrower, Richard J. Stack and Agent on behalf of itself and Lenders pursuant to which the Subordinated Note is subordinated to the prior payment and satisfaction of the Obligations. "SUBSIDIARY" shall mean, with respect to any Person, (a) any corporation of which an aggregate of 50% or more of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, A-24 directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of 50% or more or of which any such Person is a general partner or managing member, as the case may be, or may exercise the powers of a general partner or managing member, as the case may be. Notwithstanding anything to the contrary, neither DSG Holdings nor dsports.com shall be deemed to be a "Subsidiary" for any purpose hereunder or under any other Loan Document. "TAXES" shall mean taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes, levies, imposts, deductions, charges or withholdings and liabilities with respect thereto that are imposed on or measured by the net income of any Lender by the United States of America, the jurisdiction under the laws of which Lender is organized or the jurisdiction in which such Lender's applicable lending office is located or, in each case, any political subdivision thereof. "TERMINATION DATE" shall mean the date on which (a) the Aggregate Revolving Credit Commitment has been terminated in full and Agent and Lenders shall have no further obligation to make any Revolving Credit Advances or any other credit extensions or financial accommodations hereunder or under any other Loan Document, and (b) all Obligations have been irrevocably paid in full and Borrower shall have funded the amounts required, if any, under the Loan Documents into the Cash Collateral Account in respect of Letter of Credit Obligations, if any, then outstanding. "TITLE IV PLAN" shall mean a Pension Plan, other than a Multiemployer Plan, which is covered by Title IV of ERISA. "TRADEMARK LICENSE" shall mean, with respect to any Person, rights under any written agreement now owned or hereafter acquired by such Person granting any right to use any Trademark or Trademark registration. "TRADEMARKS" shall mean, with respect to any Person, all of the following in which such Person now holds or hereafter acquires any interest: (a) all common law and statutory trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States of America, any State or Territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all licenses thereunder and together with the goodwill associated with and symbolized by such trademark. "WEB SITE AGREEMENT" shall mean that certain Web Site Services Agreement, dated as of October 29, 1999, between ONRP Services, LLC and A-25 dsports.com. "WELFARE PLANS" shall mean any welfare plan, as defined in Section 3(1) of ERISA, which is maintained or contributed to by Borrower or any ERISA Affiliate. 2. CERTAIN MATTERS OF CONSTRUCTION. Any accounting term used in the Agreement or the other Loan Documents shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed, unless otherwise specifically provided therein, in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. All other undefined terms contained in the Agreement or the other Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code as in effect in the State of New York to the extent the same are used or defined therein. The words "herein," "hereof" and "hereunder" or other words of similar import refer to the Agreement as a whole, including the exhibits and schedules thereto, as the same may from time to time be amended, modified or supplemented, and not to any particular section, subsection or clause contained in this Agreement. Whenever any provision in any Loan Document refers to the "knowledge" of any Person, such provision is intended to mean that such Person has actual knowledge or awareness of a particular fact or circumstance, or that such Person, if it had exercised reasonable diligence, should have known or been aware of such fact or circumstance. For purposes of this Agreement and the other Loan Documents, the following additional rules of construction shall apply: (a) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter; (b) the term "including" shall not be limiting or exclusive, unless specifically indicated to the contrary; (c) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations; and (d) all references to any instruments or agreements, including references to any of the Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof, in each case, made in accordance with the terms of the Loan Documents. A-26 FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- FIRST AMENDMENT, dated as of May 18, 2001 (this "Amendment"), to the Amended and Restated Credit Agreement referred to below among DICK'S SPORTING GOODS, INC., a Delaware corporation ("Borrower"), the lenders party hereto ("Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent for the Lenders (in such capacity, "Agent"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. AMENDMENT TO RECITAL B OF THE CREDIT AGREEMENT. Recital B of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by deleting the amount "$140,000,000" where it appears therein and inserting in lieu thereof the amount "$170,000,000". 3. AMENDMENT TO ANNEX A. ANNEX A to the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the definition of "AGGREGATE REVOLVING CREDIT COMMITMENT" in its entirety and inserting in lieu thereof the following new definition to read as follows: "'AGGREGATE REVOLVING CREDIT COMMITMENT" shall mean $170,000,000"; 4. AMENDMENT TO APPENDIX 1. APPENDIX 1 to the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting such Appendix in its entirety and inserting in lieu thereof a new appendix to read as set forth on Appendix 1 hereto. 5. CHANGE IN LENDERS' PROPORTIONATE SHARES. Borrower and Lenders agree that upon consummation of the amendments to the Credit Agreement effected hereby, the Proportionate Share of each Lender is set forth on Appendix I attached hereto. In furtherance of the foregoing, each applicable Lender further agrees promptly to forward on the Amendment Effective Date in immediately available funds certain amounts requested by Agent directly to Agent, and Agent agrees to forward such amounts to any applicable Lender (the "LOAN ALLOCATION ADJUSTMENT") so that after giving effect to the Loan Allocation Adjustment the outstanding Revolving Credit Advances of each Lender reflects its Proportionate Share after giving effect to the Loan Allocation Adjustment. 6. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower of this Amendment and the Amended and Restated Promissory Notes referred to in Section 10(b) hereof (the "AMENDED AND RESTATED PROMISSORY NOTES") and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) This Amendment and the Amended and Restated Promissory Notes have been duly executed and delivered by or on behalf of Borrower. (c) Each of this Amendment, the Amendment and Restated Promissory Notes and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) No Default has occurred and is continuing both before and after giving effect to this Amendment. (e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 7. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue 2 to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 8. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of May 17, 2001 the aggregate outstanding principal amount of the Revolving Credit Loan is $108,500,075.10 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 9. EXPENSES. Borrower hereby reconfirms its obligations pursuant to SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 10. EFFECTIVENESS. This Amendment shall become effective as of May __, 2001 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to May __, 2001: (a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Required Lenders and Borrower and acknowledged by DAMC. (b) AMENDED AND RESTATED PROMISSORY NOTES. Each applicable Lender shall have received an Amended and Restated Promissory Note, which note amends and restates as of the Amendment Effective Date that Promissory Note dated July 26, 2000 made by Borrower in favor of such Lender. (c) BOARD RESOLUTIONS. Agent shall have received a certificate of the Secretary or an Assistant Secretary of Borrower certifying (i) the resolutions adopted by the Board of Directors of Borrower approving this Amendment and the Amended and Restated Promissory Notes and (ii) all documents evidencing other necessary corporate action by Borrower and required governmental and third party approvals, if any, with respect to this Amendment and the Amended and Restated Promissory Notes. (d) LEGAL OPINION. Agent shall have received an opinion of Beveridge & Diamond, P.C., counsel to the Loan Parties, in form and substance satisfactory to Agent and Lenders. 3 (e) FEES. Borrower shall have paid (i) an amendment fee to Agent for the account of each of the Lenders in the aggregate amount of $75,000 to be distributed as follows: General Electric Capital Corporation $12,500.00; BSB Bank & Trust Company $0.00; National Bank of Canada $0.00; The CIT Group/Business Credit, Inc. $6,250.00; Fleet Retail Finance, Inc. $18,750.00; National City Bank of Pennsylvania $12,500.00 and First Union National Bank $25,000.00. (f) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (g) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 12. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: --------- DICK'S SPORTING GOODS, INC. Name: /s/ Jeffrey Hennion ----------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: ------ GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By:______________________ Name: Its: Duly Authorized Signatory LENDERS: -------- GENERAL ELECTRIC CAPITAL CORPORATION By:_____________________ Name: Its: Duly Authorized Signatory BSB BANK & TRUST COMPANY By:_____________________ Name: Title: 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: --------- DICK'S SPORTING GOODS, INC. By:_____________________ Name: Jeffrey Hennion Title: Treasurer AGENT: ------ GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: /s/ Charles Chiodo -------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory LENDERS: -------- GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Charles Chiodo -------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory BSB BANK & TRUST COMPANY By:_____________________ Name: Title: 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: --------- DICK'S SPORTING GOODS, INC. By:___________________ Name: Jeffrey Hennion Title: Treasurer AGENT: ------ GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By:______________________ Name: Its: Duly Authorized Signatory LENDERS: --------- GENERAL ELECTRIC CAPITAL CORPORATION By:____________________ Name: Its: Duly Authorized Signatory BSB BANK & TRUST COMPANY By: /s/ John B. Westcott ---------------------- Name: John B. Westcott Title: Administrative Vice President 5 NATIONAL BANK OF CANADA By: /s/ David S. Vith ---------------------- Name: David S. Vith Title: Assistant Vice President By: /s/ Gerard Knell ---------------------- Name: Gerard Knell Title: Vice President THE CIT GROUP/BUSINESS CREDIT, INC. By:______________________ Name: Title: FLEET RETAIL FINANCE INC. By:______________________ Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By:_____________________ Name: Title: FIRST UNION NATIONAL BANK By:_____________________ Name: Title: 6 NATIONAL BANK OF CANADA By:_____________________ Name: Title: By:_____________________ Name: Title: THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ Evelyn Kusold --------------------- Name: Evelyn Kusold Title: AVP FLEET RETAIL FINANCE INC. By: /s/ James R. Dore --------------------- Name: James R. Dore Title: Director NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ John L. Hayes, IV --------------------- Name: John L. Hayes, IV Title: VP FIRST UNION NATIONAL BANK By: /s/ Joan Anderson --------------------- Name: Joan Anderson Title: 6 The undersigned Guarantor hereby (i) acknowledges to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. DICK'S ASSET MANAGEMENT CORP. By: /s/ Jeffrey Hennion --------------------- Name: Title: 7 APPENDIX 1 APPENDIX 1 Revolving Credit Commitments and Lender Information
- --------------------------------------------------------------------------------- Lender Revolving Credit Proportionate Share of Commitment Commitment - --------------------------------------------------------------------------------- GENERAL ELECTRIC $ 55,000,000.00 32.352941% CAPITAL CORPORATION 800 Connecticut Avenue, Two North Norwalk, CT 06854 Attn: Charles Chiodo Telephone: (203) 852-3600 Telecopy: (203) 852-3640 - -------------------------------------------------------------------------------- NATIONAL BANK OF $ 25,000,000.00 14.705882% CANADA One Oxford Centre 301 Grant Street Suite 3440 Pittsburgh, PA 15219 Attn: Donald P. Haddad Telephone: (412) 281-4890 Telecopy: (412) 281-4603 - -------------------------------------------------------------------------------- THE CIT GROUP/ $ 17,500,000.00 10.294118% BUSINESS CREDIT, INC. 1211 Avenue of the Americas New York, NY 10036 Attn: Evelyn Kusold Telephone: (212) 536-1208 Telecopy: (212) 536-1293 - -------------------------------------------------------------------------------- BSB BANK & TRUST $ 7,500,000.00 4.411765% COMPANY 68 Exchange Street Binghamton, NY 13902 Attn: Glenn Small Telephone: (607) 779-2590 Telecopy: (607) 772-6287 - --------------------------------------------------------------------------------
8
- ----------------------------------------------------------------------------------- Lender Revolving Credit Proportionate Share of Commitment Commitment - ----------------------------------------------------------------------------------- FLEET RETAIL FINANCE $ 30,000,000.00 17.647059% INC. 40 Broad Street, 10th Floor Boston, MA 02109 Attn: Jim Dore Telephone: (617) 434-4184 Telecopy: (617) 434-4312 - -------------------------------------------------------------------------------- NATIONAL CITY BANK $ 15,000,000.00 8.823529% OF PENNSYLVANIA 20 Stanwix Street, 19th Floor Pittsburgh, PA 15222 Attn: Vince Delie Telephone: (412) 644-6056 Telecopy: (412) 471-4883 - -------------------------------------------------------------------------------- FIRST UNION $ 20,000,000.00 11.764706% NATIONAL BANK One South Penn Square, 12th Floor Philadelphia, PA 19107 Attn: Joan Anderson Telephone: (215) 973-8376 Telecopy: (215) 973-1887 - -------------------------------------------------------------------------------- =============== ================== $170,000,000.00 100.00% - --------------------------------------------------------------------------------
9 SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND FIRST AMENDMENT TO CERTAIN COLLATERAL DOCUMENTS RELATED THERETO ------------------------------------ SECOND AMENDMENT, dated as of July __, 2001 to the Amended and Restated Credit Agreement referred to below and FIRST AMENDMENT to certain collateral documents related thereto and referred to in Section 10 hereof (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), DICK'S ASSET MANAGEMENT CORP., a Delaware corporation ("DAMC"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent for the Lenders (in such capacity, "AGENT"). W I T N E S S E T H ------------------- WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. AMENDMENT TO SECTION 1.10. SECTION 1.10 of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by adding the following new sentence at the end thereof to read as follows: "Notwithstanding anything to the contrary contained herein or in any other Loan Document, if an Event of Default shall have occurred and be continuing, no payment shall be made by Borrower in respect of the termination of an Interest Rate Agreement, until all of the other Obligations have been paid in full and the Aggregate Revolving Credit Commitment is terminated." 3. AMENDMENT TO SECTION 1.12(b). SECTION 1.12(b) of the Credit Agreement is hereby amended as of the Amendment Effective Date by adding the following new sentence at the end thereof to read as follows: "For avoidance of doubt and for purposes of determining whether any adjustments are required pursuant to the terms of this SECTION 1.12(b), no effect shall be given to any Obligations owing in respect of Interest Rate Agreements." 4. AMENDMENT TO SECTION 6.2. SECTION 6.2 of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the clause "and (i) the Investment by Borrower in DSG Holdings contemplated by SECTION 1.3(c) hereof' and inserting in lieu thereof the following: ", (i) the Investment by Borrower in DSG Holdings contemplated by SECTION 1.3(c) hereof and (j) Interest Rate Agreements not prohibited by SECTION 6.16 hereof." 5. AMENDMENTS TO SECTION 6.3. SECTION 6.3 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (i) deleting the word "and" immediately before the parenthetical "(h)" contained therein and inserting in lieu thereof the following: "(h) Indebtedness under Interest Rate Agreements to the extent not prohibited by SECTION 6.16 and" (ii) relettering clause "(h)" (before giving effect to this Amendment) clause "(i)". 6. AMENDMENT TO SECTION 6.6. SECTION 6.6 of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting such Section in its entirety and inserting in lieu thereof the following new Section to read as follows: "6.6 GUARANTEED INDEBTEDNESS. No Loan Party shall create, incur, assume or permit to exist any Guaranteed Indebtedness except for: (a) endorsements of instruments or items of payment for deposit to a bank account of such Loan Party; (b) performance bonds, indemnities entered into in the ordinary course of business consistent with past practices and indemnities provided under the E-commerce Transaction Documents; (c) Guaranteed Indebtedness relating to Interest Rate Agreements permitted to be incurred pursuant to SECTION 6.3; and (d) Guaranteed Indebtedness outstanding on the Closing Date and listed in SCHEDULE 6.3 and all extensions, renewals, replacements and modifications of such Guaranteed Indebtedness on terms and conditions which shall in any event be on terms no less favorable to Borrower, Agent or any Lender, as determined by Agent than the terms of the Guaranteed Indebtedness being extended, renewed, replaced or modified, including, without limitation, with respect to amount, premiums, fees, indemnities, covenants, events of default and remedies." 2 7. AMENDMENT TO SECTION 6.7(a). SECTION 6.7(a) of the Credit Agreement is hereby amended as of the Amendment Effective Date by inserting after the word "Lenders" contained therein the following parenthetical: "(or any affiliate thereof in connection with any Interest Rate Agreement not prohibited by SECTION 6.16)". 8. AMENDMENTS TO ANNEX A. ANNEX A to the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) adding the following new defined term in appropriate alphabetical order to read as follows: "'INTEREST RATE AGREEMENT' shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or similar agreement or arrangement designed to protect Borrower against fluctuations in interest rates entered into between Borrower and any financial institution; PROVIDED, that if such financial institution is not a Lender or an affiliate thereof the obligations of the Borrower in respect of any such agreement or arrangement shall be unsecured." and (b) deleting the definition of "Obligations" contained therein and inserting the following new definition in lieu thereof to read as follows: "'OBLIGATIONS' shall mean all loans, advances, debts, liabilities (including, without limitation, liabilities now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Agreement entered into by Borrower in accordance with the terms of the Agreement to which a Lender or an affiliate thereof was a counterparty at the time such interest rate agreement was entered into) and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable) owing by any Loan Party to Agent or any Lender (or any affiliate thereof in connection with any Interest Rate Agreement referred to above), and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under any of the Loan Documents or any such Interest Rate Agreement. This term includes (i) any Revolving Credit Advances made pursuant to the terms of the Existing Credit Agreement, and (ii) all principal and interest (including interest which accrues after the commencement of any case or proceeding referred to in Section 8.1 (f), (g) or (h)), on the Revolving Credit Loan, all amounts payable in respect of Letters of Credit under SECTION 1.18 or ANNEX F, all Letter of Credit Obligations, all Fees, Charges, expenses, attorneys' fees and any other sum chargeable to any Loan Party under any of the Loan Documents." 3 9. AMENDMENTS TO ANNEX B. ANNEX B to the Credit Agreement is hereby amended as of the Amendment Effective Date by (i) deleting Paragraph 3 of such Annex in its entirety and inserting in lieu thereof the following new Paragraph 3 to read as follows: "On or before the Closing Date, the banks at which the Blocked Accounts are held shall have entered into tri-party blocked account agreements (the "BLOCKED ACCOUNT AGREEMENTS") with Agent and the applicable Loan Parties, in form and substance acceptable to Agent. Each such Blocked Account Agreement shall provide, among other things, that (a) such bank executing such agreement has no rights of setoff or recoupment or any other claim against such Blocked Account, other than for payment of its service fees and other charges directly related to the administration of such account, and (b) such bank agrees to sweep on a daily basis all available amounts in the Blocked Account to the Concentration Account. Each Blocked Account shall be under the sole dominion and control of Agent and neither Borrower nor any other Person, through or under Borrower, shall have any control over the use of, or any right to withdraw any amount from, any Blocked Account; PROVIDED that, to the extent expressly permitted by Agent with respect to a Blocked Account in the applicable Blocked Account Agreement, Borrower may withdraw from such Blocked Account coins, one dollar bills, five dollar bills or ten dollar bills pursuant to a change or coin order. Without limiting the foregoing, Borrower agrees that no more than 55,000 per store per day may be ordered pursuant to such change or coin order. Borrower shall provide to Agent such projections and reports with respect to its coinage and petty cash needs and Blocked Account withdrawals in respect thereof as Agent may require from time to time." and (ii) deleting Attachment I to ANNEX B to the Credit Agreement in its entirety and inserting in lieu thereof the following new Attachment I attached hereto as Attachment I. 10. AMENDMENTS TO COLLATERAL DOCUMENTS. As of the Amendment Effective Date, the term "Lender" contained in each of the Security Agreement, the DAMC Security Agreement, the DAMC Trademark Security Agreement and the Pledge Agreement shall be deemed to include any affiliate of any Lender solely to the extent relating to Obligations incurred under any Interest Rate Agreement not prohibited by SECTION 6.16 of the Credit Agreement. 11. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower and DAMC of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") and each of the Collateral Documents referred to in Section 10 hereof, as amended hereby (collectively, the "AMENDED COLLATERAL DOCUMENTS") are 4 within Borrower's or DAMC's, as the case may be, corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) This Amendment has been duly executed and delivered by or on behalf of Borrower and DAMC. (c) Each of this Amendment, the Amended Credit Agreement and the Amended Collateral Documents constitutes a legal, valid and binding obligation of Borrower or DAMC, as the case may be, enforceable against Borrower or DAMC, as the case may be, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) No Default has occurred and is continuing both before and after giving effect to this Amendment. (e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 12. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 13. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of July 1, 2001 the aggregate outstanding principal amount of the Revolving Credit Loan is $95,150,108.75 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 5 14. EXPENSES. Borrower hereby reconfirms its obligations pursuant to SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 15. EFFECTIVENESS. This Amendment shall become effective as of July __, 2001 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to July __, 2001: (a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and DAMC. (b) BOARD RESOLUTIONS. Agent shall have received a certificate of the Secretary or an Assistant Secretary of Borrower certifying (i) the resolutions adopted by the Board of Directors of Borrower approving this Amendment and (ii) all documents evidencing other necessary corporate action by Borrower and required governmental and third party approvals, if any, with respect to this Amendment. (c) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (d) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 16. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 17. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. [SIGNATURE PAGES FOLLOW.] 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: --------- DICK'S SPORTING GOODS, INC. By: /s/ Jeffrey Hennion ----------------------------- Name: Jeffrey Hennion Title: Treasurer DAMC ---- DICK'S ASSET MANAGEMENT CORP. By: /s/ Jeffrey Hennion ------------------------- Name: Title: AGENT: ------ GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: /s/ Charles Chiodo ----------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory LENDERS: -------- GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Charles Chiodo ----------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory 7 BSB BANK & TRUST COMPANY By: /s/ John B. Westcott -------------------------------- Name: John B. Westcott Title: Administrative Vice President NATIONAL BANK OF CANADA By: /s/ Donald P. Haddad -------------------------------- Name: Donald P. Haddad Title: VP By: /s/ Eric L. Moore -------------------------------- Name: Eric L. Moore Title: V.P. THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ Evelyn Kusold -------------------------------- Name: Evelyn Kusold Title: AVP FLEET RETAIL FINANCE INC. By: /s/ James R. Dore -------------------------------- Name: James R. Dore Title: Director NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ John L. Hayes -------------------------------- Name: John L. Hayes Title: VP FIRST UNION NATIONAL BANK By:________________________________ Name: Title: 8 BSB BANK & TRUST COMPANY By: ----------------------------------- Name: Title: NATIONAL BANK OF CANADA By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: THE CIT GROUP/BUSINESS CREDIT, INC. By: ----------------------------------- Name: Title: FLEET RETAIL FINANCE INC. By: ----------------------------------- Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: ----------------------------------- Name: Title: FIRST UNION NATIONAL BANK By: /s/ Joan Anderson ----------------------------------- Name: Joan Anderson Title: Vice President 8 ATTACHMENT I ------------ ATTACHMENT I TO ANNEX B LIST OF BLOCKED ACCOUNTS, CONCENTRATION ACCOUNT AND DISBURSEMENT ACCOUNTS 1. BLOCKED ACCOUNTS. First Union National Bank One South Penn Square Widener Building, 12th Floor Philadelphia, PA 19107 Attn: Joan Anderson, Director Accounts: 2000006152109 2000006157560 2000006157699 Sun Trust Bank Mail Code TN- Chattanooga-0610 P.O. Box 1638 Chattanooga, TN Attn: Yvonne Dyer Account: 6801063238 Bank of America, N.A. One Kansas City Place Office 1200 Main Street P.O. Box 419038 Kansas City, MO 64105-2100 Attention: Edwin Schober Account: 347-426-9047 National City Bank 20 Stanwix Street, 25-181 Pittsburgh, PA 15222 Attention: Mark Sullivan Accounts: 628981860 698216277 754116050 649968091 9 657320754 Key Bank National Association 127 Public Square Cleveland, OH 44114 Attention: W. J. Kysla Account: 350011001632 Bank One, Wisconsin 200 W. College Avenue Appleton, WI 54911 Attention: Steve Kools Account: 6222561926 Bank One, West Virginia 707 Virginia St P.O. Box 1113 Attention: Marjorie Richards Account: 625905666 Fleet Bank 75 State Street Fourth Floor Boston, MA 02109 Attention: James Dore Account: 936-6072333 2. CONCENTRATION ACCOUNT. First Union National Bank One South Penn Square Widener Building, 12th Floor Philadelphia, PA 19107 Attn: Joan Anderson, Director Account: 2000006157586 3. DISBURSEMENT ACCOUNTS. First Union National Bank One South Penn Square Widener Building, 12th Floor 10 Philadelphia, PA 19107 Attn: Joan Anderson, Director Accounts: 2000006157573 2079950061539 Bank of America, N.A. One Kansas City Place Office 1200 Main Street P.O. Box 419038 Kansas City, MO 64105-2100 Attention: Edwin Schober Account: 347-627-1716 11 THIRD AMENDMENT AND WAIVER TO AMENDED AND RESTATED CREDIT AGREEMENT THIRD AMENDMENT AND CONSENT, dated as of August 3, 2001, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. AMENDMENT TO SECTION 6.2 OF THE CREDIT AGREEMENT. SECTION 6.2 of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the clause "and (j) Interest Rate Agreements not prohibited by SECTION 6.16 hereof" and inserting in lieu thereof the following: ", (j) Interest Rate Agreements not prohibited by SECTION 6.16 hereof, (k) investments by Borrower in those certain warrants (but not the exercise thereof) to purchase 400,000 shares of Global Sports, Inc., which warrants are each dated April 5, 2001 and (l) investments by Borrower in the common stock of Global Sports, Inc. to the extent and in accordance with the terms of Schedule "H" to that certain E-Commerce Agreement between Global Sports Interactive, Inc. and the Borrower, as such agreement and schedule are in effect on August 1, 2001." 