EXHIBIT 10.19
AMENDED AND RESTATED JOINT VENTURE AGREEMENT
This Agreement is made and entered into the 12th day of March 1999 (the
"Effective Date"), by and between JUSCO CO., LTD. ("JUSCO"), a company
incorporated under the laws of Japan with its principal office at ▇-▇-▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇-▇▇, ▇▇▇▇▇-▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇ and THE SPORTS AUTHORITY, INC.
("TSA"), a corporation organized and existing under the laws of the State of
Delaware, United States of America ("U.S.A."), with its principal place of
business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇.
WHEREAS, JUSCO and TSA entered into a certain JOINT VENTURE AGREEMENT
dated January 19, 1995 (the "JVA") under which they established the Joint
Venture Company (as defined below), Mega Sports Co., Ltd., to develop, operate
and grow a chain of THE SPORTS AUTHORITY stores in Japan;
WHEREAS, JUSCO and TSA amended the JVA in certain respects by entering
into a certain FIRST AMENDMENT TO JOINT VENTURE AGREEMENT dated September 6,
1996 (the "1JVA"); and
WHEREAS, JUSCO and TSA desire to restructure their joint venture
relationship to adjust for current and future circumstances, and desire by this
Agreement to amend and replace in their entireties the JVA and 1JVA;
NOW, THEREFORE, in consideration of the mutual promises, undertakings
and covenants herein, and for other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree:
SECTION I
PURPOSES OF THE JOINT VENTURE; CERTAIN
RESTRICTIONS ON THE PARTIES
1.1 TRUST. JUSCO and TSA acknowledge that the strong spirit of affinity, trust
and mutual respect between them is a crucial element to the success of their
joint venture,
and believe that such provides a foundation for the start of their business
relations as set forth in this Agreement. Accordingly, JUSCO and TSA shall
endeavor to make all material decisions with respect to the operation of the
Joint Venture Company in the spirit of cooperation and mutual trust.
1.2 CONSTRUCTION. This Agreement replaces in their entireties the JVA and the
1JVA.
1.3 PURPOSE. The purpose of the joint venture is to establish, develop and
operate in Japan sporting goods retail stores stocked and designed along the
lines of TSA Stores, as defined below. JUSCO and TSA also acknowledge an
interest in extending the relationship to other Asian countries, subject to
their development, with respect to any such venture, of a mutually acceptable
business plan and to the negotiation and execution of a definitive written
agreement containing terms and conditions mutually acceptable to JUSCO and TSA.
Neither JUSCO nor TSA shall have any obligation of any nature whatsoever with
respect to the extension of the relationship beyond Japan unless and until such
a definitive agreement is executed by each of them. Notwithstanding the
foregoing, to the extent possible and not otherwise prohibited by law or any TSA
confidentiality or other agreement, TSA shall notify and consult with JUSCO
concerning its intent to expand elsewhere in Asia prior to the time TSA actually
selects a joint venture partner or firmly resolves to directly enter the subject
Asian country without a partner. Such notice and consultation shall not entitle
JUSCO to a right of first refusal to participate in a TSA project elsewhere in
Asia.
1.4 STRUCTURE. The joint venture is being carried out by the Joint Venture
Company, as defined below, which is incorporated and resident in Japan for tax
purposes.
1.5 CERTAIN RESTRICTIONS. JUSCO and TSA acknowledge and agree that, in order to
maximize the potential for success of the joint venture, the exchange of
confidential and proprietary information with respect to each other's business
has been and shall remain essential. JUSCO and TSA further acknowledge that they
would not engage in the joint venture unless the restrictions set forth below
were agreed to, since such restrictions are essential to preserve and protect
the rights of the disclosing party with respect to its confidential and
proprietary information. Therefore, during the Term of this Agreement, and for a
period of eighteen (18) months following the expiration or termination hereof,
unless otherwise agreed in writing by TSA and JUSCO:
(a) SPORTING GOODS STORES.
(i) JUSCO shall not, and shall cause its Related Companies not,
either directly or indirectly as a partner, joint venturer,
independent agent, lender or through stock ownership or
otherwise, to engage in, be connected with or operate in
Japan, the U.S.A. or any other jurisdictions throughout the
world, or have a financial interest in any entity or
partnership that operates in any such jurisdiction, any
Sporting Goods Stores, as defined below.
(ii) TSA shall not, and shall cause its Related Companies not,
either directly or indirectly as a partner, joint venturer,
independent agent, lender or through stock ownership or
otherwise, to engage in, be connected with or operate in
Japan, or have a financial interest in any entity or
partnership that operates in Japan, any Sporting Goods Stores,
as defined below.
(iii) The foregoing restrictions shall not apply to Mega Sports Co.,
Ltd..
(iv) The eighteen (18) month restriction period specified above
shall not apply to such Party if such Party exercises its
right to terminate the Agreement under Section 11.2(a), (b) or
(c).
(b) SPORTING GOODS DEPARTMENTS. JUSCO shall not, and shall cause its
Related Companies not, either directly or indirectly as a partner, joint
venturer, independent agent, lender or through stock ownership or otherwise, to
engage in, be connected with or operate Sporting Goods Departments, as defined
below, or have a financial interest in any entity or partnership that operates
any Sporting Goods Departments, as defined below, within two (2) miles of any
TSA Store (i) in Japan or (ii) in any other jurisdictions throughout the world
in which TSA and JUSCO have executed a definitive written agreement to operate
sporting goods retail stores stocked and designed along the lines of TSA Stores.