3. AMENDMENTS TO ANNEX A. ANNEX A to the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) adding the following new defined term in appropriate alphabetical order to read as follows: "ELIGIBLE L/C INVENTORY" means all finished goods inventory owned by Borrower and covered by documentary Letters of Credit, which finished goods Inventory is in transit to one of Borrower's locations and which finished goods Inventory (a) is owned by Borrower, (b) is fully insured, (c) is subject to a first priority security interest in and lien upon such goods in favor of Agent (except for any possessor lien upon such goods in the possession of a freight carrier or shipping company securing only the freight charges for the transportation of such goods to Borrower), (d) is evidenced or deliverable pursuant to documents, notices, instruments, statements and bills of lading that have been delivered to Agent or an agent acting on its behalf, and (e) is otherwise deemed to be "Eligible Inventory" hereunder. (b) deleting clause (c) of the definition of "Eligible Inventory" contained therein and inserting the following new clause in lieu thereof to read as follows: (c) "is Inventory in transit (other than Eligible L/C Inventory and Inventory in transit from one of Borrower's distribution centers to one of Borrower's stores provided that such Inventory is being shipped in the normal course of business and consistent with Borrower's past practice and Agent continues to maintain a first priority perfected security interest in such Inventory)." 4. WAIVER. Agent and Lenders hereof waive the Event of Default that may arise from Borrower's failure to comply with SECTION 6.2 of the Credit Agreement solely to the extent such Event of Default relates to the Borrower's ownership of certain warrants to purchase 400,000 shares of the common stock of Global Sports, Inc., which warrants are each dated April 5, 2001. For avoidance of doubt, the foregoing waiver does not waive any violation of the Credit Agreement related to the exercise by the Borrower of any such warrants or any portion thereof. 5. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) This Amendment has been duly executed and delivered by or on behalf of Borrower. 2 (c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) No Default has occurred and is continuing after giving effect to this Amendment. (e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 6. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 7. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of July 29, 2001 the aggregate outstanding principal amount of the Revolving Credit Loan is $104,500,100.04 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 8. EXPENSES. Borrower hereby reconfirms its obligations pursuant to SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 3 9. EFFECTIVENESS. This Amendment shall become effective as of August 3, 2001 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to August 3, 2001: (a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and DAMC. (b) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (c) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 11. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. [SIGNATURE PAGES FOLLOW) 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: -------- DICK'S SPORTING GOODS, INC. By: /s/ Jeffrey Hennion ------------------------------------ Name: Jeffrey Hennion Title: Treasurer AGENT: ----- GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: ------------------------------------ Name: Its: Duly Authorized Signatory LENDERS: ------- GENERAL ELECTRIC CAPITAL CORPORATION By: ------------------------------------ Name: Its: Duly Authorized Signatory 5 BSB BANK & TRUST COMPANY By: ------------------------------- Name: Title: NATIONAL BANK OF CANADA By: ------------------------------- Name: Title: By: ------------------------------- Name: Title: THE CIT GROUP/BUSINESS CREDIT, INC. By: ------------------------------- Name: Title: FLEET RETAIL FINANCE INC. By: ------------------------------- Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: ------------------------------- Name: Title: FIRST UNION NATIONAL BANK By: ------------------------------- Name: Title: 6 The undersigned Guarantor hereby (i) acknowledges each of the amendments and waivers to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendments. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. DICK'S ASSET MANAGEMENT CORP. By: /s/ Jeffrey Hennion ------------------------------------- Name: Title: 7 FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT FOURTH AMENDMENT, dated as of September __, 2001, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. AMENDMENT TO SECTION 6.11 OF THE CREDIT AGREEMENT. SECTION 6.11 of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting clause (h) of such section in its entirety and inserting in lieu thereof the following new clause (h) to read as follows: "(h) Borrower may make payments on or after September 9, 2001 of the Indebtedness evidenced by the Preferred Stock Subordinated Notes, together with interest thereon, in accordance with the terms thereof, to the extent that (1) both before and after giving effect to any such payment no actual or pro-forma Default or Event of Default shall have occurred and be continuing, including without limitation under SECTION 6.10 hereof, (2) after giving effect to such payment, Borrower, based on the pro-forma Projections acceptable to Agent, previously provided to Agent and assuming for purposes of this clause (2) that such payment was made on the first day of the first four Fiscal Quarter period to be tested under SECTION 6.10 after the proposed date of such payment, shall be in compliance with SECTION 6.10, (3) all accounts payable of Borrower are current, or being paid according to historical practice and with normal trade terms, and (4) after giving effect to such payment Excess Borrowing Availability shall not be less than $15,000,000 for a minimum of thirty (30) days following such payment as determined by Agent based on the pro-forma Projections referred to in clause (2) above, provided that Borrower prior to making any such payment shall have delivered to Agent a certificate from a financial officer of Borrower and in form and substance satisfactory to Agent demonstrating compliance with the foregoing." 3. AMENDMENTS TO ANNEX F. ANNEX F to the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the first proviso of paragraph one thereof and replacing it with the following proviso to read as follows: "PROVIDED, that the aggregate amount of all Letter of Credit Obligations at any one time outstanding (whether or not then due and payable) shall not exceed the lesser of a) $20,000,000, (b) the Aggregate Revolving Credit Commitment MINUS the outstanding Revolving Credit Loan and (c) the Borrowing Base MINUS the outstanding Revolving Credit Loan;" 4. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) This Amendment has been duly executed and delivered by or on behalf of Borrower. (c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) No Default has occurred and is continuing after giving effect to this Amendment. (e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 2 5. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 6. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of August 31, 2001 the aggregate outstanding principal amount of the Revolving Credit Loan is $86,027,824.61 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 7. EXPENSES. Borrower hereby reconfirms its obligations pursuant to SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 8. EFFECTIVENESS. This Amendment shall become effective as of September __, 2001 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to September __, 2001: (a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and DAMC. (b) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (c) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 3 10. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. [SIGNATURE PAGES FOLLOW] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: -------- DICK'S SPORTING GOODS, INC. By: /s/ Jeffrey Hennion ------------------------------ Name: Jeffrey Hennion Title: Treasurer AGENT: ----- GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: /s/ Charles Chiodo ------------------------------ Name: Charles Chiodo Its: Duly Authorized Signatory LENDERS: ------- GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Charles Chiodo ------------------------------ Name: Charles Chiodo Its: Duly Authorized Signatory 5 BSB BANK & TRUST COMPANY By: /s/ John B. Westcott --------------------------------- Name: John B. Westcott Title: Administrative Vice President NATIONAL BANK OF CANADA By: --------------------------------- Name: Title: By: --------------------------------- Name: Title: THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ Evelyn Kusuld --------------------------------- Name: Evelyn Kusuld Title: AVP FLEET RETAIL FINANCE INC. By: /s/ James R. Dore --------------------------------- Name: James R. Dore Title: Director NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ John L. Hayes IV --------------------------------- Name: John L. Hayes IV Title: VP FIRST UNION NATIONAL BANK By: /s/ Joan Anderson --------------------------------- Name: Joan Anderson Title: Vice President 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: -------- DICK'S SPORTING GOODS, INC. By: ---------------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: ----- GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: ---------------------------------- Name: Its: Duly Authorized Signatory LENDERS: ------- GENERAL ELECTRIC CAPITAL CORPORATION By: ---------------------------------- Name: Its: Duly Authorized Signatory BSB BANK & TRUST COMPANY By: ---------------------------------- Name: Title: NATIONAL BANK OF CANADA By: /s/ Donald P. Haddad ---------------------------------- Name: Donald P. Haddad, VP 5 Title: By: /s/ Gerald B. Knell ----------------------------------- Name: Gerald B. Knell Title: VP THE CIT GROUP/BUSINESS CREDIT, INC. By: ----------------------------------- Name: Title: FLEET RETAIL FINANCE INC. By: ----------------------------------- Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: ----------------------------------- Name: Title: FIRST UNION NATIONAL BANK By: ----------------------------------- Name: Title: The undersigned Guarantor hereby (i) acknowledges each of the amendments and waivers to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the 6 The undersigned Guarantor hereby (i) acknowledges each of the amendments and waivers to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendments. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. DICK'S ASSET MANAGEMENT CORP. By: /s/ Jeffrey Hennion ------------------------------------- Name: Jeffrey Hennion Title: Vice President-Treasurer 7 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT FIFTH AMENDMENT, dated as of February __, 2002, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. AMENDMENT TO SECTION 1.3. SECTION 1.3 of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by (a) deleting the word "and" where it appears immediately prior to clause (e) and (b) adding at the end of such SECTION 1.3 a new clause (f) to read as follows: "and (f) for the Option Exercise Loan as permitted by Section 6.11(i)." 3. AMENDMENT TO SECTION 6.2. SECTION 6.2 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (a) deleting the word "and" where it appears immediately prior to clause (l) and (b) adding at the end of such SECTION 6.2 a new clause (m) to read as follows: "and (m) investments by Borrower in the form of the Option Exercise Loan and the receipt of the Option Exercise Note." 4. AMENDMENT TO SECTION 6.4. SECTION 6.4 of the Credit Agreement is hereby amended as of the Amendment Effective Date by adding immediately prior to the last sentence of such SECTION 6.4 a new clause (f) to read as follows: "and (f) Borrower may enter into the Option Exercise Loan and hold the Option Exercise Note." 5. AMENDMENT TO SECTION 6.11. SECTION 6.11 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (a) deleting the word "and" where it appears immediately prior to clause (h) and (b) adding at the end of such SECTION 6.11 a new clause (i) to read as follows: " and (i) Borrower may enter into the Option Exercise Loan." 6. AMENDMENTS TO ANNEX A OF THE CREDIT AGREEMENT. ANNEX A of the Credit Agreement is hereby amended as of the Amendment Effective Date by inserting the following new definitions in order to read as follows: "OPTION EXERCISE LOAN" means that certain loan in the principal amount of $6,195,615.00 from Borrower to the Option Exercise Party made on May 18, 2001, to enable the Option Exercise Party to exercise outstanding options to purchase Stock in Borrower. "OPTION EXERCISE NOTE" means that certain promissory note issued to Borrower by the Option Exercise Party in connection with the Option Exercise Loan. "OPTION EXERCISE PARTY" means Edward W. Stack." 7. AMENDMENT TO ANNEX F OF THE CREDIT AGREEMENT. ANNEX F of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the first proviso of paragraph one thereof and replacing it with the following proviso to read as follows: "PROVIDED, that the aggregate amount of all Letter of Credit Obligations at any one time outstanding (whether or not then due and payable) shall not exceed the lesser of (a) 25,000,000, (b) the Aggregate Revolving Credit Commitment MINUS the outstanding Revolving Credit Loan, and (c) the Borrowing Base MINUS the outstanding Revolving Credit Loan;" 8. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) This Amendment has been duly executed and delivered by or on behalf of Borrower. 2 (c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) No Default has occurred and is continuing after giving effect to this Amendment. (e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 9. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 10. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of January 30, 2002 the aggregate outstanding principal amount of the Revolving Credit Loan is $81,000,100.00 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 11. EXPENSES. Borrower hereby reconfirms its obligations pursuant to SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 12. Effectiveness. This Amendment shall become effective as of February __, 2002 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the 3 judgment of the Agent of each of the following conditions on or prior to February __, 2002: (a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and All American Sports Licensing, Inc. (b) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (c) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 13. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 14. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. [SIGNATURE PAGES FOLLOW] 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: -------- DICK'S SPORTING GOODS, INC. By: -------------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: ----- GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: -------------------------------- Name: Its: Duly Authorized Signatory LENDERS: ------- GENERAL ELECTRIC CAPITAL CORPORATION By: -------------------------------- Name: Its: Duly Authorized Signatory 5 BSB BANK & TRUST COMPANY By: -------------------- Name: Title: NATIONAL BANK OF CANADA By: -------------------- Name: Title: THE CIT GROUP/BUSINESS CREDIT, INC. By: -------------------- Name: Title: FLEET RETAIL FINANCE INC. By: -------------------- Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: -------------------- Name: Title: FIRST UNION NATIONAL BANK By: -------------------- Name: Title: 6 The undersigned Guarantor hereby (i) acknowledges each of the amendments and waivers to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. AMERICAN SPORTS LICENSING, INC. By: --------------------------- Name: Title: 7 SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT SIXTH AMENDMENT, dated as of April 3, 2002, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. AMENDMENT TO SECTION 6.2 OF THE CREDIT AGREEMENT. SECTION 6.2 of the Credit Agreement is hereby amended as of the Amendment Effective Date by amending and restating clause (k) of such Section to read as follows: "(k) investments by Borrower or ASL in those certain warrants (but, except as set forth in the proviso to this clause (k), not the exercise thereof) to purchase 400,000 shares of Global Sports, Inc., which warrants are each dated April 5, 2001, and any underlying shares acquired through the exercise thereof PROVIDED, that Borrower or ASL may only exercise such warrants on the terms contained therein if (i) Borrower has Excess Borrowing Availability of at least $5,000,000 after giving effect to any such exercise; and (ii) the exercise of such warrants is triggered by the approval by certain vendors of the sale of their products on the website maintained in the Borrower's name," 3. AMENDMENTS TO ANNEX A OF THE CREDIT AGREEMENT. ANNEX A of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by: (a) inserting the following new definitions in order to read as follows: "'ASL" means American Sports Licensing, f/k/a Dick's Asset Management Corp., a Delaware corporation and a wholly-owned Subsidiary of Borrower. "DEPOSIT ACCOUNTS" means all "deposit accounts" as such term is defined in the Code, now or hereafter held in the name of any Loan Party. "LETTER-OF-CREDIT RIGHTS" means letter-of-credit rights as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, including rights to payment or performance under a letter of credit, whether or not such Loan Party, as beneficiary, has demanded or is entitled to demand payment or performance. "SOFTWARE" means all "software" as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, other than software embedded in any category of goods, including all computer programs and all supporting information provided in connection with a transaction related to any program. "SUPPORTING OBLIGATIONS" means all supporting obligations as such term is defined in the Code, including letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property. "UNIFORM COMMERCIAL CODE JURISDICTION" means any jurisdiction that had adopted all or substantially all of Article 9 as contained in the 2000 Official Text of the Uniform Commercial Code, as recommended by the National Conference of Commissioners on Uniform State Laws and the American Law Institute, together with any subsequent amendments or modifications to the Official Text."' and (b) amending and restating the following definitions to read as follows: "ACCOUNT DEBTOR" means any Person who may become obligated to any Loan Party under, with respect to, or on account of, an Account, Chattel Paper or General Intangibles (including a payment intangible). "ACCOUNTS" means all "accounts," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, or Instruments) (including any such obligations that may be characterized as an account or contract right under the Code), (b) all of each Loan Party's rights in, to and under all purchase orders or receipts for goods or services, (c) all of each Loan Party's rights to any goods represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all rights to payment due to any Loan Party for property sold, leased, licensed, assigned or otherwise disposed of, for a policy of insurance issued or to be issued, for a secondary obligation 2 incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract, arising out of the use of a credit card or charge card, or for services rendered or to be rendered by such Loan Party or in connection with any other transaction (whether or not yet earned by performance on the part of such Loan Party), (e) all health care insurance receivables and (f) all collateral security of any kind, given by any Account Debtor or any other Person with respect to any of the foregoing. "CHATTEL PAPER" means any "chattel paper," as such term is defined in the Code, including electronic chattel paper, now owned or hereafter acquired by any Loan Party. "CODE" means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York; PROVIDED, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; PROVIDED FURTHER, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent's or any Lender's Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term "CODE" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. "DOCUMENTS" means all "documents," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located. "EQUIPMENT" means all "equipment," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located and, in any event, including all such Loan Party's machinery and equipment, including processing equipment, conveyors, machine tools, data processing and computer equipment, including embedded software and peripheral equipment and all engineering, processing and manufacturing equipment, office machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, together with all additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto. 3 "FIXTURES" means all "fixtures" as such term is defined in the Code, now owned or hereafter acquired by any Loan Party. "GENERAL INTANGIBLES" means all "general intangibles," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, including all right, title and interest that such Loan Party may now or hereafter have in or under any Contract, all payment intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real property, tangible rights or intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit, checking and other bank accounts, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of such Loan Party or any computer bureau or service company from time to time acting for such Loan Party. "GOODS" means all "goods" as defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located, including embedded software to the extent included in "goods" as defined in the Code, manufactured homes, standing timber that is cut and removed for sale and unborn young of animals. "INSTRUMENTS" means all "instruments," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located, and, in any event, including all certificated securities, all certificates of deposit, and all promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. "INVENTORY" means all "inventory," as such term is defined in the Code, now owned or hereafter acquired by any Loan Party, wherever located, and in any event including inventory, merchandise, goods and other personal property that are held by or on behalf of any Loan Party for sale 4 or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process, finished goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in such Loan Party's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software. "INVESTMENT PROPERTY" means all "investment property" as such term is defined in the Code now owned or hereafter acquired by any Loan Party, wherever located, including (i) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of any Loan Party, including the rights of any Loan Party to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (iii) all securities accounts of any Loan Party; (iv) all commodity contracts of any Loan Party; and (v) all commodity accounts held by any Loan Party. "PROCEEDS" means "proceeds," as such term is defined in the Code, including (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Loan Party from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to any Loan Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority), (c) any claim of any Loan Party against third parties (i) for past, present or future infringement of any Patent or Patent License, or (ii) for past, present or future infringement or dilution of any Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill associated with any Trademark or Trademark License, (d) any recoveries by any Loan Party against third parties with respect to any litigation or dispute concerning any of the Collateral including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral, (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock, and (f) any and all other amounts, rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral."' 4. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: 5 (a) Each of the execution, delivery and performance by Borrower of this Amendment and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT"), the Amended and Restated Security Agreement, dated as of the date hereof, between Borrower and Agent (the "AMENDED BORROWER SECURITY AGREEMENT") and the Amended and Restated Security Agreement, dated as of the date hereof, between ASL and Agent (the "AMENDED ASL SECURITY AGREEMENT") are within Borrower's or ASL's respective corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) This Amendment and the Amended Borrower Security Agreement have been duly executed and delivered by or on behalf of Borrower and the Amended ASL Security Agreement has been duly executed and delivered by or on behalf of ASL. (c) Each of this Amendment, the Amended Borrower Security Agreement and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) The Amended ASL Security Agreement constitutes a legal, valid and binding obligation of ASL enforceable against ASL, in accordance with its terms, except as enforceability may be limited by applicable bankruptcy insolvency, reorganization, moratorium or similar laws affecting creditor's rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (e) No Default has occurred and is continuing after giving effect to this Amendment. (f) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 5. NO OTHER AMENDMENTS. Except as expressly amended herein and in the Amended Borrower Security Agreement and the Amended ASL Security Agreement, the Credit Agreement, the Security Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in 6 accordance with their terms. In addition, except as specifically provided herein and in the Amended Borrower Security Agreement and the Amended ASL Security Agreement, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 6. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of April 3, 2002 the aggregate outstanding principal amount of the Revolving Credit Loan is $85,174,928.99 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 7. EXPENSES. Borrower hereby reconfirms its obligations pursuant to SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 8. Effectiveness. This Amendment shall become effective as of April 3, 2002 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to April 3, 2002: (a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders, Borrower and DAMC. (b) AMENDED BORROWER SECURITY AGREEMENT. Agent shall have received (i) a fully executed copy of the Amended Borrower Security Agreement, (ii) a Power of Attorney in the form attached thereto and (iii) completed schedules as required by the Amended Borrower Security Agreement, all in form and substance satisfactory to Agent. (c) AMENDED ASL SECURITY AGREEMENT. Agent shall have received (i) a fully executed copy of the Amended ASL Security Agreement, (ii) a Power of Attorney in the form attached thereto, and (iii) completed schedules as required by the Amended ASL Security Agreement, all in form and substance satisfactory to Agent. 7 (d) TRADEMARK SECURITY AGREEMENT AMENDMENT. Agent shall have received a fully executed amendment to the DAMC Trademark Security Agreement, in form and substance satisfactory to Agent. (e) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (e) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10. COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. [SIGNATURE PAGES FOLLOW] 8 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: -------- DICK'S SPORTING GOODS, INC. By: /s/ Jeffrey Hennion -------------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: ----- GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: -------------------------------- Name: Its: Duly Authorized Signatory LENDERS: ------- GENERAL ELECTRIC CAPITAL CORPORATION By: -------------------------------- Name: Its: Duly Authorized Signatory 9 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: -------- DICK'S SPORTING GOODS, INC. By: ------------------------------ Name: Jeffrey Hennion Title: Treasurer AGENT: ----- GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: /s/ Charles Chiodo ------------------------------ Name: Charles Chiodo Its: Duly Authorized Signatory LENDERS: ------- GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Charles Chiodo ----------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory 9 BSB BANK & TRUST COMPANY By: /s/ Lisa N. Kost ------------------------- Name: Lisa N. Kost Title: Assistant Vice President NATIONAL BANK OF CANADA By: ------------------------ Name: Title: By: ------------------------ Name: Title: THE CIT GROUP/BUSINESS CREDIT, INC. By: ------------------------ Name: Title: FLEET RETAIL FINANCE INC. By: ------------------------ Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: ------------------------ Name: Title: 10 BSB BANK & TRUST COMPANY By: ------------------------ Name: Title: PNC BANK, NATIONAL ASSOCIATION By: /s/ Eric L. Moore ------------------------ Name: Eric L. Moore Title: V.P. By: ------------------------ Name: Title: THE CIT GROUP/BUSINESS CREDIT, INC. By: ------------------------ Name: Title: FLEET RETAIL FINANCE INC. By: ------------------------ Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: ------------------------ Name: Title: [WACHOVIA] By: ------------------------ Name: Title: 10 BSB BANK & TRUST COMPANY By: ------------------------ Name: Title: NATIONAL BANK OF CANADA By: ------------------------ Name: Title: By: ------------------------ Name: Title: THE CIT GROUP/BUSINESS CREDIT, INC. By: /s/ Evelyn Kusold ------------------------ Name: Evelyn Kusold Title: AVP FLEET RETAIL FINANCE INC. By: /s/ James R. Dore ------------------------ Name: James R. Dore Title: Director NATIONAL CITY BANK OF PENNSYLVANIA By: ------------------------ Name: Title: 10 BSB BANK & TRUST COMPANY By: ------------------------ Name: Title: NATIONAL BANK OF CANADA By: ------------------------ Name: Title: By: ------------------------ Name: Title: THE CIT GROUP/BUSINESS CREDIT, INC. By: ------------------------ Name: Title: FLEET RETAIL FINANCE INC. By: ------------------------ Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ John L. Hayes IV ------------------------ Name: John L. Hayes IV Title: VP [WACHOVIA] By: ------------------------ Name: Title: 10 WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Mark S. Supple ------------------------ Name: Mark S. Supple Title: Director The undersigned Guarantor hereby (i) acknowledges each of the amendments and waivers to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. AMERICAN SPORTS LICENSING, INC. By: /s/ Gordon W. Stewart --------------------------------------- Name: Gordon W. Stewart Title: Secretary 11 SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT SEVENTH AMENDMENT, dated as of July 15, 2002, to the Amended and Restated Credit Agreement referred to below (this "AMENDMENT") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("BORROWER"), the lenders party hereto ("LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "AGENT"). WITNESSETH ---------- WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follow: 1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. AMENDMENT TO RECITAL B OF THE CREDIT AGREEMENT, Recital B of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by the deleting the amount "$170,000,000" where it appears therein and inserting in lieu thereof the amount "$180,000,000". 3. AMENDMENT TO ANNEX A. ANNEX A to the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) amending and restating the following new definitions in their entirety to read as follows: "AGGREGATE REVOLVING CREDIT COMMITMENT" shall mean $180,000,000"; "COMMITMENT TERMINATION DATE" shall mean the earliest of (a) May 30, 2006, (b) the date of termination of the Aggregate Revolving Credit Commitment pursuant to SECTION 8.2 and (c) the date of termination of the Aggregate Revolving Credit Commitment in accordance with the provisions of SECTION 1.2(d)." and (b) adding the following new definition to read as follows: "Seventh Amendment Fee Letter" shall mean that certain fee letter between Agent and Borrower dated as of July 15, 2002." 4. AMENDMENT TO APPENDIX 1. APPENDIX 1 to the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting such Appendix in its entirety and inserting in lieu thereof a new appendix to read as set forth on Appendix 1 hereto. 5. CHANGE IN LENDERS' PROPORTIONATE SHARES. Borrower and Lenders agree that upon consummation of the amendments to the Credit Agreement effected hereby, the Proportionate Share of each Lender is set forth on Appendix I attached hereto. In furtherance of the foregoing, each applicable Lender further agrees promptly to forward on the Amendment Effective Date in immediately available funds certain amounts requested by Agent directly to Agent, and Agent agrees to forward such amounts to any applicable Lender (the "LOAN ALLOCATION ADJUSTMENT") so that after giving effect to the Loan Allocation Adjustment the outstanding Revolving Credit Advances of each Lender reflects its Proportionate Share after giving effect to the Loan Allocation Adjustment. 6. REPRESENTATIONS AND WARRANTIES. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower of this Amendment and the Amended and Restated Promissory Notes referred to in Section 10(b) hereof (the "AMENDED AND RESTATED PROMISSORY NOTES") and the performance of the Credit Agreement, as amended hereby (the "AMENDED CREDIT AGREEMENT") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) This Amendment and the Amended and Restated Promissory Notes have been duly executed and delivered by or on behalf of Borrower. (c) Each of this Amendment, the Amendment and Restated Promissory Notes and the Amended Credit Agreement, constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) No Default has occurred and is continuing both before and after giving effect to this Amendment. (e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true 2 and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 7. NO OTHER AMENDMENTS. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 8. OUTSTANDING INDEBTEDNESS; WAIVER OF CLAIMS. Borrower hereby acknowledges and agrees that as of July 10, 2002 the aggregate outstanding principal amount of the Revolving Credit Loan is $83,000,100.00 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 9. EXPENSES. Borrower hereby reconfirms its obligations pursuant to SECTION 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 10. EFFECTIVENESS. This Amendment shall become effective as of July 15, 2002 (the "AMENDMENT EFFECTIVE DATE") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to July 15, 2002: (a) AMENDMENT. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Required Lenders and Borrower and acknowledged by ASL. (b) AMENDED AND RESTATED PROMISSORY NOTES. Each applicable Lender shall have received an Amended and Restated Promissory Note, which note amends and restates as of the Amendment Effective Date that Promissory Note made by Borrower in favor of such Lender. (c) BOARD RESOLUTIONS. Agent shall have received a certificate of the Secretary or an Assistant Secretary of Borrower 3 certifying (i) the resolutions adopted by the Board of Directors of Borrower approving this Amendment and the Amended and Restated Promissory Notes and (ii) all documents evidencing other necessary corporate action by Borrower and required governmental and third party approvals, if any, with respect to this Amendment and the Amended and Restated Promissory Notes. (d) LEGAL OPINION. Agent shall have received an opinion of Beveridge & Diamond, P.C., counsel to the Loan Parties, in form and substance satisfactory to Agent and Lenders. (e) SEVENTH AMENDMENT FEE LETTER. Agent shall have received a duly executed and delivered Seventh Amendment Fee Letter, in form and substance satisfactory to Agent. (f) FEES. Borrower shall have paid (i) an amendment fee to Agent for the account of each of the following Lenders in the aggregate amount of $190,625 to be distributed as follows: General Electric Capital Corporation $68,750.00; PNC Business Credit $31,250.00; Citizen's Business Credit $9,375.00; Fleet Retail Finance, Inc. $37,500.00; National City Bank of Pennsylvania $18,750.00 and Wachovia Bank, National Association $25,000.00 (ii) a closing fee to Agent for the account of each of the following Lenders in the aggregate amount of $68,750 to be distributed as follows: PNC Business Credit $12,500.00; Citizen's Business Credit $31,250.00; National City Bank of Pennsylvania $12,500.00 and Wachovia Bank, National Association $12,500.00 and (iii) all fees as set forth in the Seventh Amendment Fee Letter. (g) PAYMENT OF EXPENSES. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (h) REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 12 COUNTERPARTS. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: DICK'S SPORTING GOODS, INC. By: /s/ Jeffrey Hennion ------------------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: /s/ James DeSantis ------------------------------------- Name: James DeSantis Its: Duly Authorized Signatory LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ James DeSantis ------------------------------------- Name: James DeSantis Its: Duly Authorized Signatory 5 PNC BUSINESS CREDIT By: /s/ Stephen W. Boyd ------------------------------------- Name: Stephen W. Boyd Title: Vice President FLEET RETAIL FINANCE INC. By: /s/ James R. Dore ------------------------------------- Name: James R. Dore Title: Director NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ John L. Hayes IV ------------------------------------- Name: John L. Hayes IV Title: VP WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Mark S. Supple ------------------------------------- Name: Mark S. Supple Title: Vice President CITIZEN'S BUSINESS CREDIT By: /s/ Donald P. Haddad ------------------------------------- Name: Donald P. Haddad Title: Vice President 6 The undersigned Guarantor hereby (i) acknowledges to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. AMERICAN SPORTS LICENSING, INC. By: /s/ Jeffrey R. Hennion ------------------------------ Name: Title: 7 APPENDIX I APPENDIX I Revolving Credit Commitments and Lender Information - ------------------------------------------------------------------------------- Lender Revolving Credit Proportionate Share of - ------ Commitment Commitment ---------- ---------- - ------------------------------------------------------------------------------- GENERAL ELECTRIC $55,000,000.00 30.55556% CAPITAL CORPORATION 800 Connecticut Avenue, Two North Norwalk, CT 06854 Attn: Charles Chiodo Telephone: (203) 852-3600 Telecopy: (203) 852-3640 - ------------------------------------------------------------------------------- PNC BUSINESS CREDIT $30,000,000.00 16.66667% 245 Fifth Avenue, 6th Floor One PNC Plaza Pittsburgh, PA 15222 Attn: Eric Moore Telephone: (412) 768-1332 Telecopy: (412) 768-4369 - ------------------------------------------------------------------------------- CITIZEN'S BUSINESS $20,000,000.00 11.11111% CREDIT COMPANY Six PPG Place Suite 820 Pittsburgh, PA 15222 Attn: Bob Beer Telephone: (412) 391-3333 Telecopy: (412) 391-2580 - ------------------------------------------------------------------------------- FLEET RETAIL FINANCE $30,000,000.00 16.66667% INC. 40 Broad Street, 10th Floor Boston, MA 02109 Attn: Jim Dore Telephone: (617) 434-4184 Telecopy: (617) 434-4312 - ------------------------------------------------------------------------------- NATIONAL CITY BANK $20,000,000.00 11.11111% OF PENNSYLVANIA 20 Stanwix Street, 19th - ------------------------------------------------------------------------------- 8 - ------------------------------------------------------------------------------- Lender Revolving Credit Proportionate Share of - ------ Commitment Commitment ---------- ---------- - ------------------------------------------------------------------------------- Floor Pittsburgh, PA 15222 Attn: Vince Delie Telephone: (412) 644-6056 Telecopy: (412) 471-4883 - ------------------------------------------------------------------------------- WACHOVIA BANK, $25,000,000.00 13.88889% NATIONAL ASSOCIATION 1339 Chestnut Street Philadelphia, PA 19107 Attn: Mark Supple Telephone (267) 321-6634 Telecopy: (267) 321-6700 - ------------------------------------------------------------------------------- ------------------- ------------------------ $180,000,000.00 100.00% - ------------------------------------------------------------------------------- 9 EX-6 7 j0833601exv6.txt EXHIBIT 6 EXHIBIT 6 EIGHTH AMENDMENT AND CONSENT TO AMENDED AND RESTATED CREDIT AGREEMENT EIGHTH AMENDMENT AND CONSENT, dated as of September 12, 2002, to the Amended and Restated Credit Agreement referred to below (this "Amendment") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("Borrower"), the lenders party hereto ("Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "Agent"). W I T N E S S E T H WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. Amendment to Section 3.9 of the Credit Agreement. Section 3.9 of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date (as hereinafter defined) to read as follows: "3.9 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness. Except for ASL, Borrower has no Subsidiaries. ASL engages in no business, operations or other activities and owns no property or assets and has no liabilities other than to the extent contemplated and permitted by Section 6.5. Borrower is not engaged in any joint venture or partnership with, or, except as set forth in Schedule 3.9 an Affiliate of, another Person. Except as set forth in Schedule 3.9, there are no outstanding rights to purchase options, warrants or similar rights or agreements pursuant to which any Loan Party may be required to issue, sell or purchase any Stock or other equity security. Schedule 3.9 lists all outstanding Stock of each Loan Party and the percentage of ownership and voting interests of the owners thereof holding at least 5% of the Stock of each Loan Party as of the Schedule 3.9 Delivery Date. Schedule 6.3 lists all Indebtedness of each Loan Party as of the Closing Date." 3. Amendment to Section 6.4 of the Credit Agreement. Section 6.4 of the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) deleting the word "and" where it appears immediately prior to clause (e) of such Section 6.4; and (b) adding immediately prior to the last sentence of such Section 6.4 a new clause (f) to read as follows: "and (f) Borrower may enter into or become a party to the IPO Transactions." 4. Amendment to Section 6.5(b) of the Credit Agreement. Section 6.5(b) of the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) deleting the word "and" where it appears immediately prior to clause (vii) of such Section 6.5(b); and (b) inserting the following new clause (viii) in such Section 6.5(b) to read as follows: "and" (viii) enter into the transactions contemplated by the IPO Transactions; and" 5. Amendment to Section 6.5(c) of the Credit Agreement. Section 6.5(c) of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date to read as follows: "(c) amend its articles or certificate of incorporation, charter, by-laws or other organizational documents (other than as contemplated by the IPO Transactions); or" 6. Amendment to Section 6.11 of the Credit Agreement. Section 6.11 of the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) deleting the word "and" where it appears immediately prior to clause (i) of such Section 6.11; and (b) inserting the following new clause (j) in such Section 6.11 to read as follows: "and (j) as may be permitted under the IPO Transactions." 7. Amendment to Annex A. Annex A to the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) adding the following new definitions to read as follows: "'2002 Stock Plan' shall mean that certain 2002 Stock Plan of Borrower substantially in the form attached to the Eighth Amendment as Exhibit D thereto. 2 'Employee Stock Purchase Plan' shall mean that certain Employee Stock Purchase Plan of Borrower substantially in the form attached to the Eighth Amendment as Exhibit E thereto. 'Eighth Amendment' shall mean the Eighth Amendment and Consent to this Agreement, dated as of September 12, 2002. 'IPO' shall mean that certain proposed initial public offering of Borrower's common Stock under the Securities Act of 1933, as amended (which may include shares sold by selling stockholders, including Edward Stack and his relatives, as well as Borrower) as completed substantially as described in the Borrower's Form S-1 Registration Statement, Registration Number 333-96587 as filed with the Securities and Exchange Commission on July 17, 2002, as amended from time to time. 'IPO Transactions' shall mean the issuance of common Stock of the Borrower and sale of common Stock of certain of its stockholders, in connection with the IPO and the following transactions related to the IPO, including Borrower (i) amending and restating its Certificate of Incorporation in the form attached to the Eighth Amendment as Exhibit A; (ii) creating a new Class B common Stock with the rights set forth in such Amended and Restated Certificate of Incorporation, entering onto the Exchange Agreement in the form attached to the Eighth Amendment as Exhibit B, and issuing and selling shares of such Class B common Stock in connection with the IPO on the terms set forth in the Exchange Agreement; (iii) increasing the number of authorized shares of common Stock up to 100,000,000 shares in order to permit a stock split immediately prior to the IPO and to consummate a stock split in the form of a dividend and in the manner approved by the Board of Directors of the Borrower; (iv) amending and restating its Bylaws in the form attached to the Eighth Amendment as Exhibit C and creating three separate classes for the board of directors as set forth in such Amended and Restated Bylaws and Amended and Restated Certificate of Incorporation; (v) adopting the 2002 Stock Plan; (vi) adopting the Employee Stock Purchase Plan; (vii) entering into that certain Amendment #1 to Second Amended and Restated Registration Rights Agreement in the form attached to the Eighth Amendment as Exhibit F; (viii) terminating the Second Amended and Restated Stockholder's Agreement, dated as of June 9, 2000; (ix) entering into an Option Agreement with Edward W. Stack in substantially the form attached hereto as Exhibit G; and (x) entering into any other agreement between or among the Borrower and some or all of its stockholders and some or all of the underwriters which is deemed necessary or advisable to consummate the IPO, including 3 underwriting agreements, custody agreements, powers of attorney, lock-up agreements, cross-receipts, representation letters and other similar agreements customarily delivered in connection with the closing of an initial public offering." 'Schedule 3.9 Delivery Date' shall have the meaning assigned to it in the Eighth Amendment." and (b) amending and restating the following definition in its entirety to read as follows: 'Permitted Stock Issuance' shall mean and include the issuance of common equity interests (including awards exercisable for common Stock or Class B common Stock, shares of common Stock and Class B common Stock) by Borrower to any Person (i) so long as no Default has occurred and is continuing or would occur as a result of such issuance, in an initial public offering (x) which is underwritten by a nationally recognized investment banking firm or other Person satisfactory to Agent in its discretion, (y) in which such equity interests are distributed to at least 25 Persons (other than Persons listed on Schedule 3.9), and (z) which is made pursuant to a registration statement on Form S-1, or any successor form thereto, relating to the registration of such common equity interests under the Securities Act of 1933, as amended, and other documents and agreements (including all underwriting or similar agreements and all documents filed with the Securities and Exchange Commission) in form and substance reasonably satisfactory to Agent, (ii) under the 2002 Stock Plan, (iii) under the Employee Stock Purchase Plan, (iv) upon the exercise of warrants listed on Schedule 3.9, (v) pursuant to the IPO and/or IPO Transactions or (vi) pursuant to the Dick's Clothing and Sporting Goods, Inc. Stock Option Plan, as amended through September 19, 1995 as in effect on April 16, 1999." 8. Amendment to Annex D. Annex D to the Credit Agreement is hereby amended as of the Amendment Effective Date by inserting the following new Paragraph 15 at the end of such Annex to read as follows: "15. SEC Filings and Press Releases. To Agent and Lenders, promptly upon their becoming available, copies of: (i) all Financial Statements, reports, notices and proxy statements made publicly available by any Loan Party to its security holders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Loan Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Loan Party to the public concerning material changes or developments in the business of any such Person." 4 9. Amendment to Credit Agreement Schedules. Schedules 6.4 and 11.8 to the Credit Agreement are hereby amended and restated as of the Amendment Effective Date to read as set forth as Schedules 6.4 and 11.8 attached hereto. 10. Consent. Agent and Lenders hereby consent, as of the Amendment Effective Date, to Borrower consummating the IPO and entering into the IPO Transactions. Agent and Lenders hereby consent and confirm that the IPO and IPO Transactions satisfy all conditions of clause (i) of the definition of Permitted Stock Issuance and no additional consent is needed thereunder as to the identity of any underwriter or with respect to any documents or agreement. 11. Representations and Warranties. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower of this Amendment and the performance of the Credit Agreement, as amended hereby (the "Amended Credit Agreement") are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) This Amendment has been duly executed and delivered by or on behalf of Borrower. (c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) No Default has occurred and is continuing both before and after giving effect to this Amendment. (e) All representations and warranties of the Loan Parties contained in the Credit Agreement and other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 12. Schedule 3.9. On or before 25 days following the date on which Borrower commences its initial public offering of its common stock under the Securities Act of 1933, as amended (the "Schedule 3.9 Delivery Date"), Borrower will deliver to Agent an updated Schedule 3.9 to the Credit Agreement. 13. Use of Proceeds. Upon the completion of the IPO, Borrower shall cause the next portion of the proceeds of the IPO (after all fees and expenses of the IPO) 5 paid to Borrower (the "IPO Proceeds") to be deposited into its Concentration Account and be initially applied against any amounts outstanding under the Revolving Credit Loan. Notwithstanding anything set forth herein to the contrary, this application of the IPO Proceeds shall not be considered a permanent reduction in the Aggregate Revolving Credit Commitment. 14. No Other Amendments, Consents. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a consent to or waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 15. Outstanding Indebtedness; Waiver of Claims. Borrower hereby acknowledges and agrees that as of September 11, 2002 the aggregate outstanding principal amount of the Revolving Credit Loan is $93,000,098.20 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 16. Expenses. Borrower hereby reconfirms its obligations pursuant to Section 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 17. Effectiveness. This Amendment shall become effective as of September 12, 2002 (the "Amendment Effective Date") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to September 12, 2002: (a) Amendment. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Required Lenders and Borrower and acknowledged by ASL. (b) Board Resolutions. Agent shall have received a certificate of the Secretary or an Assistant Secretary of Borrower certifying (i) the resolutions adopted by the Board of Directors of Borrower approving this Amendment and the Amended and Restated Promissory Notes and (ii) all documents evidencing other necessary corporate action by Borrower and required governmental and third party 6 approvals, if any, with respect to this Amendment and the Amended and Restated Promissory Notes. (c) Payment of Expenses. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (d) Representations and Warranties. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 18. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 19. Counterparts. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: DICK'S SPORTING GOODS, INC. By: /s/ Jeffrey Hennion -------------------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: GENERAL ELECTRICAL CAPITAL CORPORATION, as Agent By: /s/ Charles Chiodo -------------------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory LENDERS: GENERAL ELECTRICAL CAPITAL CORPORATION By: /s/ Charles Chiodo -------------------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory 8 PNC BUSINESS CREDIT By: /s/ Stephen W. Boyd -------------------------------------- Name: Stephen W. Boyd Title: Vice President FLEET RETAIL FINANCE INC. By: /s/ James R. Dore -------------------------------------- Name: James R. Dore Title: Director NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ John L. Hayes IV -------------------------------------- Name: John L. Hayes IV Title: VP WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Mark S. Suppie -------------------------------------- Name: Mark S. Suppie Title: Vice President CITIZEN'S BUSINESS CREDIT By: /s/ Donald A. Cmar -------------------------------------- Name: Donald A. Cmar Title: Vice President 9 The undersigned Guarantor hereby (i) acknowledges to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. AMERICAN SPORTS LICENSING, INC. By: /s/ Jeffrey Hennion --------------------------------------- Name: Jeffrey Hennion Title: Assistant Treasurer 10 EXHIBIT A Amended and Restated Certificate of Incorporation 11 EX-7 8 j0833601exv7.txt EXHIBIT 7 EXHIBIT 7 NINTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND FIRST AMENDMENT TO PLEDGE AGREEMENT NINTH AMENDMENT, dated as of December 15, 2002, to the Amended and Restated Credit Agreement referred to below (this "Amendment") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("Borrower"), the lenders party hereto ("Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "Agent"). W I T N E S S E T H WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. Amendment to Section 1.3 of the Credit Agreement. Section 1.3 of the Credit Agreement is hereby amended as of the Amendment Effective Date (as hereinafter defined) by: (a) deleting the word "and" where it appears immediately prior to clause (f) of such Section 1.3; and (b) inserting the following new clause (g) to read as follows: "and (g) until and including December 15, 2003, to repurchase ("Public Repurchases") common stock of Borrower on a public securities exchange for consideration not to exceed in the aggregate the sum of $30,000,000 plus the amount of any cash proceeds received by Borrower after the effective date of the Ninth Amendment from the exercise of options issued under the Employee Stock Purchase Plan; provided, that with respect to any Public Repurchases in any Fiscal Quarter, if after giving effect thereto the aggregate amount of all Public Repurchases in such Fiscal Quarter exceeds $10,000,000 (i) the daily average Net Borrowing Availability for the thirty days prior to the date of such Public Repurchase shall not be less than $30,000,000 after giving effect to such Public Repurchase, and (ii) Borrower provides to Agent pro forma calculations showing greater than $30,000,000 daily average net Borrowing Availability for the ninety (90) days following the date of such Public Repurchase and a certificate by the CFO of Borrower reflecting the same, each in form and substance satisfactory to Agent." 