The foregoing restriction shall apply even if JUSCO or any of its Related
Companies is already operating a Sporting Goods Department at such time as a TSA
Store begins its operations within two (2) miles of such an existing Sporting
Goods Department. The foregoing restrictions shall end upon termination of this
Agreement, and the eighteen (18) month restriction period specified above shall
not apply to JUSCO if JUSCO exercises its right to terminate the Agreement under
Section 11.2(a) or (b).
(c) The foregoing restrictions shall not be deemed to prevent JUSCO and
its Related Companies from entering into a relationship with respect to any
Sporting Goods Stores if such relationship does not result in an ownership
interest and is limited solely to providing banking or related financial
services, provided that, as the sole exception to the foregoing ownership
interest limitation, if, in connection with providing banking and related
financial services, a loan foreclosure leads to an ownership interest, the
relevant JUSCO or Related Company shall take all reasonable steps to promptly
dispose of such interest.
SECTION II
TERMS AND DEFINITIONS
For the purpose of this Agreement and of the transactions herein
contemplated, the following terms have the meaning expressed after each term:
"Affiliate
Company(ies)": A legal entity or partnership which holds directly or
indirectly more than ten percent (10%) of JUSCO or
TSA, or of which JUSCO or TSA or any of their Related
Companies directly or indirectly own or control more
than five percent (5%) and up to and including fifty
percent (50%) of the issued share capital or capital
stock, in any event not to include the Joint Venture
Company. For purposes of this definition, JUSCO, on
the one hand, and TSA, on the other, and each of
their respective Affiliate Companies shall in no
event be deemed to be an Affiliate Company of the
other Party or its Affiliate Companies.
"Board": The Board of Directors for the time being of the
Joint Venture Company, or of any Subsidiary, as the
case may be.
"Closing Date": The date specified in Section 8.2 hereof for the
closing of the transactions contemplated by Section
8.1 of this Agreement.
"Directors": Directors for the time being of the Joint Venture
Company, or of any Subsidiary, as the case may be.
"Joint Venture
Company": The company, Mega Sports Co., Ltd., incorporated as a
"kabushiki kaisha" joint stock corporation under the
laws of Japan and owned jointly by JUSCO and TSA.
"JUSCO JV
Shareholder": JUSCO or any direct or indirect wholly-owned or
controlled subsidiary of JUSCO that owns Shares of
the Joint Venture Company.
"Operative
Documents": This Amended and Restated Joint Venture Agreement,
the Amended and Restated TSA Services Agreement, the
Amended and Restated JUSCO Services Agreement, the
Amended and Restated License Agreement and the
Guaranty Agreement.
"Party(ies)": TSA and JUSCO.
"Related
Company(ies)": A legal entity which holds directly or indirectly
more than fifty percent (50%) of the issued share
capital or capital stock of JUSCO or TSA, or of which
JUSCO or TSA or their parent companies hold directly
or indirectly more than fifty percent (50%) of the
issued share capital or capital stock, in any event
not to include the Joint Venture Company. An entity
shall be deemed to hold shares indirectly if the
shares are held by another entity that is majority
controlled, either directly or through other majority
controlled entities, by such first mentioned entity.
"Control," as used herein, refers to actual voting
control, whether by ownership of a majority of the
voting securities of an entity, by agreement, or
otherwise.
"Shares": Ordinary shares of /yen/50,000 par value each in the
capital of the Joint Venture Company.
"Sporting Goods
Department" Any area of more than 18,000 square feet (or
approximately 1672 square meters) of total square
footage of gross indoor floor space devoted to the
sale of sporting goods, including the sale of
athletic and active footwear and apparel (i) which
may be a single department or the combined space in
various noncontiguous departments and (ii) which is
located in a store which is not primarily devoted to
the sale of a broad assortment of sporting goods,
including the sale of athletic and active footwear
and apparel.
"Sporting Goods
Store": Any sporting goods retail outlet (free standing
store) consisting of more than 10,000 square feet (or
approximately 900 square meters) of gross indoor
floor space devoted primarily to the sale of a broad
assortment of sporting goods, including the sale of
athletic and active footwear and apparel.
"Subsidiary(ies)": Any company wholly-owned or controlled by the Joint
Venture Company.
"TSA JV
Shareholder": TSA or any direct or indirect wholly-owned or
controlled subsidiary of TSA that owns Shares of the
Joint Venture Company.
"TSA Store": A sporting goods retail outlet consisting of more
than 10,000 square feet (or approximately 900 square
meters) of gross indoor floor space devoted primarily
to the sale of a broad assortment of sporting goods
and equipment, athletic and active footwear and
apparel operated in accordance with the uniform
concept established by TSA, as such may be amended
from time to time by TSA.
"/yen/" or "yen": The lawful currency of Japan.
"wholly-owned or
controlled
subsidiary": Any subsidiary of JUSCO or TSA, including a Related
Company, which is wholly-owned by JUSCO or TSA, or of
which JUSCO or TSA own fifty percent (50%) or more of
the issued share capital or capital stock.
SECTION III
FORMATION AND CAPITALIZATION OF THE JOINT VENTURE; RESTRUCTURING
3.1 INDEPENDENT ENTITIES. It is the intention of JUSCO and TSA that the Joint
Venture Company and any Subsidiaries shall be and remain autonomous business
organizations independent of the JUSCO JV Shareholder and the TSA JV Shareholder
and that the Joint Venture Company and any Subsidiaries shall select their own
employees except as otherwise contemplated herein.