3. Amendment to Section 6.3 of the Credit Agreement. Section 6.3 of the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) deleting the word "and" where it appears immediately prior to clause (i) of such Section 6.3; (b) inserting a new clause (i) to read as follows: "(i) all loans and advances made by Borrower to ASL as otherwise permitted herein that are not offset by amounts owed by Borrower to ASL pursuant to the ASL Licensing Agreement, provided that ASL shall have executed and delivered to Borrower a subordinated demand promissory note (the "ASL Intercompany Note") to evidence any such intercompany indebtedness owing at any time by ASL to Borrower, which subordinated demand promissory note shall be pledged and delivered to Agent pursuant to the Pledge Agreement as additional collateral security for the Obligations; and" (c) relettering clause "(i)" (before giving effect to this Amendment) clause "(j)". 4. Amendment to Section 6.4 of the Credit Agreement. Section 6.4 of the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) deleting the word "and" where it appears immediately prior to clause (f) of such Section 6.4; and (b) inserting a new clause (g) to read as follows: "and (g) Borrower may enter into transactions with its Affiliates, officers, directors, or employees provided such transactions are otherwise permitted by Section 1.3(g)." 5. Amendment to Section 6.5 of the Credit Agreement. Section 6.5 of the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) deleting the word "and" where it appears immediately prior to clause (b)(viii) of such Section 6.5; (b) inserting a new clause (b)(ix) to read as follows: "and (ix) repurchase the common stock of Borrower to the extent contemplated by Section 1.3(g)." and 2 (c) amending and restating the third paragraph of such section in its entirety to read as follows: "Borrower shall not permit ASL to, directly or indirectly, engage in any business or activities other than (i) subject to the next succeeding sentence, acquiring Borrower's Intellectual Property, (ii) acquiring the Intellectual Property of other Persons, provided that the consideration for such Intellectual Property does not exceed (A) $5,500,000 in any single transaction or (b) $10,000,000 in the aggregate in any Fiscal Year, and (iii) licensing the right to use such Intellectual Property to (A) Borrower pursuant to the ASL Licensing Agreement, and (B) dsports.com pursuant to the dsports.com Trademark Agreement. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, ASL shall not incur or suffer to exist any Indebtedness, liabilities or other obligations (other than operating expenses incurred in the ordinary course of business) or enter into any contract, document or instrument other than (i) the acquisition agreements, royalty and licensing agreements, guarantee and security documents referred to in the preceding sentence, (ii) the dsports.com Trademark Agreement, (iii) any agreements for accounting, legal or other professional services (including, without limitation, agreements for appraisals of the Trademarks held by ASL) and (iv) the lease for the premises located at 300 Delaware Avenue, Suite 548, Wilmington, Delaware; provided that the aggregate amount of operating expenses and other obligations incurred by ASL (excluding any obligations incurred pursuant to clause (ii) of the preceding sentence) shall not exceed $300,000 in any Fiscal Year. 6. Amendment to Section 6.11 of the Credit Agreement. Section 6.11 of the Credit Agreement is hereby amended as of the Amendment Effective Date by: (a) deleting the word "and" where it appears immediately prior to clause (j) of such Section 6.11; and (b) inserting a new clause (k) to read as follows: "and (k) Borrower may repurchase its common stock as contemplated by Section 1.3(g) hereof." 7. Amendment to Annex A. Annex A to the Credit Agreement is hereby amended as of the Amendment Effective Date by adding the following new definitions to read as follows: "ASL Intercompany Note" has the meaning assigned to it in Section 6.3(i) herein. 3 "ASL Licensing Agreement" means that certain Amended and Restated License Agreement dated as of June 25, 2001 between ASL and Borrower. "Ninth Amendment" shall mean the Ninth Amendment to this Agreement, dated as of December 15, 2002. "Public Repurchase" has the meaning assigned to it in Section 1.3(g) herein. 8. Amendment to Section 1 of the Pledge Agreement. Section 1 of the Pledge Agreement is hereby amended as of the Amendment Effective Date by: (a) deleting the word "and" where it appears immediately following clause (b) of such Section 1.3; (b) inserting the following new clause (c) to read as follows: "the Subordinated Demand Promissory Note dated as of December 15, 2002 made by ASL to Borrower (the "ASL Intercompany Note");" and (c) relettering clause "(c)" (before giving effect to this Amendment) clause "(d)". 9. Representations and Warranties. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by each Loan Party of this Amendment and the performance of the Credit Agreement, as amended hereby (the "Amended Credit Agreement"), the Pledge Agreement, as amended hereby (the "Amended Pledge Agreement"), and the ASL Intercompany Note, (collectively, the "Amendment Documents") are within such Loan Party's corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) Each of the Amendment Documents has been duly executed and delivered by or on behalf of Borrower. (c) Each of the Amendment Documents constitutes a legal, valid and binding obligation of each Loan Party signatory thereto, enforceable against such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 4 (d) No Default has occurred and is continuing both before and after giving effect to this Amendment. (e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 10. No Other Amendments. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 11. Outstanding Indebtedness; Waiver of Claims. Borrower hereby acknowledges and agrees that as of December 6, 2002 the aggregate outstanding principal amount of the Revolving Credit Loan is $79,027,172.38 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 12. Expenses. Borrower hereby reconfirms its obligations pursuant to Section 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 13. Effectiveness. This Amendment shall become effective as of December 15, 2002 (the "Amendment Effective Date") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to December 15, 2002: (a) Amendment. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Required Lenders and Borrower and acknowledged by ASL. (b) Board Resolutions. Agent shall have received a certificate of the Secretary or an Assistant Secretary of Borrower 5 certifying (i) the resolutions adopted by the Board of Directors of Borrower approving this Amendment and (ii) all documents evidencing other necessary corporate action by Borrower and required governmental and third party approvals, if any, with respect to this Amendment. (c) Intercompany Note. Agent shall have received a true, complete and correct copy of the ASL Intercompany Note, in form and substance satisfactory to Agent. (d) Payment of Expenses. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (e) Representations and Warranties. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 14. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 15. Counterparts. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: DICK'S SPORTING GOODS, INC. By:___________________________ Name: Jeffrey Hennion Title: Treasurer AGENT: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By:___________________________ Name: Its: Duly Authorized Signatory LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION By:___________________________ Name: Its: Duly Authorized Signatory 7 PNC BUSINESS CREDIT By:___________________________ Name: Title: FLEET RETAIL FINANCE INC. By:___________________________ Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By:___________________________ Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION By:___________________________ Name: Title: CITIZEN'S BUSINESS CREDIT By:___________________________ Name: Title: 8 The undersigned Guarantor hereby (i) acknowledges to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. AMERICAN SPORTS LICENSING, INC. By:_______________________________ Name: Title: 9 EX-8 9 j0833601exv8.txt EXHIBIT 8 Exhibit 8 TENTH AMENDMENT AND WAIVER TO AMENDED AND RESTATED CREDIT AGREEMENT TENTH AMENDMENT AND WAIVER, dated as of August 7, 2003, to the Amended and Restated Credit Agreement referred to below (this "Amendment") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("Borrower"), the lenders party hereto ("Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "Agent"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); and WHEREAS, Borrower and Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. 2. Amendment to Section 4. 1 of the Credit Agreement. Section 4.1 of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date (as hereinafter defined) to read as follows: "4. 1 Reports and Notices. Borrower covenants and agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent and each Lender the Financial Statements, Projections, Liquidity Projections and notices at the times and in the manner set forth in Annex D hereto; provided, however, that the Annual Operating Plan shall only be delivered to Agent and shall not be required to be delivered to any Lender unless Excess Borrowing Availability is less than $25,000,000 for three consecutive Business Days during any Fiscal Year (the "AOP Trigger Date"), in which case Borrower shall promptly provide a revised Annual Operating Plan to Agent and Lenders for the remainder of such Fiscal Year (and if the AOP Trigger Date occurs during the last Fiscal Quarter of such Fiscal Year, an Annual Operating Plan for the following Fiscal Year delivered prior to the first day of such Fiscal Year). Concurrently with the delivery of the annual audited financial statements referenced in the first sentence of this Section 4.1, Borrower shall cause to be delivered to Agent and each Lender a certificate of Borrower's independent certified public accountants certifying that during the course of performing their audit of Borrower they did not become aware of any Default under the Loan Documents or specifying each Default of which they became aware." 3. Amendment to Section 6.3. Section 6.3 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (a) deleting the "and" where it appears prior to clause (i) thereof and (b) inserting the following new clause (j) at the end thereof to read as follows: "and (j) Indebtedness in the form of non-cash obligations for construction in progress of leased facilities, as reflected on certain of Borrower's Financial Statements as 'Non-cash obligations for CIP - Leased Facilities." 4. Amendment to Annex A. Annex A to the Credit Agreement is hereby amended as of the Amendment Effective Date by (a) inserting the following new definitions on order therein to read as follows: "Annual Operating Plan" shall mean the annual operating plan and related projections required to be delivered under paragraph 6 of Annex D. "AOP Trigger Date" has the meaning assigned to it in Section 4.1." "Liquidity Projections" has the meaning assigned to it in Paragraph 6A of Annex D. and (b) amending and restating the following definition in its entirety to read as follows: "Projections" shall mean the projections referred to in paragraph 2 of Schedule 3.4 and as of any date the consolidated and consolidating balance sheet, statements of income and cash flow for Borrower and its Subsidiaries (including forecasted Capital Expenditures and Net Borrowing Availability) (i) by month for each of the Fiscal Years ending 2000, 2001 and 2002 and (ii) the Annual Operating Plan, the Liquidity Projections and any other projections required to be delivered by Borrower to Agent and Lenders under the Agreement. 5. Amendment to Annex D of the Credit Agreement. Annex D of the Credit Agreement is hereby amended as of the Amendment Effective Date by inserting the following new paragraph 6A after paragraph 6 to read as follows: "6A. Not later than the end of each Fiscal Year, statements of projected Inventory, projected Net Borrowing Availability and projected aggregate Revolving Credit Advances outstanding for the following Fiscal Year, 2 each in form and substance reasonably acceptable to Agent (the "Liquidity Projections")." 6. Amendment to Annex F of the Credit Agreement. Annex F of the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the first proviso of paragraph one thereof and replacing it with the following proviso to read as follows: "provided, that the aggregate amount of all Letter of Credit Obligations at any one time outstanding (whether or not then due and payable) shall not exceed the lesser of (a) $50,000,000, (b) the Aggregate Revolving Credit Commitment minus the outstanding Revolving Credit Loan, and (c) the Borrowing Base minus the outstanding Revolving Credit Loan;" 7. Waiver. As of the Amendment Effective Date, Agent and Lenders hereby waive any Events of Default arising out of Borrower's failure to comply with the provisions in paragraph 6 of Annex D requiring delivery of the Annual Operating Plan within 90 days of the close of the Fiscal Year ended February 1, 2003. 8. Representations and Warranties. To induce Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower and each Guarantor of this Amendment and the performance of the Credit Agreement, as amended hereby (the "Amended Credit Agreement") are within Borrower's and each Guarantor's corporate power and have been duly authorized by all necessary corporate and shareholder action. (b) This Amendment has been duly executed and delivered by or on behalf of Borrower and each Guarantor. (c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower and each Guarantor enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) Except as waived pursuant to Section 4 of this Amendment, no Default has occurred and is continuing both before and after giving effect to this Amendment. (e) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 3 9. No Other Amendments/Waivers. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, except as specifically provided herein, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document and shall not be deemed to prejudice any right or rights which Agent or any Lender may now have or may have in the future under or in connection with any Loan Document or any of the instruments or agreements referred to therein, as the same may be amended from time to time. 10. Outstanding Indebtedness; Waiver of Claims. Borrower hereby acknowledges and agrees that as of August 7, 2003 the aggregate outstanding principal amount of the Revolving Credit Loan is $37,572,921.90 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Lender which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 11. Expenses. Borrower hereby reconfirms its obligations pursuant to Section 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 12. Effectiveness. This Amendment shall become effective as of August 7, 2003 (the "Amendment Effective Date") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to August 7, 2003: (a) Amendment. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders and Borrower and acknowledged by ASL. (b) Operating Plan. Agent shall have received the Annual Operating Plan for the current Fiscal Year, in form and substance satisfactory to Agent. (c) Payment of Expenses. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (d) Representations and Warranties. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 4 13. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 14. Counterparts. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: DICK'S SPORTING GOODS, INC. By: /s/ Jeffrey Hennion -------------------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: -------------------------------------- Name: Its: Duly Authorized Signatory LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION By: -------------------------------------- Name: Its: Duly Authorized Signatory 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: DICK'S SPORTING GOODS, INC. By: -------------------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: /s/ Charles Chiodo -------------------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Charles Chiodo -------------------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory 6 PNC BUSINESS CREDIT By: /s/ Stephen W. Boyd -------------------------------------- Name: Stephen W. Boyd Title: Vice President FLEET RETAIL FINANCE INC. By: -------------------------------------- Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: -------------------------------------- Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION By: -------------------------------------- Name: Title: CITIZEN'S BANK OF PENNSYLVANIA By: -------------------------------------- Name: Title: 7 PNC BUSINESS CREDIT By: -------------------------------------- Name: Title: FLEET RETAIL FINANCE INC. By: /s/ James R. Dore -------------------------------------- Name: James R. Dore Title: Managing Director NATIONAL CITY BANK OF PENNSYLVANIA By: -------------------------------------- Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION By: -------------------------------------- Name: Title: CITIZEN'S BANK OF PENNSYLVANIA By: -------------------------------------- Name: Title: 7 PNC BUSINESS CREDIT By: -------------------------------------- Name: Title: FLEET RETAIL FINANCE INC. By: -------------------------------------- Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ John L. Hayes IV -------------------------------------- Name: John L. Hayes IV Title: Vice President WACHOVIA BANK, NATIONAL ASSOCIATION By: -------------------------------------- Name: Title: CITIZEN'S BANK OF PENNSYLVANIA By: -------------------------------------- Name: Title: PNC BUSINESS CREDIT By: -------------------------------------- Name: Title: FLEET RETAIL FINANCE INC. By: -------------------------------------- Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: -------------------------------------- Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ William F. Fox -------------------------------------- Name: William F. Fox Title: Vice President CITIZEN'S BUSINESS CREDIT By: -------------------------------------- Name: Title: 7 PNC BUSINESS CREDIT By: -------------------------------------- Name: Title: FLEET RETAIL FINANCE INC. By: -------------------------------------- Name: Title: NATIONAL CITY BANK OF PENNSYLVANIA By: -------------------------------------- Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION By: -------------------------------------- Name: Title: CITIZEN'S BANK OF PENNSYLVANIA By: /s/ Donald Cmar -------------------------------------- Name: Donald Cmar Title: V.P. 7 The undersigned Guarantor hereby (i) acknowledges to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. AMERICAN SPORTS LICENSING, INC. By: /s/ Jeffrey R. Hennion ------------------------------------------ Name: Jeffrey R. Hennion Title: Treasurer 8 EX-9 10 j0833601exv9.txt EXHIBIT 9 EXHIBIT 9 ELEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT ELEVENTH AMENDMENT, dated as of January 29, 2004, to the Amended and Restated Credit Agreement referred to below (this "Amendment") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("Borrower"), the lenders party hereto ("Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "Agent"). W I T N E S S E T H WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); and WHEREAS, Borrower and Required Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms not otherwise defined herein (including in the recitals hereto) shall have the meanings ascribed to them in the Credit Agreement. 2. Amendment to the first paragraph of Section 6.5 of the Credit Agreement. The first paragraph of Section 6.5 of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date (as hereinafter defined) to read as follows: "Capital Structure and Business. No Loan Party shall: (a) make any changes in its business objectives, purposes or operations which, individually or in the aggregate, could in any way adversely affect the repayment of the Obligations or reasonably be expected to have or result in a Material Adverse Effect; (b) make any change in its capital structure, including the issuance or sale of any shares of Stock, warrants or other securities convertible into Stock or any revision of the terms of its outstanding Stock; provided that Borrower may (i) issue or sell shares of its Stock (other than any Stock of any class which is preferred as to dividends or as to the distribution of assets upon the voluntary or involuntary dissolution, liquidation or winding up of any Loan Party, except for any Permitted Stock Issuance or any Stock issued in accordance with the terms of the Preferred Stock Subordinated Notes) so long as no Change of Control occurs after giving effect thereto, or make any revision of the terms of its outstanding Stock or amend or modify any partners, shareholders, voting or similar agreement to which it is a party or enter into any such agreement, (ii) enter into the DSG Holdings Limited Liability Company Agreement, (iii) form a wholly-owned Subsidiary ("Newco") for the sole purpose of acquiring any Stock held by Borrower in DSG Holdings, (iv) repurchase the common stock of Borrower to the extent contemplated by Section 1.3(c), (v) enter into that certain Second Amended and Restated Stockholders' Agreement in substantially the form of Exhibit H attached hereto, (vi) enter into that certain Second Amended and Restated Registration Rights Agreement in substantially the form of Exhibit I attached hereto, (vii) relinquish the October 2000 Warrants as described in the Information Statement, (viii) terminate the purchase agreements under which the Preferred Stock was issued, (ix) enter into the transactions contemplated by the IPO Transactions, and (x) repurchase the common stock of Borrower to the extent contemplated by Section 1.3(g); and (c) amend its articles or certificate of incorporation, charter, by-laws or other organizational documents; provided that Borrower may amend its charter or bylaws in a manner that not would adversely affect Agent or Lenders or Borrower's duty or ability to repay the Obligations; or (d) engage in any business other than the retail sale of clothing and sporting goods." 3. Amendment to Section 6.11 of the Credit Agreement. Section 6.11 of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date to read as follows: "Section 6.11 Restricted Payments. No Loan Party shall make any Restricted Payment to any Person except that: (a) any Subsidiary of Borrower may make Restricted Payments to Borrower; (b) subject to the terms of the Subordination Agreement, Borrower may make regularly scheduled payments of principal and interest on the Subordinated Note; (c) Borrower may make regularly scheduled payments of principal and interest on the Richard T. Stack Notes, as in effect on the date hereof; (d) Borrower may make the payments to Martin Stack contemplated by Section 6.4(b); (e) Borrower may make payments to Stack Associates, L.P. and EWS Development Corp. in accordance with the terms of those two leases as in effect on the date hereof referred to in items 6 and 7 of Schedule 6.4; (f) Borrower may make capital contributions to DSG Holdings in accordance with Section 1.2 of the DSG Holdings Contribution Agreement and as contemplated by Section 1.3(c) hereof; (g) Borrower may repurchase its common stock as contemplated by Section 1.3(d) hereof and the Information Memorandum; (h) Borrower may make payments on or after September 9, 2001 of the Indebtedness evidenced by the Preferred Stock Subordinated Notes, together with interest thereon, in accordance with the terms thereof, to the extent that (1) both before and after giving effect to any such payment no actual or pro-forma Default or Event of Default shall have occurred and be continuing, including without limitation under Section 6.10 hereof, (2) after giving effect to such payment, Borrower, based on the pro-forma 2 Projections acceptable to Agent, previously provided to Agent and assuming for purposes of this clause (2) that such payment was made on the first day of the first four Fiscal Quarter period to be tested under Section 6.10 after the proposed date of such payment, shall be in compliance with Section 6.10, (3) all accounts payable of Borrower are current, or being paid according to historical practice and with normal trade terms, and (4) after giving effect to such payment Excess Borrowing Availability shall not be less than $15,000,000 for a minimum of thirty (30) days following such payment as determined by Agent based on the pro-forma Projections referred to in clause (2) above, provided that Borrower prior to making any such payment shall have delivered to Agent a certificate from a financial officer of Borrower and in form and substance satisfactory to Agent demonstrating compliance with the foregoing; (i) Borrower may enter into the Option Exercise Loan, (j) as may be permitted under the IPO Transactions, (k) Borrower may repurchase its common stock as contemplated by Section 1.3(g) hereof, and (l) Borrower may make dividends and distributions in the form of Stock to its Stockholders to the extent permitted by Section 6.5(b)(i) hereof." 4. Representations and Warranties. To induce Required Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower and each Guarantor of this Amendment and the performance of the Credit Agreement, as amended hereby (the "Amended Credit Agreement") are (i) within Borrower's and each Guarantor's corporate power and have been duly authorized by all necessary corporate and shareholder action; (ii) do not contravene any provision of any Loan Party's charter or bylaws or equivalent organizational or charter or other constituent documents; (iii) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (iv) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which any Loan Party is a party or by which any Loan Party or any of its property is bound; (v) do not result in the creation or imposition of any Lien upon any of the property of any Loan Party other than those in favor of Agent, on behalf of itself and the Lenders, pursuant to the Loan Documents; and (vi) do not require the consent or approval of any Governmental Authority or any other Person. (b) This Amendment has been duly executed and delivered by or on behalf of Borrower and each Guarantor. (c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower and each Guarantor enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, 3 moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) No Default or Event of Default has occurred and is continuing both before and after giving effect to this Amendment. (e) No action, claim or proceeding is now pending or, to the knowledge of any Loan Party signatory hereto, threatened against such Loan Party, at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators, which challenges such Loan Party's right, power, or competence to enter into this Amendment or, to the extent applicable, perform any of its obligations under this Amendment, the Amended Credit Agreement or any other Loan Document, or the validity or enforceability of this Amendment, the Amended Credit Agreement or any other Loan Document or any action taken under this Amendment, the Amended Credit Agreement or any other Loan Document or which if determined adversely could have or result in a Material Adverse Effect. To the knowledge of each Loan Party, there does not exist a state of facts which is reasonably likely to give rise to such proceedings. (f) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 5. Remedies. This Amendment shall constitute a Loan Document. The breach by any Loan Party of any representation, warranty, covenant or agreement in this Amendment shall constitute an immediate Event of Default hereunder and under the other Loan Documents. 6. No Other Amendments/Waivers. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document by the Agent or the Lenders with respect to any right or remedy which the Agent or the Lenders may now or in the future have under the Loan Documents, at law or in equity or otherwise or be deemed to prejudice any rights or remedies which the Agent or the Lenders may now have or may have in the future under or in connection with any Loan Document or under or in connection with any Default or Event of Default which may now exist or which may occur after the date hereof. The Credit Agreement and all other Loan Documents are hereby in all respects ratified and confirmed. 7. Outstanding Indebtedness; Waiver of Claims. Borrower hereby acknowledges and agrees that as of January 29, 2004 the aggregate outstanding principal amount of the Revolving Credit Loan is $639,738.99 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or 4 deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Indemnified Person which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 8. Expenses. Borrower hereby reconfirms its obligations pursuant to Section 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 9. Effectiveness. This Amendment shall become effective as of January [__], 2004 (the "Amendment Effective Date") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to January [__], 2004: (a) Amendment. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders and Borrower and acknowledged by ASL. (b) Payment of Expenses. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (c) Representations and Warranties. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 11. Counterparts. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: DICK'S SPORTING GOODS, INC. By: /s/ Jeffrey Hennion ----------------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: /s/ Charles Chiodo ----------------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Charles Chiodo ----------------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory 6 PNC BUSINESS CREDIT By: /s/ Stephen W. Boyd ----------------------------------- Name: Stephen W. Boyd Title: Vice President FLEET RETAIL FINANCE INC. By: /s/ James R. Dore ----------------------------------- Name: James R. Dore Title: Managing Director NATIONAL CITY BANK OF PENNSYLVANIA By: ----------------------------------- Name: Title: WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Anthony D. Braxton ----------------------------------- Name: Anthony D. Braxton Title: Director CITIZEN'S BANK OF PENNSYLVANIA By: /s/ Don Cmar ----------------------------------- Name: Don Cmar Title: Vice President 7 The undersigned Guarantor hereby (i) acknowledges to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. AMERICAN SPORTS LICENSING, INC. By: /s/ Patricia F. Genzel ---------------------------------- Name: Patricia F. Genzel Title: Vice President 8 EX-10 11 j0833601exv10.txt EXHIBIT 10 EXHIBIT 10 TWELFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT TWELFTH AMENDMENT, dated as of February 11, 2004, to the Amended and Restated Credit Agreement referred to below (this "Amendment") among DICK'S SPORTING GOODS, INC., a Delaware corporation ("Borrower"), the lenders party hereto ("Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for the Lenders (in such capacity, "Agent"). W I T N E S S E T H WHEREAS, Borrower, Lenders and Agent are parties to that certain Amended and Restated Credit Agreement, dated as of July 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); and WHEREAS, Borrower and Required Lenders have agreed to amend the Credit Agreement in the manner, and on the terms and conditions, provided for herein; NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms not otherwise defined herein (including in the recitals hereto) shall have the meanings ascribed to them in the Credit Agreement. 2. Amendment to Section 6.1 of the Credit Agreement. Section 6.1 of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date (as hereinafter defined) to read as follows: "6.1 Mergers, Subsidiaries, Etc. No Loan Party shall, directly or indirectly, by operation of law or otherwise, merge, consolidate or otherwise combine with any Person or acquire or hold all or substantially all of the assets or capital stock of any Person or form, acquire or hold any Subsidiary, except that Borrower may hold any portion of the stock of DSG Holdings and/or all of the Stock of DAMC and so long as no Default has occurred and is continuing DAMC may merge with and into Borrower so long as Borrower is the surviving entity of such merger." 3. Amendment to Section 6.2 of the Credit Agreement. Section 6.2 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (a) deleting the "and" where it appears prior to clause (i) thereof, and (b) inserting the following new clauses (n) and (o) at the end thereof to read as follows: "(n) Investments in Permitted Investments, provided that (i) the aggregate outstanding principal amount of such Permitted Investments shall not exceed $20,000,000 at any time, unless the Borrower shall have Excess Availability at such time of at least $50,000,000, and (ii) such Permitted Investments are subject to a first priority perfected Lien of Agent for the benefit of Lenders; and (o) Investments in the Convertible Note Hedge." 4. Amendment to Section 6.3 of the Credit Agreement. Section 6.3 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (a) deleting the "and" where it appears prior to clause (k) thereof, and (b) inserting the following new clause (l) at the end thereof to read as follows: "and (l) Indebtedness evidenced by the Convertible Notes in an aggregate principal amount at maturity not in excess of $290,000,000, and the Convertible Note Warrant Transaction, provided that the terms of the Convertible Note Documents are substantially as described in the draft Offering Memorandum for Senior Convertible Notes due 2024 dated February [__], 2004 and attached as Annex G hereto. 5. Amendment to the first paragraph of Section 6.5 of the Credit Agreement. Clause (b) of the first paragraph of Section 6.5 of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date to read as follows: "(b) make any change in its capital structure, including the issuance or sale of any shares of Stock, warrants or other securities convertible into Stock or any revision of the terms of its outstanding Stock; provided that Borrower may (i) issue or sell shares of its Stock (which shall include any Permitted Stock Issuance or any Stock issued in accordance with the terms of the Preferred Stock Subordinated Notes, but shall not include any other issuance or sale of any Stock of any class which is preferred as to dividends or as to the distribution of assets upon the voluntary or involuntary dissolution, liquidation or winding up of any Loan Party) so long as no Change of Control occurs after giving effect thereto, or make any revision of the terms of its outstanding Stock or amend or modify any partners, shareholders, voting or similar agreement to which it is a party or enter into any such agreement, (ii) enter into the DSG Holdings Limited Liability Company Agreement, (iii) form a wholly-owned Subsidiary ("Newco") for the sole purpose of acquiring any Stock held by Borrower in DSG Holdings, (iv) repurchase the common stock of Borrower to the extent contemplated by Section 1.3(c), (v) enter into that certain Second Amended and Restated Stockholders' Agreement in substantially the form of Exhibit H attached hereto, (vi) enter into that certain Second Amended and Restated Registration Rights Agreement in substantially the form of Exhibit I attached hereto, (vii) relinquish the October 2000 Warrants as described in the Information Statement, (viii) terminate the purchase agreements under which the Preferred Stock was issued, including rights to purchase Stock as provided in Section 4.21 of the Convertible Note Indenture, (ix) enter into the transactions contemplated by the IPO Transactions, (x) repurchase the common stock of Borrower to the extent contemplated by Section 1.3(g), (xi) issue warrants pursuant to the Convertible Note Warrant Transaction, (xii) issue the Convertible Notes, (xiii) issue Stock upon conversion of the Convertible Notes, 2 (xiv) issue Stock upon exercise of the warrants issued pursuant to the Convertible Note Warrant Transaction, (xv) enter into the Convertible Note Hedge and receive or acquire Stock thereunder, and (xvi) enter into the Registration Rights Agreement;" 6. Amendment to Section 6.11 of the Credit Agreement. Section 6.11 of the Credit Agreement is hereby amended as of the Amendment Effective Date by (a) deleting the "and" where it appears prior to clause (l) thereof, and (b) inserting the following new clause (m) at the end thereof to read as follows: "and (m) Borrower may make (i) regularly scheduled payments of interest to holders of the Convertible Notes, (ii) payments in cash or Stock upon conversion of any of the Convertible Notes pursuant to Section 4.1 of the Convertible Note Indenture and paragraph 9 of the Convertible Notes; (iii) payments in cash on or after February 11, 2009 upon redemption of the Convertible Notes pursuant to Section 3.8 of the Convertible Note Indenture and paragraph 7 of the Convertible Notes, (iv) payments in cash on or after February 11, 2009 upon redemption of the Convertible Notes by the Borrower pursuant to Section 3.1 of the Convertible Note Indenture and paragraph 6 of the Convertible Notes, provided that no Default or Event of Default has occurred and is continuing both before and after giving effect to any such payment, (v) payment in cash of the aggregate principal amount of the Convertible Notes upon maturity or upon acceleration, (vi) payment of liquidated damages to the holders of Convertible Notes pursuant to Section 3 of the Registration Rights Agreement, (vii) payments in cash or Stock pursuant to the Convertible Notes Warrant Transaction, (viii) any payments required for registration expenses pursuant to Section 5 of the Registration Rights Agreement, and (ix) payment of the Change in Control Purchase Price (as defined in Section 3.9(c) of the Convertible Note Indenture) of any Convertible Notes upon a Change in Control (as defined in Section 3.9(a) of the Convertible Note Indenture) pursuant to Section 3.9 of the Convertible Note Indenture and paragraph 7 of the Convertible Notes." 7. Amendment to Section 6.21 of the Credit Agreement. Section 6.21 of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date to read as follows: "6.21 Limitations on Modifications of Subordinated Note, Preferred Stock Subordinated Notes and Convertible Notes. Borrower shall not amend, modify or change, or consent or agree to any amendment, modification or change to, any of the terms or provisions of the Subordinated Note, any Preferred Stock Subordinated Note, any Convertible Note Document, or, in each case, any documents relating thereto (other than any such amendment, modification or change which would only extend the maturity or reduce the amount of any payment of 3 principal thereof or premium thereon or which would reduce the rate or extend the date for payment of interest thereon). Notwithstanding the foregoing, Borrower may amend, modify or change, or consent or agree to any amendment, modification or change to, any of the terms or provisions of any Convertible Note Document, or any document relating thereto, unless such amendment, modification or change would have an adverse effect on the Lenders. The Lenders acknowledge that any amendment, modification or change required by the Trust Indenture Act of 1939, or by the United States Securities and Exchange Commission, shall not be deemed to have an adverse effect on the Lenders." 8. Amendment to Section 6.16 of the Credit Agreement. Section 6.16 of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date to read as follows: "6.16 No Speculative Investments. No Loan Party shall engage in any speculative investment or any investment involving commodity options or futures contracts. For purposes of this Section 6.16, neither the Convertible Note Hedge nor the Convertible Note Warrant Transaction shall be deemed to be a speculative investment." 9. Amendment to Section 8.1(m) of the Credit Agreement. Section 8.1(m) of the Credit Agreement is hereby amended and restated as of the Amendment Effective Date to read as follows: "(m) There shall occur any default or event of default under the Subordinated Note, any Preferred Stock Subordinated Note or any Convertible Note Document. " 10. Amendment to Annex A. Annex A to the Credit Agreement is hereby amended as of the Amendment Effective Date by inserting the following new definitions on order therein to read as follows: "'Convertible Note Documents' shall mean the Convertible Note Indenture, the Convertible Notes, the Convertible Note Hedge, the Convertible Note Warrants, any other agreement or instrument now or hereafter executed pursuant thereto or in connection therewith, in each case as such agreements and instruments may be amended, supplemented, waived or otherwise modified from time to time, in each case, subject to the limitations in Section 6.21 hereof. 'Convertible Note Hedge' shall mean that certain transaction entered into pursuant to that certain Confirmation of OTC Convertible Note Hedge dated as of February [__], 2004, by and between Borrower and Merrill Lynch International, and that certain Guarantee of Merrill Lynch & Co., Inc. dated as of February [__], 2004 in favor of Borrower, each in substantially the same form as the draft dated February [__], 2004 4 attached as Annex H hereto, as each such agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. 'Convertible Note Indenture' shall mean that certain Indenture by and between the Borrower and Wachovia Bank, N.A., as trustee, in substantially the same form as the draft dated February [__], 2004 attached as Annex I hereto, as such agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. 'Convertible Note Warrant Transaction' shall mean that certain transaction entered into pursuant to the Confirmation of OTC Warrant Transaction dated as of February 12, 2004, by and between Borrower and Merrill Lynch International, and that certain Guarantee of Merrill Lynch & Co., Inc. dated as of February 12, 2004 in favor of Borrower, as each such agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. 'Convertible Notes' shall mean the Senior Convertible Notes due 2024 issued by the Borrower pursuant to the Convertible Note Indenture, in substantially the same form as Exhibit A to the form of Convertible Note Indenture attached as Annex I hereto, as such Convertible Notes may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. 'Excess Availability' shall mean, at any time, (a) Borrowing Availability, minus (b) the aggregate Revolving Credit Loan then outstanding, minus (c) the aggregate amount of all then outstanding and unpaid trade payables and other obligations of Borrower which are outstanding more than sixty (60) days past due as of such time, minus (d) without duplication, the amount of checks issued by Borrower to pay trade payables and other obligations which are more than sixty (60) days past due as of such time, but not yet sent. 'Permitted Investments' shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of three years or less from the date of acquisition issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided, that, the full faith and credit of the United States of America is pledged in support thereof; (b) obligations of state and local governments or agencies thereof (including variable rate demand notes and auction rate securities) with a maturity date or reset period of one year or less from the date of acquisition; (c) commercial paper with a maturity of one year or less from the date of acquisition issued by a corporation (except an Affiliate of Borrower) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 5 by Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. ("S&P") or at least P-1 by Moody's Investors Service, Inc. ("Moody's"); (d) corporate notes (including variable rate demand notes, auction rate securities and Eurodollar notes) issued by a corporation (except an Affiliate of Borrower) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A2 by S&P or at least A by Moody's with a maturity date of two years or less from the date of acquisition; (e) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $500,000,000; (f) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year or less from the date of acquisition; provided, that, the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (g) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (f) above. 'Registration Rights Agreement' means that certain Registration Rights Agreement entered into among the Borrower, Merrill, Lynch, Pierce, Fenner & Smith Incorporated and any other initial purchasers of the Convertible Notes, as amended, supplemented or otherwise modified in accordance with the terms hereof and thereof." 11. Amendment to Annex A. Annex A to the Credit Agreement is hereby amended as of the Amendment Effective Date by amending and restating each of the following definitions in its entirety to read as follows: "'Change of Control' shall mean (a) the failure of the Permitted Holders to directly own Stock of Borrower representing 51% or more of the voting capital stock of Borrower or to Control Borrower; or (b) the Permitted Holders shall cease to have the power to designate or elect a majority of Borrower's board of directors or a majority of Borrower's board of directors at any time in office are no longer designated or elected by the Permitted Holders, or (c) a Change in Control, as defined in the Convertible Note Indenture. 'Restricted Payment' shall mean, with respect to any Person, either directly or indirectly, (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of such Person's Stock, (b) 6 any payment on account of the purchase, redemption, defeasance or other retirement, or to obtain the surrender of, such Person's Stock or any other payment or distribution made in respect thereof, (c) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder or Affiliate of such Person other than relating to salaries, bonuses and other compensation to such Person's officers, directors and employees in the ordinary course of business consistent with past practice, (d) any payment, purchase, redemption, retirement, or other acquisition for value or setting apart of any money for a sinking, or other analogous fund for the purchase, redemption, retirement or other acquisition of, or to obtain the surrender of, or any payment (scheduled, voluntary or other) of principal of or interest on, or any other amount owing in respect of, any Subordinated Note or any other Subordinated Debt, or any Convertible Note or (e) any payment of a claim for the recision of the purchase or sale of, or for material damages arising from the purchase or sale of any Stock of such Person, or of a claim for indemnification or contribution arising out of or relating to any such claim for damages or recision." 12. Convertible Note Documents. Borrower shall deliver to Agent true and correct executed copies of the Convertible Note Documents promptly upon issuance of the Convertible Notes. 13. Schedule 3.9. On or before 25 days following the date on which Borrower issues the Convertible Notes, Borrower will deliver to Agent an updated Schedule 3.9 to the Credit Agreement. 14. Representations and Warranties. To induce Required Lenders and Agent to enter into this Amendment, Borrower hereby represents and warrants that: (a) Each of the execution, delivery and performance by Borrower and each Guarantor of this Amendment and the performance of the Credit Agreement, as amended hereby (the "Amended Credit Agreement") are (i) within Borrower's and each Guarantor's corporate power and have been duly authorized by all necessary corporate and shareholder action; (ii) do not contravene any provision of any Loan Party's charter or bylaws or equivalent organizational or charter or other constituent documents; (iii) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (iv) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which any Loan Party is a party or by which any Loan Party or any of its property is bound; (v) do not result in the creation or imposition of any Lien upon any of the property of any Loan Party other than those in favor of Agent, on behalf of itself and the Lenders, pursuant to the Loan Documents; and (vi) do not require the consent or approval of any Governmental Authority or any other Person. 7 (b) This Amendment has been duly executed and delivered by or on behalf of Borrower and each Guarantor. (c) Each of this Amendment and the Amended Credit Agreement constitutes a legal, valid and binding obligation of Borrower and each Guarantor enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). (d) No Default or Event of Default has occurred and is continuing both before and after giving effect to this Amendment. (e) No action, claim or proceeding is now pending or, to the knowledge of any Loan Party signatory hereto, threatened against such Loan Party, at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators, which challenges such Loan Party's right, power, or competence to enter into this Amendment or, to the extent applicable, perform any of its obligations under this Amendment, the Amended Credit Agreement or any other Loan Document, or the validity or enforceability of this Amendment, the Amended Credit Agreement or any other Loan Document or any action taken under this Amendment, the Amended Credit Agreement or any other Loan Document or which if determined adversely could have or result in a Material Adverse Effect. To the knowledge of each Loan Party, there does not exist a state of facts which is reasonably likely to give rise to such proceedings. (f) All representations and warranties of the Loan Parties contained in the Credit Agreement and the other Loan Documents are true and correct as of the date hereof with the same effect as though such representations and warranties had been made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date. 15. Remedies. This Amendment shall constitute a Loan Document. The breach by any Loan Party of any representation, warranty, covenant or agreement in this Amendment shall constitute an immediate Event of Default hereunder and under the other Loan Documents. 16. No Other Amendments/Waivers. Except as expressly amended herein, the Credit Agreement and the other Loan Documents shall be unmodified and shall continue to be in full force and effect in accordance with their terms. In addition, this Amendment shall not be deemed a waiver of any term or condition of any Loan Document by the Agent or the Lenders with respect to any right or remedy which the Agent or the Lenders may now or in the future have under the Loan Documents, at law or in equity or otherwise or be deemed to prejudice any rights or remedies which the Agent or the Lenders may now have or may have in the future under or in connection with any Loan Document or under or in connection with any Default or Event of Default which 8 may now exist or which may occur after the date hereof. The Credit Agreement and all other Loan Documents are hereby in all respects ratified and confirmed. 17. Outstanding Indebtedness; Waiver of Claims. Borrower hereby acknowledges and agrees that as of February 11, 2004 the aggregate outstanding principal amount of the Revolving Credit Loan is $0 and that such principal amount is payable pursuant to the Credit Agreement without offset, withholding, counterclaim or deduction of any kind. Borrower hereby waives, releases, remises and forever discharges Agent, Lenders and each other Indemnified Person from any and all Claims of any kind or character, known or unknown, which Borrower ever had, now has or might hereafter have against Agent or any Indemnified Person which relates, directly or indirectly, to any acts or omissions of Agent or such Lender or any other Indemnified Person on or prior to the Amendment Effective Date. 18. Expenses. Borrower hereby reconfirms its obligations pursuant to Section 11.2 of the Credit Agreement to pay and reimburse Agent for all reasonable out-of-pocket expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith. 19. Effectiveness. This Amendment shall become effective as of February 11, 2004 (the "Amendment Effective Date") only upon satisfaction in full in the judgment of the Agent of each of the following conditions on or prior to February 11, 2004: (a) Amendment. Agent shall have received eight (8) original copies of this Amendment duly executed and delivered by Agent, Lenders and Borrower and acknowledged by ASL. (b) Payment of Expenses. Borrower shall have paid to Agent all costs and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent and Lenders (including, without limitation, reasonable legal fees and expenses). (c) Representations and Warranties. All representations and warranties contained in this Amendment shall be true and correct on and as of the Amendment Effective Date. 20. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 21. Counterparts. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 9 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written. BORROWER: DICK'S SPORTING GOODS, INC. By: /s/ Jeffrey Hennion ------------------------------------- Name: Jeffrey Hennion Title: Treasurer AGENT: GENERAL ELECTRIC CAPITAL CORPORATION, as Agent By: /s/ Charles Chiodo ------------------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory LENDERS: GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Charles Chiodo ------------------------------------- Name: Charles Chiodo Its: Duly Authorized Signatory 10 PNC BUSINESS CREDIT By: /s/ Stephen W. Boyd ------------------------------------- Name: Stephen W. Boyd Title: Vice President FLEET RETAIL FINANCE INC. By: /s/ James R. Dore ------------------------------------- Name: James R. Dore Title: Managing Director NATIONAL CITY BANK OF PENNSYLVANIA By: /s/ Richard M. Beaty II ------------------------------------- Name: Richard M. Beaty II Title: Assistant Vice President WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Anthony D. Braxton ------------------------------------- Name: Anthony D. Braxton Title: Director CITIZEN'S BANK OF PENNSYLVANIA By: /s/ Don Cmar ------------------------------------- Name: Don Cmar Title: Vice President 11 The undersigned Guarantor hereby (i) acknowledges to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under its Guaranty shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment. ACKNOWLEDGED, CONSENTED and AGREED to as of the date first written above. AMERICAN SPORTS LICENSING, INC. By: /s/ Jeffrey R. Hennion ------------------------------------- Name: Jeffrey R. Hennion Title: Treasurer 12 ANNEX G DRAFT OFFERING MEMORANDUM 13 ANNEX H FORM OF CONVERTIBLE NOTE HEDGE 14 ANNEX I FORM OF CONVERTIBLE NOTE INDENTURE 15 EX-11 12 j0833601exv11.htm EXHIBIT 11 EXHIBIT 11
 