3.2 INCORPORATION OF THE JOINT VENTURE COMPANY. The Parties have caused the
Joint Venture Company to be incorporated in Japan as a "kabushiki kaisha" joint
stock corporation under the Commercial Code of Japan. The registered head office
of the Joint Venture Company shall be located in Japan as determined by JUSCO.
3.3 REVISED ARTICLES OF INCORPORATION. The current Articles of Incorporation of
the Joint Venture Company are attached as EXHIBIT A. As set forth in Section
8.3, the Parties shall cause the Joint Venture Company to adopt Amended Articles
of Incorporation necessary in order to give effect to the changes in the joint
venture relationship as required by this Agreement. In the event of any conflict
between the Japanese and English language versions of the Articles of
Incorporation, original or as amended, the Japanese language version shall
govern.
3.4 AUTHORIZED CAPITAL AND CAPITAL CONTRIBUTIONS. As of the Effective Date, the
authorized capital of the Joint Venture Company is /yen/1,000,000,000 and the
total paid-in capital is /yen/400,000,000. JUSCO and TSA have subscribed for
3,920 and 4,080 Shares at par (respectively). As of the Effective Date, the
3,920 Shares issued to the JUSCO JV Shareholder represent fortynine percent
(49%) of the issued share capital of the Joint Venture Company, and the 4,080
Shares issued to the TSA JV Shareholder
represent fiftyone percent (51%) of the issued share capital of the Joint
Venture Company.
3.5 ADJUSTMENT OF CAPITAL CONTRIBUTIONS, SHARE OWNERSHIP AND SHAREHOLDING RATIOS
ON THE CLOSING DATE. On the Closing Date, the following transactions shall take
place and the respective shareholder ratios of the JUSCO JV Shareholder and the
TSA JV Shareholder shall be adjusted as follows:
(a) The JUSCO JV Shareholder shall purchase 2,560 Shares at par value
from the TSA JV Shareholder ("Purchase Shares") by wire transfer of
(Y)128,000,000 ("Purchase Price") to the TSA JV Shareholder's account per the
TSA JV Shareholder's written instructions.
(b) JUSCO and TSA shall cooperate and cause the Joint Venture Company
to accept their respective Share certificate(s), make adjustments to the same,
and amend the Joint Venture Company's stock register to reflect the sale and
transfer of the Purchase Shares from the TSA JV Shareholder to the JUSCO JV
Shareholder. Further, the JUSCO JV Shareholder and the TSA JV Shareholder shall
cause the Joint Venture Company to take all actions, adopt any resolutions,
execute any documents and do any other things necessary to accomplish, perfect
and record the sale and transfer of the Purchase Shares from the TSA JV
Shareholder to the JUSCO JV Shareholder.
(c) Once the sale and transfer of the Purchase Shares from the TSA JV
Shareholder to the JUSCO JV Shareholder is completed, the 6,480 Shares issued
and registered to the JUSCO JV Shareholder shall represent eightyone percent
(81%) of the issued share capital of the Joint Venture Company, and the 1,520
Shares issued and registered to the TSA JV Shareholder shall represent nineteen
percent (19%) of the issued share capital of the Joint Venture Company (the
"Adjusted Ownership Ratio").
3.6 [Blank]
3.7 FINANCING.
(a) JUSCO shall assist the Joint Venture Company in securing any needed
capital as may be required for its operations and planned growth. If required to
do so by
any creditors of the Joint Venture Company, in addition to its capital
contributions otherwise provided for herein, JUSCO shall furnish instruments
which provide comfort to creditors of the Joint Venture Company.
(b) The Parties shall take such steps as are necessary to assure that
the Joint Venture Company shall not issue any other Shares, convertible bonds
and bonds with warrants or other equity interest in the Joint Venture Company,
without first offering such other Shares or securities to each of the JUSCO JV
Shareholder and the TSA JV Shareholder in proportion to their shareholding in
the Joint Venture Company at the time of issuance so as to enable each Party to
maintain its proportional holding (measured in nominal value) of the issued
share capital of the Joint Venture Company. New Shares, convertible bonds and
bonds with warrants may be issued to those other than the Shareholders if
approved by the unanimous affirmative vote of all of the Shares represented at a
general meeting of Shareholders at which all of the Shares of the Shareholders
are represented in person or by proxy.
(c) Except as provided in paragraph (d) below, the TSA JV Shareholder
shall not be required to furnish instruments which provide comfort to creditors
of the Joint Venture Company. If, however the TSA JV Shareholder furnishes any
such comfort letters, such actions shall not constitute a waiver of this
provision or give rise to any future obligations to provide such instruments.
(d) If, by the exercise of the Share Purchase Option set forth in
Section 10.3(b), the TSA JV Shareholder's Share ownership ratio becomes equal to
thirty percent (30%) of all of the issued and outstanding Shares of the Joint
Venture Company, and JUSCO has been required or will be required in the future
to provide instruments which provide comfort to creditors of the Joint Venture
Company, then notwithstanding paragraphs (a) and (c) above to the contrary, TSA
and JUSCO shall provide, in strict accordance with their respective shareholding
ratios, instruments which provide comfort to creditors of the Joint Venture
Company.