Exhibit 11

EXECUTION COPY

MERRILL LYNCH CAPITAL CORPORATION
4 World Financial Center
250 Vesey Street
New York, NY 10080

June 21, 2004

Dick’s Sporting Goods, Inc.
200 Industry Drive
Pittsburgh, PA 15275

Re: Project Baseball — Interim Loan Commitment Letter

Ladies and Gentlemen:

     Dick’s Sporting Goods, Inc. (“you” or “Buyer” or “Borrower”) has advised Merrill Lynch Capital Corporation and its affiliates (“Merrill Lynch” or “we” or “us”) that Buyer intends to acquire all of the outstanding common stock, no par value (the “Common Stock”), of Galyan’s Trading Company, Inc., an Indiana corporation (“Target”), pursuant to a merger agreement (the “Merger Agreement”) to be entered into by and among Buyer, Target and a newly formed wholly owned subsidiary of Buyer incorporated in Indiana (“Acquisition Sub”). You have further advised us that (1) Buyer intends to launch a tender offer for the Common Stock as soon as practicable following the date hereof, (2) at the conclusion of such tender offer you intend to acquire all of the Common Stock tendered, which shall be at least 51% of the issued and outstanding Common Stock of the Target on a fully diluted basis (the “Acquisition”), (3) thereafter you intend to cause as reasonably promptly as possible Acquisition Sub to merge with and into Target, with Target being the surviving corporation in such merger and becoming a wholly owned subsidiary of Buyer (the “Merger”), (4) if more than 90% of the Common Stock of the Target on a fully diluted basis is acquired in the Acquisition then the Merger will be effected as soon as possible thereafter in a statutory short form merger, and (5) if a short-form merger is not permitted by law to effect the Merger, Target will hold a shareholder meeting as soon as possible after the Acquisition in order to approve the Merger and the merger will be effective promptly after obtaining such approval (the date of the consummation of the Merger, the “Merger Date”). The sources and uses of funds necessary to consummate the Acquisition, the Merger and the other transactions contemplated hereby are set forth on Annex I (the amount of consideration required to consummate the Acquisition, the “Acquisition Consideration”

 

 

and the amount of consideration required to consummate both the Merger and the Acquisition, the “Merger Consideration”).

     In addition, you have advised Merrill Lynch that in connection with the consummation of the Acquisition and the Merger, Buyer will raise gross cash proceeds through either (A) an increase in committed amounts available to the Buyer under the Buyer’s Amended and Restated Credit Agreement dated as of July 26, 2000 among the Buyer, the Lenders Party thereto and General Electric Capital Corporation (“GECC”), as amended (the “Senior Credit Facility”) or an amendment or restatement (or other modification) or the replacement of such facility (even if the replacement includes additional borrowing capacity and/or is comprised of new or additional lenders) (the “Senior Credit Facility Increase”), or (B) if the Senior Credit Facility Increase is not consummated prior to or concurrently with the consummation of the Acquisition, the draw down under a senior secured interim loan of up to $175.0 million (the “Interim Loan” and together with the Senior Credit Facility, the “Credit Facilities”) for the purpose of purchasing Target’s Common Stock and paying other expenses or costs of the Transactions that would be anticipated to be refinanced with debt securities (the “Take-out Securities”).

     In addition, you have advised us that, on or prior to the date of initial funding under the Interim Loan (the “Closing Date”), Target and its subsidiaries will either (A) obtain an amendment or a waiver under their respective existing indebtedness (the “Existing Indebtedness”) to permit the Acquisition and the Merger without materially burdensome conditions, (B) refinance such Existing Indebtedness in a manner that permits the Acquisition and the Merger without increasing the amount of Target’s outstanding indebtedness or (C) repay all of their Existing Indebtedness and terminate all commitments to make extensions of credit under their respective existing indebtedness (collectively, the “Refinancing”) and in the event of (C) Buyer shall have received additional financing either through the Senior Credit Facility Increase or otherwise to accomplish the Refinancing.

     The Acquisition, the Refinancing, the entering into and borrowings under the Interim Loan by the parties herein described, the Merger and the other transactions contemplated hereby entered into and consummated in connection with the Acquisition and the Merger are herein referred to as the “Transactions.”

     You have requested that Merrill Lynch commit to provide the Interim Loan to finance the Acquisition and the payment of certain related fees and expenses.

     Accordingly, subject to the terms and conditions set forth below, Merrill Lynch hereby agrees with you as follows:

     1. Commitment. Merrill Lynch hereby commits to provide to Borrower the Interim Loan upon the terms and subject to the conditions set forth or referred to herein, in the Fee Letter (the “Fee Letter”) dated the date hereof and delivered to you, and in the Interim Loan Summary of Terms and Conditions attached hereto (and incorporated by reference herein) as Exhibit A (the “Term Sheet”). At September 15, 2004, any unused interim loan commitments under this Commitment Letter will terminate immediately after making the extensions of credit thereunder

 

 

contemplated hereby. To the extent that an underwriting or purchase agreement is entered into by the Borrower with respect to any securities, the commitments hereunder shall be terminated on the date of execution thereof in an amount equal to the expected aggregate gross proceeds from the securities covered thereby.

     2. Syndication. We reserve the right and intend, after the date hereof but prior to or after the execution of the definitive documentation for the Interim Loan (the “Credit Documents”), to syndicate all or a portion of our commitments to one or more financial institutions (together with Merrill Lynch, the “Lenders”). Our commitment hereunder is subject to our (or one or more of our affiliates) acting as sole and exclusive book-runner, lead arranger and syndication agent for the Interim Loan and any other debt financing (including any high yield debt financing) that is consummated in connection with the Acquisition, the Merger or the Refinancing (other than the Senior Credit Facility Increase). We (or one or more of our affiliates) will manage all aspects of the syndication (in consultation with you), including decisions as to the selection of potential Lenders to be approached and when they will be approached, when their commitments will be accepted and which Lenders will participate and the final allocations of the commitments among the Lenders (which are likely not to be pro rata across facilities among Lenders), and we will exclusively perform all functions and exercise all authority as customarily performed and exercised in such capacities, including selecting counsel for the Lenders and negotiating the Credit Documents. Any agent, book-runner or arranger titles (including co-agents) awarded to other Lenders are subject to our prior approval and shall not entail any role with respect to the matters referred to in this paragraph without our prior consent. You agree that no Lender will receive compensation outside the terms contained herein and in the Fee Letter in order to obtain its commitment to participate in the Interim Loan. We may select (in consultation with you) a Lender to act as an administrative agent (the “Administrative Agent”) for the Interim Loan to perform such ministerial and administrative functions as we shall reasonably designate.

     You understand that we intend to commence the syndication of the Interim Loan, and you agree actively to assist us in achieving a timely syndication that is satisfactory to us. The syndication efforts will be accomplished by a variety of means, including direct contact during the syndication between senior management, advisors and affiliates of Buyer and (to the extent reasonably possible after use of commercially reasonable best efforts) Target on the one hand and the proposed Lenders on the other hand, and the hosting by Buyer, with Merrill Lynch, of meetings with prospective Lenders at such times and places as we may reasonably request. You agree to, promptly, upon our request, (a) provide and use your commercially reasonable best efforts to have Target provide, to us all information reasonably requested by us to complete successfully the syndication, including information and projections (including updated projections) contemplated hereby, (b) assist and use your commercially reasonable best efforts to have Target assist us in the preparation of a Confidential Information Memorandum and other marketing materials (the contents of which you shall be solely responsible for) to be used in connection therewith (including obtaining any necessary consents of Target’s accountants), and (c) make available your representatives and use your commercially reasonable best efforts to make available representatives of Target and your and their respective subsidiaries and affiliates for participation in road shows and presentations. You also agree to use your commercially reasonable best efforts to ensure that our syndication efforts benefit materially from the existing lending relationships of Buyer and Target (and their respective affiliates).

 

 

     3. Fees. As consideration for our commitment hereunder and our agreement to arrange, manage, structure and syndicate the Interim Loan, you agree to pay to us the fees and expenses as set forth herein, in the Term Sheet and in the Fee Letter.

     4. Conditions. Merrill Lynch’s commitment hereunder is subject to the conditions set forth elsewhere herein, in the Term Sheet and in the Fee Letter.

     Our commitment hereunder is also subject to the conditions that (a) since January 31, 2004, there shall not have occurred or become known (1) a Material Adverse Effect (as such term is defined in the Merger Agreement) with respect to the Target and its subsidiaries taken as a whole or (2) any material adverse change or any condition, fact, event or development that has resulted or could reasonably be expected to result in a material adverse change in the business, operations, condition (financial or otherwise), assets, liabilities (contingent or otherwise) or prospects of Buyer and its subsidiaries taken as a whole (as in existence before giving effect to the Transactions) (a “Buyer Material Adverse Change” and either of (1) or (2) a “Material Adverse Change”); (b) no material disruption or material adverse change (or development that could reasonably be expected to result in a prospective material disruption or material adverse change) in or affecting the U.S. or international loan syndication, financial, banking or capital markets generally shall have occurred or be continuing that, individually or in the aggregate in our sole judgment would adversely affect our ability to syndicate the Interim Loan or effect the sale of the Take-out Securities; (c) no banking moratorium shall have been declared by either Federal or New York authorities; (d) we shall be satisfied that, after the date hereof and prior to and during the syndication of the Interim Loan, none of Borrower or Target or any of their respective subsidiaries or affiliates shall have syndicated or issued, attempted to syndicate or issue, announced or authorized the announcement of, or engaged in discussions concerning the syndication or issuance of, any debt facility or debt security of (or other financing by) any of them, including renewals thereof, other than the Credit Facilities; (e) you and Merrill, Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) shall have executed and delivered the engagement letter (the “Engagement Letter”) in the form attached hereto as Annex A and such Engagement Letter shall be in full force and effect and you shall not be in breach thereof; (f) we shall be satisfied with all terms of the Transactions and shall have had the opportunity to review and shall be reasonably satisfied with the Merger Agreement (it being acknowledged that MLPF&S is satisfied with the Merger Agreement as in effect as of the time of this letter), Schedule TO, Schedule 14D-9 and all related documentation (and all exhibits, schedules, appendices and attachments thereto); (g) the Information (as defined in Section 5 below) will be complete and correct in all material respects and will not, taken as a whole, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements were made; and (h) we shall not have become aware after the date hereof of any information or other matter (including any matter relating to financial models and underlying assumptions relating to the Projections (as defined in Section 5 below)) that in our sole judgment is inconsistent in a material and adverse manner with any information or other matter disclosed to us prior to the date hereof.

     5. Information and Investigations. You hereby represent and covenant that (a) all information and data (excluding financial projections) that have been or will be made available by Borrower or Target or any of Borrower’s or Target’s respective affiliates, representatives or advisors

 

 

to us or any Lender (whether prior to or on or after the date hereof), taken as a whole (the “Information”), is and will be complete and correct in all material respects and does not and will not, taken as a whole, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements are made, and (b) all financial projections concerning Borrower, Target and their respective subsidiaries and the Transactions (the “Projections”) that have been made or will be prepared by or on behalf of Borrower or any of Borrower’s affiliates, representatives or advisors and that have been or will be made available to us or any Lender (whether prior to or on or after the date hereof) have been and will be prepared in good faith based upon assumptions believed by you to be reasonable. You agree that Merrill Lynch shall be given such access to business, financial, legal and other information regarding Borrower and its subsidiaries as it shall reasonably request including, without limitation, access to the management, books and records, contracts and properties of Borrower and its subsidiaries. You agree to supplement the Information and the Projections from time to time until the Merger Date and, if requested by us, for a reasonable period thereafter necessary to complete the syndication of the Interim Loan, so that the representation and covenant in the preceding sentence remain correct in all material respects (and not just on the date that any Information is furnished). You also agree to provide Merrill Lynch access to such Information that you receive from Target that Merrill Lynch shall reasonably request. You also agree to promptly provide Merrill Lynch with copies of documentation submitted to the Securities and Exchange Commission (“SEC”), Federal Trade Commission and/or Department of Justice by Borrower, Acquisition Sub or Target in connection with the Transactions (provided that with respect to information provided to the FTC or DOJ the Borrower need not provide any proprietary or other information not publicly available so long as Borrower engages in good faith discussions with Merrill Lynch, upon the request of Merrill Lynch, as to the nature and general content of any information so provided) as well as any correspondence or comments sent to or received from such entities by the Borrower, Acquisition Sub or Target. In syndicating the Interim Loan we will be entitled to use and rely primarily on the Information and the Projections without responsibility for independent check or verification thereof.