3.8. [BLANK]
3.9. CORPORATE NAME OF THE JOINT VENTURE COMPANY. The corporate name of the
Joint Venture Company shall be and remain "Mega Sports Co., Ltd." or such other
names as the Parties may agree upon in writing and which may be approved by the
relevant Legal
Affairs Bureau in Japan, subject to the terms and conditions of the Amended and
Restated License Agreement, as set forth in Section 6.2 hereof. In no event
shall the corporate name of the Joint Venture Company include the words "Sports
Authority" or "Authority" in English or their Japanese equivalents. Neither the
JUSCO JV Shareholder nor any of its Affiliate Companies or Related Companies
shall use any trade name of TSA except as provided in the Amended and Restated
License Agreement.
SECTION IV
MANAGEMENT AND OPERATIONS OF THE JOINT VENTURE COMPANY
VOTING PROCEDURES
4.1 MANAGEMENT OF THE JOINT VENTURE COMPANY.
(a) BOARD OF DIRECTORS. As of the Closing Date, the Parties agree that
the Board of the Joint Venture Company shall consist of five (5) persons, and
may later be increased as agreed by a majority of the Shareholders. Of the
initial five (5) member Board, the JUSCO JV Shareholder shall appoint four (4)
Directors, and the TSA JV Shareholder shall appoint one (1) Director. As the
number of Directors is increased, each of the TSA JV Shareholder and the JUSCO
JV Shareholder shall be entitled to appoint additional Directors in accordance
with their respective Share ownership ratios at such times. In any event, so
long as this Agreement remains in effect, the TSA Joint Venture Shareholder
shall be entitled to appoint at least one (1) Director. Each respective JV
Shareholder may remove the person or persons so appointed as Directors by it at
any time and the other Shareholder agrees to vote in favor of such removal at
the Shareholder's meeting where the matter is voted upon. Except for the TSA JV
Shareholder's right to remove its appointed Director(s) at its sole discretion,
the Director(s) appointed by the TSA JV Shareholder shall not be removed by vote
of the Shareholders except for cause consisting of gross misconduct or gross
negligence in performing the duties of a Director of the Joint Venture Company.
On or before the Closing Date, each of the Parties shall specify the persons to
be appointed as the incoming class of Directors of the Joint Venture Company.
The Parties shall cause their respective JV Shareholders to elect the Directors
in accordance with the provisions of this Section.
(b) MEETINGS. The Parties shall provide that there shall be at least
four (4) meetings per year of the Board of the Joint Venture Company, one (1) of
which shall be held in the United States and three (3) in Japan, or at such
other locations as may be mutually agreed between the Parties.
Unless otherwise agreed in writing by all Directors in respect of any Board
meeting, all Directors shall be given not less than twenty-one (21) days notice
of a Board meeting, such notice to be sent to each Director together with an
agenda of matters to be discussed or considered at that meeting of the Board.
(c) APPOINTMENT OF CHAIRMAN AND VICE-CHAIRMAN. The Chairman and
Vice-Chairman of the Board shall be appointed by the Board.
4.2 REPRESENTATIVE DIRECTOR. The Company shall have a sole Representative
Director, who shall be nominated by JUSCO and appointed by the Board from
amongst the Directors appointed by the JUSCO JV Shareholder to the Board.
Nothing herein shall require the Board to replace the Representative Director
serving as of the Closing Date. The Representative Director shall be the
President of the Joint Venture Company. The Representative Director shall have
the general overall power to supervise and operate the business and affairs of
the Joint Venture Company, in accordance with the Japanese Commercial Code and
in accordance with any limitations upon his or her powers which are set by the
Board or as otherwise set forth herein.
4.3 MANAGEMENT OF SUBSIDIARIES. The Board of any Subsidiary shall consist of
members appointed by the Shareholders in proportion to their then current
percentage of Share ownership in the Joint Venture Company, provided that the
TSA JV Shareholder shall always have the right to appoint at least one member of
each such Subsidiary Board.
4.4 EMPLOYEES ASSIGNED TO THE JOINT VENTURE COMPANY.
(a) The Representative Director will have sole authority to hire or
replace persons to serve in any needed position in the Joint Venture Company
with JUSCO being entitled to recommend persons for given positions.
(b) In addition, experts whose services will not be required by the
Joint Venture Company on a full-time basis, such as distribution center experts,
or systems, real estate and construction supervision experts, may be assigned by
JUSCO and/or TSA, as the case may be, at the request and approval of the
Representative Director, to provide services to the Joint Venture Company on a
part-time or temporary assignment basis.
(c) The cost of all employees assigned by TSA or JUSCO to provide
services to the Joint Venture Company shall be reimbursed to the assigning party
under the Amended and Restated TSA Service Agreement or the Amended and Restated
JUSCO Service Agreement, as referenced in Section VI hereof.
4.5 TRANSACTIONS WITH JUSCO OR TSA; INSURANCE.
(a) The Parties agree that the Joint Venture Company and any
Subsidiaries shall be operated as independent businesses and that, in addition
to the voting requirements in Sections 4.6(d) and 4.8, any transaction between
or among the Joint Venture Company or any Subsidiary, on the one hand, and JUSCO
or TSA or any of their Affiliate Companies or Related Companies, on the other
hand, shall be on an arms-length basis. Any sales or purchases of materials,
products or services, or leases to or from the Joint Venture Company or any
Subsidiary by JUSCO or TSA or any of their Affiliate Companies or Related
Companies shall be competitive with alternative sources of equivalent materials,
products or services, or leases, in terms of price, design, performance,
quality, technology, delivery and other material terms.
To the extent that services, goods, facilities or leases are provided to the
Joint Venture Company and/or its Subsidiaries by TSA or JUSCO or any of their
Related Companies (a "Provider"), the Joint Venture Company (or any Subsidiary
purchasing such goods, services or facilities) shall pay for such goods,
services, facilities or leases as agreed between the Joint Venture Company or
Subsidiary and the Provider. Except as otherwise agreed upon in a written
document signed by the Provider, the Joint Venture Company shall defend,
indemnify and hold harmless the Provider and its officers, directors and
employees from and against any claim, damage, loss, cost, expense (including
reasonable attorneys fees) or penalty, or any action therefor, arising out of or
in connection with any such services, goods, facilities or leases.
As a condition to the exercise of its right of indemnification, a Provider must
assign to the Joint Venture Company, upon request, any rights that it may have
against its supplier and/or any other third party relating to the occurrence
that gave rise to the indemnification obligation of the Joint Venture Company.
(b) The Joint Venture Company and its Subsidiaries shall maintain at
all times during the term of this Agreement an amount of coverage consistent
with good business practices in Japan for comprehensive general liability
insurance, including products and completed operations and contractual liability
coverage, naming TSA and JUSCO and their respective Related Companies as
additional insureds. Each policy of insurance purchased by the Joint Venture
Company and its Subsidiaries pursuant to the preceding sentence shall (i) be
placed with a reputable insurance company acceptable to the Board, (ii) either
have a self-insurance retention or a deductible in amounts consistent with good
business practices in Japan as such amount may be modified by the Board, and
(iii) contain other terms acceptable to the Board.
4.6 ACTION BY SHAREHOLDERS.
(a) Any action of the Joint Venture Company or any Subsidiary with
respect to any decision or process requiring a resolution by shareholders under
Japanese law or hereunder shall be decided by resolution resulting from an
affirmative vote of more than fifty percent (50%) of Shares represented at a
Shareholders meeting unless otherwise specified by Japanese law or herein.
(b) At all Shareholders meetings, more than fifty percent (50%) of the
issued and outstanding share capital of the Joint Venture Company or Subsidiary
(as the case may be) must be represented in person or by proxy. Proper
notification of each Shareholders meeting shall be provided to the Shareholders,
in accordance with the Articles of Incorporation.
(c) Notwithstanding paragraph (a) above, certain actions specified
under the Japanese Commercial Code shall require a "special resolution" which
shall be adopted by the affirmative vote of at least two-thirds of the Shares
represented at a general meeting of Shareholders.
(d) Notwithstanding paragraphs (a) and (c) above, for the following
actions of the Joint Venture Company or any Subsidiary, approval and adoption of
the subject resolution shall require the unanimous affirmative vote of all of
the Shares represented at a general meeting of Shareholders at which all of the
Shares of the TSA JV Shareholder are represented in person or by proxy:
(i) Any resolution to amend the Articles of Incorporation to
modify Article 1 ("Corporate Name"), Article 2 ("Objects and
Purpose"), Article 5 ("Total Number of Shares to be
Issued...Kind and Par Value of Each Share"), Article 8
("Restriction on Transfer of Shares"), Article 10 ("Preemptive
Right to New Shares, Convertible Bonds and Bonds with
Warrants"), or Article 13 ("Resolutions").
(ii) Any resolution to remove, absent cause consisting of gross
misconduct or gross negligence, the Director appointed by the
TSA JV Shareholder;
(iii) Any resolution approving the transfer of the entire business
of the Joint Venture Company, or greater than a fifty percent
(50%) portion thereof;
(iv) Any resolution approving the transfer of all or greater than
fifty percent (50%) of the assets of the Joint Venture
Company;
(v) Any resolution approving the amalgamation or merger of the
Joint Venture Company;
(vi) Any resolution approving the reduction of paid in capital
including the manner in which the reduction is carried out;
(vii) Any resolution concerning dissolution of the Joint Venture
Company;
(viii) Any resolution approving the issuance of new Shares at
favorable prices to persons other than the TSA JV Shareholder
or the JUSCO JV Shareholder, or which does not afford the TSA
JV Shareholder the right to purchase such Shares in proportion
to its Share ownership ratio; and
(ix) To the extent that any such transaction does not offer
equivalent treatment to both the TSA JV Shareholder and the
JUSCO JV Shareholder in proportion to their Share ownership
ratios, any issuance of preferred stock or options or warrants
with respect thereto or securities convertible into preferred
stock, or any split, combination or reclassification, or
redemption or purchase by the Joint Venture Company, of Shares
or other securities (including options and warrants).
If any of the foregoing resolutions cannot be decided upon by the necessary
unanimous vote at a particular Shareholders meeting, the determination of such
matter shall be postponed to a Shareholder meeting to be held within sixty (60)
calendar days of the first meeting, provided that, if time is of the essence for
resolving the matter in question, such as if the matter will be rendered moot
unless a prompt decision is made, the second Shareholder meeting shall be held
as soon after the first Shareholder meeting as is necessary and appropriate
under the circumstances. Between the first and second such Shareholder meetings,
the Parties shall revisit the matter in question and may express their views to
each other, orally and in writing, on such matter. At the second Shareholder
meeting, if such matter once again fails to be decided upon by the necessary
unanimous vote, then upon the written request of either the JUSCO JV Shareholder
or the TSA JV Shareholder, the matter shall be submitted to a decision of the
Chief Executive Officers of the Shareholders, who shall attempt to resolve the
matter in an expeditious manner.