     6. Indemnification. You agree (i) to indemnify and hold harmless Merrill Lynch and each of the other Lenders and their respective officers, directors, employees, affiliates, representatives, advisors, agents and controlling persons and successors and assigns (Merrill Lynch and each such other person being an “Indemnified Party”) from and against any and all losses, claims, damages, costs, expenses and liabilities, joint or several, to which any Indemnified Party may become subject under any applicable law, or otherwise related to or arising out of or in connection with this Commitment Letter, the Fee Letter, the Term Sheet, the Interim Loan, the use of proceeds of any such loan, any of the Transactions or any related transaction or the performance by any Indemnified Party of the services contemplated hereby, and will reimburse each Indemnified Party promptly upon demand for any and all expenses (including, without limitation, the fees, disbursements and other charges of counsel) as they are incurred in connection with the investigation of or 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 and whether or not such claim, action or proceeding is initiated or brought by or on behalf of Borrower, Target or any of their respective affiliates or shareholders, or any other person or entity, and whether or not any of the Transactions are consummated or this Commitment Letter is terminated, except to the extent found in a final non-appealable judgment by a

 

 

court of competent jurisdiction to have resulted solely from such Indemnified Party’s bad faith or gross negligence and (ii) not to assert any claim against any Indemnified Party for consequential, punitive or exemplary damages on any theory of liability in connection in any way with the transactions described in or contemplated by this Commitment Letter and the Fee Letter. No Indemnified Party shall be liable for any damages arising from the use by others of Information or other materials obtained through electronic, telecommunications or other information transmission systems.

     You agree that, without our prior written consent, neither you nor any of your affiliates or subsidiaries will settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification has been or could be sought under the indemnification provisions hereof (whether or not any other Indemnified Party is an actual or potential party to such claim, action or proceeding), unless such settlement, compromise or consent (i) includes an unconditional written release in form and substance satisfactory to the Indemnified Parties of each Indemnified Party from all liability arising out of or related to such claim, action or proceeding and (ii) does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of any Indemnified Party.

     In the event that an Indemnified Party is requested or required to appear as a witness or deponent in any action brought by or on behalf of or against you, Target or any of your or their subsidiaries or affiliates in which such Indemnified Party is not named as a defendant, you agree to reimburse such Indemnified Party for all expenses incurred by it in connection with such Indemnified Party’s appearing and preparing to appear as such a witness or a deponent, including, without limitation, the fees and expenses of its legal counsel.

     7. Expenses. You agree to reimburse Merrill Lynch and its affiliates for their reasonable expenses upon our request made from time to time (including, without limitation, all reasonable due diligence investigation expenses, fees of consultants engaged with your consent (not to be unreasonably withheld), syndication expenses (including printing, distribution, bank meeting, appraisal, valuation and rating agency fees and expenses, and charges of IntraLinks), travel expenses, duplication fees and expenses, audit fees, search fees, filing and recording fees and the reasonable fees, disbursements and other charges of counsel (including local counsel) and any sales, use or similar taxes (and any additions to such taxes) related to any of the foregoing) incurred in connection with the negotiation, preparation, execution and delivery, waiver or modification, administration, collection and enforcement of this Commitment Letter, the Term Sheet, the Fee Letter and the Credit Documents and the security arrangements in connection therewith and whether or not such fees and expenses are incurred before or after the date hereof or any loan documentation is entered into or the Transactions are consummated or any extensions of credit are made under the Interim Loan or this Commitment Letter is terminated or expires.

     8. Confidentiality. This Commitment Letter, the Term Sheet and the Fee Letter, the contents of any of the foregoing, and our and/or our affiliates’ activities pursuant hereto or thereto, are confidential and shall not be disclosed by or on behalf of you or any of your affiliates to any person without our prior written consent, except that you may disclose this Commitment Letter and the Term Sheet (but not the Fee Letter or any matter related to any information in the Fee Letter) (i) to

 

 

your and Target’s officers, directors, employees and advisors, and then only in connection with the Transactions and on a confidential and need-to-know basis, (ii) as you are required by applicable law or compulsory legal process (based on the advice of legal counsel); provided, however, that if disclosure is required by applicable law or compulsory legal process you agree to give us prompt notice thereof and to cooperate with us in securing a protective order and that any disclosure made pursuant to public filings shall be subject to our prior approval (not to be unreasonably withheld) and (iii) to the extent reasonably required by the SEC or stock exchange listing disclosure requirements (based on the advice of legal counsel). You agree that you will permit us to review and approve any reference to us or any of our affiliates in connection with the Interim Loan or the transactions contemplated hereby contained in any press release or any other public disclosure or SEC filing prior to public release or public filing. You agree that we and our affiliates may share information concerning Borrower, Target and their respective subsidiaries and affiliates among ourselves.

     9. Termination. Our commitment hereunder is based upon the representations and warranties made to us hereunder and the accuracy and completeness of the financial and other information regarding Borrower, Target and their respective subsidiaries and the Transactions previously provided to us. In the event that (i) by means of continuing review or otherwise Merrill Lynch becomes aware of or discovers new information or developments concerning conditions or events previously disclosed to us that we believe in our sole discretion is inconsistent in any material adverse respect with the Projections or the Information provided to us prior to the date hereof, or any condition, fact, event or development shall have occurred or become known since January 31, 2004 that in our sole judgment has had or resulted in or could reasonably be expected to have or result in a Material Adverse Change, or a material adverse effect on the Transactions or on the tax or accounting consequences of the Transactions, or (ii) the Merger Agreement is terminated or expires or the effort to acquire Target is abandoned, this Commitment Letter and our commitment hereunder shall terminate. In addition, our commitment hereunder shall terminate in its entirety on the earlier of (A) September 15, 2004, if the Credit Documents have not been executed and delivered by Borrower and the Lenders by such date, (B) the date of execution and delivery of the Credit Documents by Borrower and the Lenders and (C) the date of the Acquisition if the initial funding under the Interim Loan does not occur on such date. Notwithstanding the foregoing, the provisions of Sections 3, 5, 6, 7, 8 and 11 hereof shall survive any termination pursuant to this Section 9.

     10. Assignment; etc. This Commitment Letter and our commitment hereunder shall not be assignable by any party hereto (other than by us to our affiliates) without the prior written consent of the other parties hereto, and any attempted assignment shall be void and of no effect; provided, however, that nothing contained in this Section 10 shall prohibit us (in our sole discretion) from (i) performing any of our duties hereunder through any of our affiliates, and you will owe any related duties (including those set forth in Section 2 above) to any such affiliate, and (ii) granting (in consultation with you) participations in, or selling (in consultation with you) assignments of all or a portion of, the commitments or the loans under the Interim Loan pursuant to arrangements satisfactory to us. This Commitment Letter is solely for the benefit of the parties hereto and does not confer any benefits upon, or create any rights in favor of, any other person other than the Indemnified Parties.

     11. Governing Law; Waiver of Jury Trial. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York (without regard to

 

 

any principles of conflict of laws thereof to the extent the same are not mandatorily applicable by statute and would require or permit the application of the laws of another jurisdiction). Each of the parties hereto waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) related to or arising out of or in connection with this Commitment Letter, the Fee Letter, the Term Sheet, the Interim Loan, the use of proceeds of any such loan, any of the Transactions or any related transaction or the performance by any Indemnified Party of the services contemplated hereby.

     12. Amendments; Counterparts; etc. No amendment or waiver of any provision hereof or of the Term Sheet or of the Fee Letter shall be effective unless in writing and signed by the parties hereto and then only in the specific instance and for the specific purpose for which given. This Commitment Letter, the Engagement Letter, the Term Sheet and the Fee Letter are the only agreements between the parties hereto with respect to the matters contemplated hereby and thereby and set forth the entire understanding of the parties with respect thereto. This Commitment Letter may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart by telecopier shall be effective as delivery of a manually executed counterpart.

     13. Public Announcements; Notices. We may, at our expense, publicly announce as we may choose the capacities in which we or our affiliates have acted hereunder; provided however, that at any time prior to the Closing Date we may only make such announcement with your prior consent. Any notice given pursuant hereto shall be mailed or hand delivered in writing, if to (i) you, at your address set forth on page one hereof, with a copy to such persons as you may designate in writing; and (ii) Merrill Lynch, at 4 World Financial Center, 250 Vesey Street, New York, New York 10080, Attention: Edward Aitken and Wissam Kairouz.

(Signature Page Follows)

 

 

     Please confirm that the foregoing correctly sets forth our agreement of the terms hereof and the Fee Letter by signing and returning to Merrill Lynch the duplicate copy of this letter and the Fee Letter enclosed herewith. Unless we receive your executed duplicate copies hereof and thereof by 5:00 p.m., New York City time, on June 21, 2004, our commitment hereunder will expire at such time.

     We are pleased to have this opportunity and we look forward to working with you on this transaction.
         
  Very truly yours,


MERRILL LYNCH CAPITAL CORPORATION
 		  
  By:   /s/  Shiela McGillicuddy  
       
    Name:  Shiela McGillicuddy    
    Title:    Vice President    
 

Accepted and agreed to as of
the date first written above:

DICK’S SPORTING GOODS, INC.

         
By:
  /s/  William R. Newlin  
       
  Name:   William R. Newlin
  Title:    Executive Vice President and Chief
             Administrative Officer		    

 

 

Sources and Uses of Funds

(in $ in millions)

                         
Sources
           Uses
        
Senior Credit Facility Increase or Interim Loan
   $ 175.0     Purchase price of equity   $ 308.9  
Excess Cash and Investments
   $ 175.0     Refinancing of Existing Debt, net of cash   $ 45.4  
Other
   $ 15.0     One Time Costs   $ 0.6  
 
           Transaction Fees and Expenses   $ 10.0  
 
    
 		              
 		  
Total Sources
   $ 365.0    
Total Uses
   $ 365.0  
 
    
 		              
 		  

 

 

Exhibit A

INTERIM LOAN
SUMMARY OF TERMS AND CONDITIONS1

     
Borrower:
  “Borrower” means Dick’s Sporting Goods, Inc.
 
    
Sole Book-Runner, Lead Arranger and Syndication Agent:
  Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) will act as sole and exclusive book-runner, lead arranger and syndication agent (the “Lead Arranger”).
 
    
Administrative Agent:
  A Lender or other financial institution to be selected by the Lead Arranger in consultation with Borrower (the “Administrative Agent”).
 
    
Lenders:
  Merrill Lynch Capital Corporation (or one of its affiliates) and a syndicate of financial institutions (the “Lenders”) arranged by the Lead Arranger in consultation with Borrower.
 
    
Interim Loan:
  Senior Secured Interim Loan (the “Interim Loan”).
 
    
Principal Amount:
  Up to $175.0 million.
 
    
Documentation:
  Usual for facilities and transactions for this type and reasonably acceptable to Borrower and the Lenders. The documentation for the Interim Loan will include, among others, a credit agreement (the “Interim Loan Agreement”), guarantees and appropriate pledge, security interest, mortgage, deposit account and other appropriate collateral documents (collectively, the “Interim Loan Documents”). Borrower and each Guarantor (as defined below under “Guarantees”) are herein referred to as the “Credit Parties” and individually referred to as a “Credit Party.”
 
    
Transactions:
  As described in the Commitment Letter.
 
    
Use of Proceeds:
  To partially effect the Acquisition and to pay fees and expenses related to the Transactions.

1   Capitalized terms used herein and not defined shall have the meanings assigned to such terms in the Commitment Letter to which this Exhibit A is attached (the “Commitment Letter”).

 

 

     
Termination of Commitments:
  The commitments in respect of the Interim Loan (including pursuant to the Commitment Letter) will terminate on September 15, 2004 if not drawn on or prior to such date.
 
    
Availability:
  The Interim Loan will be available to be drawn in one or more drawing, subject to the terms and conditions set forth in the Interim Loan Credit Documents, until September 15, 2004, solely for the purposes of purchasing Common Stock of the Target in connection with the Acquisition which had at such time been tendered, accomplishing the Refinancing and/or paying fees and expenses related to the Transactions actually incurred; provided that no amount of the Interim Loan shall be made available to the Borrower until Borrower or Acquisition Sub shall have already purchased shares of Common Stock of the Target in an aggregate amount of at least $175.0 million using financing other than the Interim Loan.
 
    
Maturity:
  The Interim Loan will mature on the date (the “Initial Maturity Date”) that is twelve months after the initial funding date (the “Funding”).
 
    
Interest Rate:
  The Interim Loan will bear, at any time, interest at a rate per annum equal to:
 
    
  3 month LIBOR (as adjusted at the end of each interest period and adjusted for all applicable reserve requirements) at such time, plus the following basis points spread:
                         
From the Beginning   To the            
of the Month
   End of the Month
   Spread
1
     3     500 bps        
4
     6     550 bps        
7
     9     600 bps        
10
     12     650 bps        
     
  In no event will the interest rate on the Interim Loan be less than 6.25% per annum.
 
    
 
   Upon and during the continuance of an event of default, the interest rate then applicable to the Interim Loan will increase to a margin of 200 basis points over the rate otherwise in effect.
 
    
Interest Payment Dates:
  Quarterly, in arrears.
 
    
Security:
  The Interim Loan, the Guarantees, and (to the extent relating to the Interim Loan) the obligations of Borrower under each interest rate protection agreement entered into with a Lender

2

 

     
  or an affiliate of a Lender will be secured by (A) a perfected first priority lien on and security interest in, and pledge of, all of the capital stock (to the full extent permitted under U.S. law) and intercompany notes of Target and each of the direct and indirect subsidiaries of Target existing on the Closing Date (after giving effect to the Transactions (other than the Merger)) or thereafter created or acquired, except that with respect to foreign subsidiaries only 65% of the capital stock thereof need be pledged; (B) a perfected first priority lien on, and security interest in, all of the tangible and intangible properties and assets (including without limitation all cash, cash equivalents, contract rights (including under partnership agreements, management agreements, operating agreements, affiliation agreements and similar agreements), inventory, real property interests, intellectual property, trade names, equipment, receivables and proceeds of the foregoing) of each Credit Party and their respective direct and indirect subsidiaries (other than Target and its direct and indirect subsidiaries) existing on the Closing Date or thereafter created or acquired; provided that to the extent that a first priority lien with respect to any such Collateral (as defined) has been granted to the lenders under the Senior Credit Facility and such Senior Credit Facility remains outstanding, any lien provided hereunder with respect to any such Collateral shall be a second priority lien; and (C) a perfected first priority lien on, and security interest in, all of the tangible and intangible properties and assets (including without limitation all cash, cash equivalents, contract rights (including under partnership agreements, management agreements, operating agreements, affiliation agreements and similar agreements), inventory, real property interests, intellectual property, trade names, equipment, receivables and proceeds of the foregoing) of Target and its direct and indirect subsidiaries existing on such date or thereafter created or acquired (provided that to the extent that a first priority lien with respect to any such Collateral has been granted to the lenders under Target’s Existing Indebtedness and as a result of the Refinancing the Target’s Existing Indebtedness remains outstanding on the Closing Date, such lien and security interest on such Collateral may be a second priority security interest) (collectively, the “Collateral”), except for those properties and assets for which the Lead Arranger shall determine in its sole discretion that the costs of obtaining such security interest are excessive in relation to the value of the security to be afforded thereby (it being understood that none of the foregoing shall be subject to any other liens or security interests, except for certain customary exceptions to be agreed upon and any first lien on the Collateral contemplated pursuant to clause (B) under the

3

 

     
  Senior Credit Facility to the extent still outstanding and clause (C) under the Existing Indebtedness to the extent still outstanding). The obligations of any of the Borrower’s foreign subsidiaries (if any) which become guarantors under the Interim Loan will be secured in a manner to be determined by the Lead Arranger in its sole discretion. All such security interests will be created pursuant to documentation satisfactory in all respects to the Lead Arranger and on the Closing Date such security interests shall have become perfected and the Lead Arranger shall have received satisfactory evidence as to the enforceability and priority thereof. To the extent still outstanding, the Borrower’s Senior Credit Facility and related documentation shall be amended to permit the Collateral of the Interim Loan in accordance with this section. Borrower shall use its reasonable best efforts to provide the Collateral in (C) above on the Closing Date, provided that the Collateral described in (A) and (B) above must be provided and perfected on the Closing Date and the Collateral described in (C) above must be provided and perfected no later than 15 business days following the Merger Date.
 
    
Guarantees:
  The Interim Loan will be guaranteed on a senior basis by each entity that guarantees or is obligated under the Senior Credit Facility or to the extent that the Senior Credit Facility are no longer outstanding, by the Borrower and Borrower’s direct and indirect subsidiaries existing on the Closing Date and the Borrower will use its reasonable best efforts to have the Interim Loan guaranteed by Target and each subsidiary of Target on a senior basis by the Closing Date and the Borrower will cause the Interim Loan to be guaranteed by Target and each subsidiary of Target on a senior basis on the Merger Date. Each such guarantee is herein referred to as a “Guarantee” and each such guarantor, a “Guarantor.” The Guarantors and Borrower are herein referred to as the “Credit Parties.”
 
    
Ranking:
  The Interim Loan will be a senior obligation of Borrower ranking pari passu with other senior indebtedness of Borrower and senior to all subordinated indebtedness.
 
    
Optional Prepayment:
  The Interim Loan will be prepayable at par at any time at Borrower’s option, in whole or in part, plus accrued and unpaid interest. Breakage costs, if any, will be paid by Borrower.
 
    
Mandatory Prepayment:
  Upon the receipt by Borrower or any of its subsidiaries of (A) 100% of the net cash proceeds from (i) the incurrence of any debt or the issuance of any debt securities (subject to

4

 

     
  limited exceptions and baskets to be agreed upon), (ii) any capital contribution or the sale or issuance of any capital stock or any securities convertible into or exchangeable for capital stock or any warrants, rights or options to acquire capital stock, (iii) insurance proceeds or asset sales and other asset dispositions (subject to limited exceptions and baskets to be agreed upon and subject to such assets not being subject to a first priority lien under the Senior Credit Facility) and (iv) any amount received from any party under any escrow arrangements under the Merger Agreement or as a direct or indirect result of any breach of any term or provision of the Merger Agreement or otherwise in respect of any claim by Borrower or any of its subsidiaries arising out of the Merger or the Acquisition (other than to the extent relating to indemnification or reimbursement of amounts paid by Borrower or any of its subsidiaries to persons other than Borrower or any of its subsidiaries) and (B) 75% of Excess Cash Flow (to be defined), Borrower will prepay the Interim Loan in an amount equal to such net proceeds or Excess Cash Flow at par, together with accrued interest thereon. In addition, upon the occurrence of a Change of Control (to be defined), Borrower will be required to offer to prepay the entire aggregate principal amount of the Interim Loan in cash for a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest. Breakage costs, if any, will be paid by Borrower. To the extent still outstanding, the Borrower’s Senior Credit Facility shall be amended to permit the mandatory prepayments of the Interim Loan in accordance with this section.
 
    
Conditions to Effectiveness and to initial Interim Loan:
  The effectiveness of the Interim Loan and the making of the initial Interim Loan shall be subject to conditions precedent that are usual for facilities and transactions of this type, to those specified herein and in the Commitment Letter and to such additional conditions precedent as may be required by the Lead Arranger (all such conditions to be satisfied in a manner satisfactory in all respects to the Lead Arranger and the Lenders or the Required Lenders (as the case may be) (as defined below under “Required Lenders”)), including, but not limited to, execution and delivery of the Interim Loan Documents acceptable in form and substance to the Lead Arranger and the Required Lenders by each Credit Party thereto prior to the Closing Date; delivery of reasonably satisfactory borrowing certificates and other customary closing certificates; receipt of valid security interests as contemplated hereby; absence of defaults, prepayment events or creation of liens under debt instruments or other agreements as a result of the transactions contemplated hereby; absence of material litigation; evidence of authority;

5

 

     
  compliance with applicable laws and regulations (including but not limited to ERISA, margin regulations, bank regulatory limitations and environmental laws); delivery of reasonably satisfactory legal opinions; and adequate insurance.
 