Such resolution, if any, must occur within ninety (90) calendar days of the date
the written request for resolution was submitted by one of the Shareholders,
provided, that, if time is of the essence for resolving the matter in question,
such as if the matter will be rendered moot unless a prompt decision is made,
the Chief Executive Officers shall resolve the matter as soon as is necessary
and appropriate under the circumstances. If resolution does not occur within
ninety (90) calendar days of the date the written request for resolution was
submitted by one of the Shareholders, or within such shorter period of time as
is necessary and appropriate under the circumstances such that the matter in
question is not rendered moot, then the matter in question shall not be approved
and the Parties shall be free to pursue other courses of action, which may
include but not be limited to initiating a transfer of a Party's Shares as
provided in Section 10.6.
4.7 ACTIONS BY BOARD OF DIRECTORS. In the event any action by the Board of the
Joint Venture Company or any Subsidiary with respect to any decision or process
shall be required by Japanese law or specified herein as an action to be decided
by the Board, except as provided in Section 4.12(c), and except as defined and
modified in Section 4.8 (governing Category A Actions), such action shall
require the affirmative votes of a majority of the Board adopted at a Board
meeting in which a quorum is in effect.
4.8 ACTIONS BY BOARD OF DIRECTORS FOR CATEGORY A ACTIONS. Action by the Board of
the Joint Venture Company or any Subsidiary with respect to the following
decisions or processes (herein referred to as "Category A Actions") shall
require approval by unanimous vote of all Directors in attendance of a duly
notified meeting where there is a quorum as defined in Section 4.12.
(a) the sale or other disposition of any of the assets of the Joint
Venture Company having a fair market value of greater than fifty percent (50%)
of the total assets of the Joint Venture Company;
(b) any transfer of the Shares of the Joint Venture Company except to a
wholly-owned or controlled subsidiary of TSA or JUSCO;
(c) [BLANK]; and
(d) any transaction or series of related transactions, excluding real
estate leases, involving more than (Y)100,000,000 between the Joint Venture
Company and or any Subsidiary on the one hand, and TSA or JUSCO or any of their
Related Companies, on the other hand, provided that approval of any transaction
described in this item (d) shall not be unreasonably withheld.
The Directors appointed by the JUSCO JV Shareholder and the TSA JV Shareholder
shall attempt to arrive at a consensus on such Category A Actions. However, in
the event of a failure to obtain an affirmative unanimous vote of all Directors
in attendance of a duly notified meeting where there is a quorum as defined in
Section 4.12 with respect to a Category A Action, or if a quorum is not present,
then such matter shall be postponed to a Board meeting to be held within sixty
(60) calendar days of the first meeting, provided that, if time is of the
essence for resolving the matter in question, such as if the matter will be
rendered moot unless a prompt decision is made, the
second Board meeting shall be held as soon after the first Board meeting as is
necessary and appropriate under the circumstances. Between the first and second
such Board meetings, the Directors shall revisit the matter in question and may
express their views to each other, orally and in writing, on such matter. At the
second Board meeting, if such matter once again fails to be decided upon by the
necessary unanimous vote, or if a quorum is not present as set forth in Section
4.12, then upon the written request of either the JUSCO JV Shareholder or the
TSA JV Shareholder, any such matter shall be submitted to a decision of the
Chief Executive Officers of the Shareholders, who shall attempt to resolve the
matter in an expeditious manner.
Such resolution, if any, must occur within ninety (90) calendar days of the date
the written request for resolution was submitted by one of the Shareholders,
provided, that, if time is of the essence for resolving the matter in question,
such as if the matter will be rendered moot unless a prompt decision is made,
the Chief Executive Officers shall resolve the matter as soon as is necessary
and appropriate under the circumstances. If resolution does not occur within
ninety (90) calendar days of the date the written request for resolution was
submitted by one of the Shareholders, or within such shorter period of time as
is necessary and appropriate under the circumstances such that the matter in
question is not rendered moot, then the matter in question shall not be approved
and the Parties shall be free to pursue other courses of action, which may
include but not be limited to initiating a transfer of a Party's Shares as
provided in Section 10.6.
4.9 To the extent under Japanese law that any Category A Action under Section
4.8 is deemed to be a matter of decision of Shareholders and not the Board, such
action shall be decided as if it were a Shareholders action under Section
4.6(d). Conversely, to the extent any Shareholder action under Section 4.6(d) is
deemed to be a matter of decision for the Board and not Shareholders, such
action shall be decided as if it were a Category A Action under Section 4.8.
4.10 ADDITIONAL MATTERS TO BE NOTIFIED TO THE BOARD OF DIRECTORS. The following
additional matters shall not be actions decided by the Board and are among those
matters to be solely within the discretion of the Representative Director,
provided however, that the Board shall be notified of actions taken with respect
to such matters prior to or within a reasonable time after the actions are taken
by the Representative Director:
(a) the appointment and removal of, and the compensation and benefits
packages for all management other than the Representative Director in his role
as President;
(b) the adoption, amendment or termination of any collective bargaining
agreement, employee compensation and benefit plans or other material personnel
practices or policies of the Joint Venture Company and Subsidiaries; and
(c) the adoption of or change in any major policy of the Joint Venture
Company or a Subsidiary relating to merchandising or store operations for the
TSA Stores.
If any of the foregoing matters are matters which require Board action under
Japanese law, such action shall be taken in accordance with Section 4.7.
4.11 ACTIONS PERMITTING IMPLEMENTATION OF MATTERS DECIDED PURSUANT TO PROCEDURES
SET FORTH IN SECTIONS 4.6, 4.7 AND 4.8. Each Party agrees with respect to the
Joint Venture Company and any Subsidiaries to take all such other actions, and
to cause its respective JV Shareholder and the members of the Board that it
appoints to take all such other actions, as may be requested by the other Party
to permit the implementation of matters decided pursuant to the procedures set
forth in Sections 4.6, 4.7 and 4.8, including, but not limited to, the adoption
of any amendment to the Articles of Incorporation of the Joint Venture Company
or any Subsidiary if any such amendment is necessary for such purpose.
4.12 QUORUM FOR BOARD MEETINGS.
(a) For there to be a quorum at a Board meeting, all Directors must be
duly notified, and except as provided in paragraphs (b) and (c) below more than
fifty percent (50%) of the Directors in office must be present.
(b) Notwithstanding paragraph (a) above, for all Board meetings where
any Category A Action is considered, at least one (1) Director appointed by the
TSA JV Shareholder must be present. No Category A Actions may be brought before
the Board and approved without the presence of at least one (1) Director
appointed by the TSA JV
Shareholder. The Parties agree that with regard to any resolution concerning any
Category A Action that is not adopted in conformance with Sections 4.8 and
4.12(b), the Parties shall cause such resolution to rescinded and canceled, and
shall cause the Board to reconsider such matter at a meeting in conformance with
Section 4.12(b).
(c) Notwithstanding paragraph (a) and (b) above, with respect to any
resolution relating to the commencement, conduct of the defense or settlement of
any litigation between the Joint Venture Company or any Subsidiary and: (i) TSA,
(A) the vote of a Director appointed by the TSA JV Shareholder shall not be
required for approval, (B) the Directors appointed by the TSA JV Shareholder
shall abstain, and (C) the affirmative vote of a majority of the Directors
appointed by the JUSCO JV Shareholder shall be sufficient for approval; (ii)
JUSCO, (A) the vote of a Director appointed by the JUSCO JV Shareholder shall
not be required for approval, (B) the Directors appointed by the JUSCO JV
Shareholder shall abstain, and (C) the affirmative vote of the Director
appointed by the TSA JV Shareholder shall be sufficient for approval.
SECTION V
[Blank]
SECTION VI
SERVICES AND LICENSE AGREEMENTS
6.1 GENERAL PROVISIONS. TSA and JUSCO shall render certain services to the Joint
Venture Company, and TSA shall license certain rights to the Joint Venture
Company, pursuant to the agreements referred to in this Section VI.
6.2 AMENDED AND RESTATED LICENSE AGREEMENT. Attached hereto as EXHIBIT B, which
the Parties shall cause the Joint Venture Company to execute on or before the
Closing Date, is the form of the agreement pursuant to which TSA and The Sports
Authority Michigan, Inc., a wholly-owned subsidiary of TSA, shall license
trademarks, trade names, technology and technical data to the Joint Venture
Company.
6.3 SERVICES AGREEMENTS. Attached hereto as EXHIBITS C and D, each of which the
Parties shall cause the Joint Venture Company to execute on or before the
Closing Date, are the forms of agreements pursuant to which TSA and JUSCO,
respectively, shall provide services to the Joint Venture Company.
6.4 GUARANTY AGREEMENT. Attached hereto as EXHIBIT E, which the Parties shall
execute on or before the Closing Date, is the agreement by which JUSCO
guarantees performance by the Joint Venture Company of its financial obligations
to both TSA and The Sports Authority Michigan, Inc. under the Amended and
Restated License Agreement.
SECTION VII
CONDITIONS PRECEDENT TO CLOSING
7.1 CONDITIONS. The Obligations of each of the Parties under this Agreement to
consummate the closing shall be subject to the fulfillment, at or prior to the
closing, of all of the following conditions:
(a) JAPAN GOVERNMENTAL APPROVALS. Obtaining from the relevant
governmental authorities of Japan all required approvals, consents or waivers as
are necessary or deemed advisable and acceptable to the Parties to consummate
the transactions contemplated under the Operative Documents (which shall be the
responsibility of JUSCO, in accordance with TSA's review and prior written
approval of the steps to be taken by JUSCO to obtain each such required
approval, consent or waiver), and the Fair Trade Commission of Japan shall not
make or threaten to make any objection to any provision of any transaction so
contemplated.
(b) OPERATIVE DOCUMENTS. Execution and delivery of the Operative
Documents as provided herein.
7.2 NOTIFICATION OF FULFILLMENT OF CONDITIONS. Each of the Parties shall
promptly notify each other as soon as each Party has determined that the
conditions precedent specified in Section 7.1 have been fulfilled to its
satisfaction.
SECTION VIII
CLOSING
8.1 PURCHASE OF SHARES. At the Closing, (i) JUSCO shall cause the JUSCO JV
Shareholder to pay, by wire transfer of immediately available funds to the
account specified by TSA, an amount equal to the Purchase Price for the Purchase
Shares, (ii) the Parties shall cause their respective JV Shareholders to deliver
the certificates representing their respective Shares to the Joint Venture
Company for cancellation, (iii) the Parties shall cause the Joint Venture
Company to record in its stock register the transfer of the Purchase Shares to
the JUSCO JV Shareholder, and (iv) the Parties shall cause the Joint Venture
Company to deliver to each JV Shareholder one or more new stock certificates
properly endorsed to the respective JV Shareholders in accordance with the
Adjusted Ownership Ratio as set forth in Section 3.5 (c).
8.2 CLOSING. Subject to the terms and conditions stated herein, the Closing
hereunder shall take place on March 26, 1999, or such later date mutually agreed
by the Parties (the "Closing Date"), at such location in Japan and at such time
as agreed by the Parties hereto prior to the Closing Date.