    
  The making of Interim Loan will be subject to customary conditions, including the following conditions:
 
    
  (A) The delivery, on or prior to the Closing Date, of a certificate from the chief financial officer of Borrower and, if the Lead Arranger requests, at Borrower’s expense, a nationally recognized appraisal or valuation consultant reasonably satisfactory to the Lead Arranger, in form and substance reasonably satisfactory to the Lead Arranger, with respect to the solvency of each Credit Party immediately after the consummation of the Transactions to occur on the Closing Date.
 
    
  (B) Immediately prior to the consummation of the Acquisition, the Borrower shall have sufficient available cash, investments, availability under the Senior Credit Facility (to the extent still outstanding) and other available financing (in addition to the Interim Loan) on terms and conditions and pursuant to documentation reasonably satisfactory to the Lead Arranger in order to pay for the Acquisition Consideration, the Refinancing, the Merger Consideration and the fees and expenses of the Transaction (which amount shall be at least (1) $190 million, if Target’s Existing Indebtedness has not been refinanced or amended in a manner to permit the Acquisition and Merger with no materially burdensome conditions, or (2) $175 million, if Target’s Existing Indebtedness has been amended in a manner to permit the Acquisition and Merger with no materially burdensome conditions and remains outstanding following the Acquisition Date).
 
    
  (C) The terms, conditions and structure of the Acquisition, the Merger and the Merger Agreement, the offer to purchase, the Schedule TO, the Offer Documents (as defined in the Merger Agreement), the Schedule 14D-9, the proxy statement (if any) and other related documentation shall be in form and substance reasonably satisfactory to the Lead Arranger, and shall not be changed from those described in the Commitment Letter and the Merger Agreement in effect on the date hereof in any material respect that could reasonably be expected to be adverse to the Lenders (it being acknowledged that the Lead Arranger is satisfied with the Merger Agreement as in effect on the

6

 

     
  date hereof). The Lead Arranger shall have promptly received copies, certified by Borrower, of all filings made with any governmental authority in connection with the Transactions.
 
    
  (D) Simultaneously with the making of the Interim Loan, the Acquisition shall have been consummated in all material respects in accordance with the terms of the Merger Agreement (without the waiver or amendment of any material condition or payment term unless consented to by the Lead Arranger), which terms, along with the conditions and structure of the Acquisition and the Merger Agreement, shall be in form and substance reasonably satisfactory to the Lead Arranger, and shall not be changed from those described in the Commitment Letter in any material respect that could reasonably be expected to be adverse to the Lenders. Each of the parties thereto shall have complied in all material respects with all covenants set forth in the Merger Agreement to be complied with by it on or prior to the Closing Date (without the waiver or amendment of any of the material terms thereof or any payment terms unless consented to by the Lead Arranger).
 
    
  (E) Simultaneously with the making of the Interim Loan, Borrower shall have effected the Refinancing on terms and conditions and pursuant to documentation reasonably satisfactory to the Lead Arranger. If pursuant to the Refinancing the Existing Indebtedness is repaid, all liens in respect of the Existing Indebtedness shall have been released and the Lead Arranger shall have received evidence thereof satisfactory to the Lead Arranger and a “pay-off” letter or letters reasonably satisfactory to the Lead Arranger with respect to the Existing Indebtedness. After giving effect to the Transactions and the other transactions contemplated hereby, each Credit Party and its subsidiaries shall have outstanding no indebtedness or preferred stock (or direct or indirect guarantee or other credit support in respect thereof) other than the loans under the Credit Facilities, Borrower’s convertible notes outstanding on the date hereof and such other debt on a schedule to the Commitment Letter and in an amount acceptable to the Lead Arranger and the Lenders and for which arrangements satisfactory to the Lead Arranger have been made.
 
    
  The Lead Arranger shall be satisfied (in its judgment) with the proposed and actual capitalization and corporate and organizational structure of Target, Borrower and their respective subsidiaries (after giving effect to the Transactions), including as to direct and indirect ownership

7

 

     
  and as to the terms of the indebtedness and capital stock of Target, Borrower and their respective subsidiaries (after giving effect to the Transactions).
 
    
  (F) There shall not have occurred or become known since January 31, 2004 (1) any material adverse change or any condition, fact, event or development that has resulted or could reasonably be expected to result in a material adverse change in the business, operations, condition (financial or otherwise), assets, liabilities (contingent or otherwise) or prospects of Borrower and its subsidiaries taken as a whole (as in existence before giving effect to the Transactions) (a “Borrower Material Adverse Change”) or (2) a Material Adverse Effect with respect to the Target and its subsidiaries taken as a whole as such term is defined in the Merger Agreement (either of (1) or (2) a “Material Adverse Change”).
 
    
  (G) The Lead Arranger shall have received reasonably satisfactory evidence (including satisfactory supporting schedules and other data) that (i) pro forma consolidated EBITDA (to be defined) of Borrower and its subsidiaries after giving effect to the Transactions for the trailing four quarters ended immediately prior to the Closing Date, calculated in a manner acceptable to the Lead Arranger in accordance with GAAP was not less than $137.5 million and (ii) the ratio of pro forma consolidated debt to pro forma consolidated EBITDA of Borrower and its subsidiaries after giving effect to the Transactions for the trailing four quarters ended immediately prior to the Closing Date, calculated in a manner reasonably acceptable to the Lead Arranger, was not greater than 2.75x.
 
    
  (H) The respective amounts of the sources and uses for the Transactions shall be consistent with the table set forth in Annex I to the Commitment Letter and the terms and conditions of each of the “sources” and “uses” set forth therein shall be satisfactory to the Lead Arranger.
 
    
  (I) All requisite governmental authorities and third parties shall have approved or consented to the Transactions and the other transactions contemplated hereby to the extent required (without the imposition of any materially burdensome condition or qualification in the sole judgment of the Lead Arranger or, in the case of antitrust matters, in the sole judgment of the Lead Arranger an Aggregate MAE (as defined in the Merger Agreement)) and all such approvals shall be in full force and effect, all applicable waiting periods shall have expired and there shall be no

8

 

     
  governmental or judicial action, actual or threatened, that, in the judgment of the Lead Arranger, has had or could have a reasonable likelihood of resulting in a Material Adverse Change (other than with respect to anti-trust matters, in which case any such matters shall not in the judgment of the Lead Arranger have or could have a reasonable likelihood of resulting in an Aggregate MAE (as defined in the Merger Agreement)). The Transactions shall be in compliance with all applicable laws and regulations. The Transactions, Acquisition and Merger shall not be subject to any anti-takeover, control share, poison pill or other similar provisions, except those that have been waived or for which there is an exemption. To the extent still outstanding, the Senior Credit Facility shall have approved the Interim Loan (and any refinancing thereof) on the terms described in the Commitment Letter and herein.
 
    
  (J) To the extent requested by the Lead Arranger, the Lead Arranger shall have received appraisals, satisfactory in form and substance to the Lead Arranger and from an appraiser satisfactory to the Lead Arranger, of the real property, personal property and other property of the Borrower (and, to the extent available, Target) after giving effect to the Transactions. The Lead Arranger shall have received satisfactory title insurance policies (including such endorsements as the Lead Arranger may require), current certified surveys, evidence of zoning and other legal compliance, certificates of occupancy, legal opinions and other customary documentation required by the Lead Arranger with respect to any real property of Borrower (and, to the extent available, Target) and their subsidiaries subject to mortgages. To the extent requested by the Lead Arranger, the Lead Arranger and the Lenders shall have received satisfactory third-party environmental reports (including Phase I reports) of each Credit Party and its subsidiaries.
 
    
  (K) The Lead Arranger and the Required Lenders shall be satisfied as to the amount and nature of all tax, ERISA, employee retirement benefit, and other contingent liabilities to which any Credit Party or any of its subsidiaries may be subject, and the plans of each Credit Party and its subsidiaries with respect thereto.
 
    
  (L) All accrued fees and expenses (including the fees and expenses of counsel to the Lenders, the Lead Arranger and the Administrative Agent) of the Lenders, the Lead Arranger and the Administrative Agent in connection with the Interim Loan Documents shall have been paid. All fees owed

9

 

     
  pursuant to the Fee Letter shall have been paid.
 
    
  (M) There shall not exist any threatened or pending litigation, action, proceeding or counterclaim by or before any court or governmental, administrative or regulatory agency or authority, domestic or foreign, (i) challenging the consummation of any of the Transactions or that could in the sole judgment of the Lead Arranger or the Required Lenders result in a Material Adverse Change (other than with respect to anti-trust matters, in which case any such matters could not in the sole judgment of the Lead Arranger or the Required Lenders result in an Aggregate MAE (as defined in the Merger Agreement)), (ii) seeking to prohibit the ownership or operation by the Borrower, Target or any of their respective subsidiaries of all or a material portion of any of their respective businesses or assets not contemplated by the Merger Agreement or (iii) seeking to obtain, or which could result or has resulted in the entry of, any judgment, order or injunction that (a) would restrain, prohibit or impose adverse or burdensome conditions on the ability of the Lenders to make loans under the Interim Loan, (b) in the sole judgment of the Lead Arranger and Required Lenders could reasonably be expected to result in a Material Adverse Change (other than with respect to anti-trust matters, in which case any such matters could not in the sole judgment of the Lead Arranger or the Required Lenders that could reasonably be expected to result in an Aggregate MAE (as defined in the Merger Agreement)), (c) could purport to affect the legality, validity or enforceability of any Interim Loan Document or any documents relating thereto or could have a material adverse effect on the ability of any Credit Party to fully and timely perform their obligations under the Interim Loan Documents or the rights and remedies of the Lenders, or (d) would be materially inconsistent with the stated assumptions underlying the projections provided to the Lead Arranger and the Lenders. The Lead Arranger and the Lenders shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the U.S.A. Patriot Act.
 
    
  (N) The Lenders shall have received projected pro forma cash flows, balance sheets and income statements for the period of four years following the Closing Date, which projections shall be (i) based upon reasonable assumptions made in good faith, (ii) satisfactory to the Lenders in their sole discretion and (iii) substantially in conformity with those projections delivered to the Lenders during

10

 

     
  syndication. The Lenders shall have received (i) audited consolidated financial statements of Borrower and Target for fiscal 2001 through 2003, accompanied by an unqualified audit report of an independent accounting firm of national standing, (ii) unaudited interim consolidated financial statements of Borrower and Target for each fiscal quarterly period ended after January 31, 2004 and not less than 45 days prior to the Closing Date (and the equivalent quarterly period in the prior year), reviewed in accordance with SAS 100 by an independent accounting firm of national standing, (iii) monthly consolidated financial statements for the Borrower (and to the extent available Target) for the months subsequent to the latest annual or quarterly financial statements and ended not less than 30 days prior to the Closing Date, (iv) appropriate pro forma financial statements for Borrower prepared in accordance with Regulation S-X and (v) such other financial statements, selected financial data and financial information, if any, which would be required in a registration statement on Form S-1, and all such financial statements shall be satisfactory to the Lead Arranger in its sole discretion.
 
    
  (O) The Lenders shall have received the results of a recent lien search, and to the extent requested by the Lead Arranger, a recent tax and judgment search in such jurisdictions and offices as determined by the Lead Arranger (including without limitation where assets of each of Borrower, (Target, to the extent available) and its subsidiaries are located or recorded), and such search shall reveal no liens on any of their assets except for liens permitted by the Interim Loan Documents or liens to be discharged in connection with the transactions contemplated hereby.
 
    
  (P) All other material documentation, including, without limitation, any tax sharing agreement, employment agreement or other financing arrangement, with respect to or in connection with any of the Transactions shall be in form and substance reasonably satisfactory to the Lead Arranger.
 
    
  (Q) The Interim Loan Agreement shall contain a covenant providing if more than 90% of the Common Stock of the Target on a fully diluted basis is acquired in the Acquisition then the Merger will be effected as soon as possible thereafter (or simultaneously therewith) in a statutory short form merger, and if a short-form merger is not permitted by law to effect the Merger, Target will hold a shareholder meeting as soon as possible after the Acquisition in order to approve the Merger and the merger

11

 

     
  will be effective promptly after obtaining such approval
 
    
  The Lenders shall have received such other legal opinions, corporate documents, security documents and other instruments and/or certificates as they may reasonably request.
 
    
Conditions to All Extensions of Credit:
  Each extension of credit under the Interim Loan will be subject to customary conditions, including the (i) absence of any Default or Event of Default, and (ii) continued accuracy of representations and warranties.
 
    
Representations and Warranties:
  Customary for facilities similar to the Interim Loan and such additional representations and warranties as may reasonably be required by the Lead Arranger.
 
    
Affirmative Covenants:
  Customary for facilities similar to the Interim Loan and such additional affirmative covenants as may reasonably be required by the Lead Arranger including delivery of other financial information and information required under the U.S.A. Patriot Act.
 
    
  In addition, the Interim Loan Agreement will contain provisions pursuant to which Borrower shall undertake to (i) cooperate with the Take-out Bank (as defined below under “Refinancing of Interim Loan”) and provide the Take-out Bank with information required by the Take-out Bank in connection with any Debt Offering (as defined below under “Refinancing of Interim Loan”) or other means of refinancing the Interim Loan, (ii) assist the Take-out Bank in connection with the marketing of the Take-out Securities (including promptly providing to the Take-out Bank any information reasonably requested to effect the issue and sale of the Take-out Securities and making available senior management of Borrower and Target for investor meetings), and (iii) cooperate with the Take-out Bank in the timely preparation of any registration statement or private placement memorandum relating to any Debt Offering and other marketing materials to be used in connection with the syndication of the Interim Loan.
 
    
Negative Covenants:
  Customary for facilities similar to the Interim Loan and such others as may reasonably be required by the Lead Arranger (with customary baskets and exceptions to be negotiated), including, but not limited to, limitation on indebtedness; limitation on liens; limitation on investments; limitation on capital expenditures; limitation on contingent obligations; limitation on dividends, redemptions and repurchases of equity interests; limitation on mergers, acquisitions and asset

12

 

     
  sales; limitation on restrictions on amending the Interim Loan Documents; limitation on issuance, sale or other disposition of subsidiary stock; limitation on sale-leaseback transactions; limitation on transactions with affiliates; limitation on dividend and other payment restrictions affecting subsidiaries; limitation on changes in business conducted; and limitation on prepayment or repurchase of subordinated or other pari passu indebtedness. No material change may be made to the Merger Agreement without the consent of the Lead Arranger and the Required Lenders.
 
    
Financial Covenants:
  The Interim Loan will contain financial covenants appropriate in the context of the proposed transaction based upon the financial information provided to the Lead Arranger, including, but not limited to the following (definitions and numerical calculations to be set forth in the Interim Loan Agreement): minimum interest coverage ratio, maximum ratio of total debt to EBITDA (to be defined) and fixed charge coverage ratio. The financial covenants contemplated above will be tested on a quarterly basis and will apply to Borrower and its subsidiaries on a consolidated basis.
 
    
Interest Rate Management:
  An amount designated by the Lead Arranger of the Interim Loan must be hedged on terms and for a period of time reasonably satisfactory to the Lead Arranger with a counterparty reasonably acceptable to the Lead Arranger.
 
    
Events of Default:
  Customary for facilities similar to the Interim Loan and such others as may reasonably be required by the Lead Arranger.
 
    
Refinancing of Interim Loan:
  Borrower shall undertake to use its best efforts to (i) prepare an offering memorandum for a private placement through resale pursuant to Rule 144A or (ii) file a registration statement under the Securities Act with respect to one or more offerings of Take-out Securities (in each case, a “Debt Offering”), to refinance in full the Interim Loan and consummate such Debt Offering as soon as practicable thereafter in an amount sufficient to refinance the Interim Loan. Such Debt Offering shall be on such terms and conditions (including (without limitation) covenants, events of default, interest rate, yield and redemption prices and dates) as the financial institution party to the Engagement Letter (the “Take-out Bank”) may in its judgment determine to be appropriate in light of prevailing circumstances and market conditions and the financial condition and prospects of Borrower and its subsidiaries at the time of sale and containing such other customary terms as determined by the Take-out Bank. If any Take-out Securities are issued in a

13

 

     
  transaction not registered under the Securities Act, all such Take-out Securities shall be entitled to the benefit of a registration rights agreement to be entered into by the relevant issuer and any other obligor in respect of indebtedness being refinanced in customary form acceptable to the Take-out Bank (which shall include provisions for a customary registered exchange offer with respect to any Take-out Securities). Borrower will enter into an underwriting agreement or securities purchase agreement relating to any Debt Offering, which shall be substantially in the form of MLPF&S’s standard underwriting agreement or securities purchase agreement for high yield offerings of a similar nature and which will include a requirement for a customary comfort letter from accountants for Borrower and Target. If a “qualified independent underwriter” is required by the National Association of Securities Dealers Inc., Borrower will pay such underwriter’s fee and agree to indemnify such underwriter on customary terms. The proceeds of any Debt Offering will be used to repay, first, all accrued and unpaid interest on the Interim Loan and, second, the then aggregate unpaid principal amount (and premium required to be paid, if any) of the Interim Loan to the extent of such proceeds. Until the Interim Loan is repaid in full, all of Borrower’s obligations under the Interim Loan Agreement relating to the issuance and sale of Take-out Securities will continue to be in effect (whether or not any Debt Offering shall have been previously initiated or consummated).
 
    
Obligation to Complete Sale of Securities:
   Following Funding, upon notice (a “Take-out Securities Notice”) by the Take-out Bank, Borrower will issue and sell debt securities in an amount not less than $150.0 million or any such greater amount necessary to refinance in full the Interim Loan upon such terms and conditions as are specified by the Take-out Bank in the Take-out Securities Notice; provided, however, that: (i) the Take-out Bank, in its discretion after consultation with Borrower, shall determine whether the Take-out Securities shall be issued through a registered public offering or a private placement; (ii) such Take-out Securities will contain such terms, including (without limitation) covenants, events of default, interest rates, yields, and redemption prices and dates (and registration rights in the event of a private placement or Rule 144A offering), as are customary for similar financings and as the Take-out Bank considers appropriate in light of prevailing circumstances and market conditions and Borrower’s and its subsidiaries’ financial condition and prospects at the time of sale, and such additional terms and provisions as the Take-out Bank deems customary; and (iii) all other arrangements with respect to such Take-out

14

 

     
 
   Securities shall be satisfactory in all respects to the Take-out Bank in light of then prevailing market conditions and the financial condition and prospects of Borrower and its subsidiaries at the time of sale including the ranking and security of such Take-out Securities.
 
    
Yield Protection and Increased Costs:
  Usual for facilities and transactions of this type.
 
    
Required Lenders:
  Lenders having a majority of the outstanding credit exposure (the “Required Lenders”), subject to amendments of certain provisions of the Interim Loan Documents requiring the consent of Lenders having a greater amount (or all) of the outstanding credit exposure.
 
    
Assignments and Participations:
  Each assignment (unless to another Lender or its affiliates) shall be in a minimum amount of $1.0 million (unless Borrower and the Lead Arranger otherwise consent or unless the assigning Lender’s exposure is thereby reduced to $0). Assignments shall be permitted with the Lead Arranger’s consent (such consent not to be unreasonably withheld, delayed or conditioned). Participations shall be permitted without restriction. Voting rights of participants will be subject to customary limitations.
 
    
Expenses and Indemnification:
  In addition to those out-of-pocket expenses reimbursable under the Commitment Letter, all reasonable out-of-pocket expenses of the Lead Arranger and the Administrative Agent (and the Lenders for enforcement costs and documentary taxes) associated with the preparation, execution and delivery of any waiver or modification (whether or not effective) of, and the enforcement of, any Interim Loan Document (including the reasonable fees, disbursements and other charges of counsel for the Lead Arranger and the Administrative Agent) are to be paid by the Credit Parties. The Credit Parties will indemnify the Lead Arranger, the Administrative Agent and the other Lenders and hold them harmless from and against all costs, expenses (including reasonable fees, disbursements and other charges of counsel) and liabilities arising out of or relating to any litigation or other proceeding (regardless of whether the Lead Arranger, the Administrative Agent or any such other Lender is a party thereto) that relate to the Transactions or any transactions related thereto, except to the extent determined by a court of competent jurisdiction in a final and nonappealable judgment to have resulted solely from such person’s gross negligence or bad faith.
 
    
Governing Law and Forum:
  New York (except for security documentation that
the Lead Arranger determines should be governed by local law).

15

 

     
 
    
Waiver of Jury Trial:
  All parties to the Interim Loan Documents waive right to trial by jury.
 
    
Special Counsel for Sole Book-Runner, Lead Arranger and Syndication Agent:
  Fried, Frank, Harris, Shriver & Jacobson LLP (as well as such local counsel as may be selected by the Lead Arranger).

16

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