8.3 GENERAL MEETING. As soon as possible following the Effective Date, but in
any event no later than the Closing Date, a general meeting of the Joint Venture
Company shall be held, to be attended by the TSA JV Shareholder and JUSCO JV
Shareholder (the "General Meeting"), at which the following matters shall be
resolved:
(a) Approval of the Amended Articles of Incorporation as required by
the transactions contemplated herein;
(b) Election of Directors and/or Statutory Auditors in accordance with
Sections 4.1 (a) and 9.2 of this Agreement; and
(c) Approval of any other matters set forth in Section 3.5 hereof.
8.4 FIRST MEETING OF NEW BOARD. Immediately following the General Meeting, the
first meeting of the new Board shall be held, at which the following matters
shall be resolved:
(a) Approval and authorization of the transfer of the Purchase Shares
from the JUSCO JV Shareholder to the TSA JV Shareholder;
(b) Approval and authorization of the execution by the Joint Venture
Company of the agreements referred to in Section VI of this Agreement; and
(c) Approval of any other matters referred to in Section 3.5 hereof.
8.5 FOLLOWING FIRST NEW BOARD MEETING. As of the Closing Date, the Joint Venture
Company shall:
(a) Issue revised Share certificates to the TSA JV Shareholder and the
JUSCO JV Shareholder, respectively, representing the Shares subscribed to by
each of them and complete the registration of Shareholders in the Joint Venture
Company's register of Shareholders; and
(b) Execute the agreements referred to in Section VI of this Agreement
to which it is a party.
SECTION IX
ACCOUNTING MATTERS/AUDITOR
9.1 FISCAL YEAR. The fiscal year of the Joint Venture Company and any Subsidiary
shall end on January 31 each year.
9.2 STATUTORY AUDITOR. The Joint Venture Company shall have one (1) statutory
auditor appointed by the JUSCO JV Shareholder. If the paid-in capital of the
Joint Venture Company is increased to (Y)500,000,000 or more or total
liabilities equal or exceed (Y)20,000,000,000, requiring at least three (3)
statutory auditors, then the Board shall nominate and appoint a second and third
statutory auditor. The Parties agree to cause their Shares to be voted to elect
as the auditors the persons so nominated.
9.3 RIGHT OF INSPECTION. The accounting books, records and accounts of the Joint
Venture Company and each Subsidiary shall at all times be open to inspection by
duly authorized representatives of JUSCO and TSA during regular business hours.
The
objective of the Parties in any inspection shall be the evaluation of their
investment and not the retrieval of information to assist such Party in its own
retailing and other business operations.
9.4 BOOKS AND RECORDS. The accounting books, records and accounts of the Joint
Venture Company and any Subsidiary shall be kept in accordance with generally
accepted accounting principles and practices in Japan and audited by the Joint
Venture Company's external auditor at the expense of the appropriate Joint
Venture Company or Subsidiary, as applicable. The frequency and extent of such
audits, in addition to any statutory requirements, shall be determined by the
Board of the Joint Venture Company. The Parties agree to nominate and approve
Tomatsu or another mutually acceptable firm as the external auditor.
SECTION X
RESTRICTION ON TRANSFER OF SHARES
10.1 GENERAL RESTRICTION. JUSCO shall not permit the JUSCO JV Shareholder, and
TSA shall not permit the TSA JV Shareholder (the JUSCO JV Shareholder and the
TSA JV Shareholder collectively referred to herein as the "Shareholders" and
individually as a "Shareholder") except with the prior written consent of the
other Shareholder, to directly or indirectly sell, assign, give or otherwise
dispose of, or pledge or encumber, any interest in all or any portion of Shares
owned by it in any manner except (i) as provided in Section 10.3, or (ii)
subsequent to the third anniversary of the Closing Date of this Agreement, in
accordance with Section 10.6.
10.2 SHARES COVERED BY AGREEMENT. This Agreement shall be applicable to all
Shares held by a Shareholder, whether now owned or hereafter acquired by
whatever means, including, but not limited to, Shares acquired by purchase,
Share dividend or received as a replacement for or in addition to the
above-described Shares through any recapitalization or reorganization of the
Joint Venture Company.
10.3 TRANSFERS TO WHOLLY-OWNED OR CONTROLLED SUBSIDIARIES; TSA OPTION TO
PURCHASE SHARES FROM JUSCO.
(a) Notwithstanding anything in this Agreement to the contrary,
(i) the TSA JV Shareholder may, from time to time, transfer all
(but not less than all) of its Shares to any direct or
indirect wholly-owned or controlled subsidiary of TSA, and
(ii) the JUSCO JV Shareholder may, from time to time, transfer all
(but not less than all) of its Shares to any direct or
indirect wholly-owned or controlled subsidiary of JUSCO (each
of the foregoing transfers in this paragraph is hereinafter
referred to as a "Permitted Transfer" and each wholly-owned or
controlled subsidiary referred to as a "Transferee");
(iii) provided, however, that:
(A) any such Transferee shall continue to be a direct or
indirect wholly-owned or controlled subsidiary of TSA
or Jusco, as the case may be,
(B) all of the aforementioned Transferees shall be bound
by all of the terms and conditions of this Agreement
in the same manner as is applicable to its
transferor-Shareholder hereunder,
(C) JUSCO or TSA, as the case may be, shall continue to
be bound by all of the terms and conditions of this
Agreement,
(D) the Shareholder effecting a Permitted Transfer shall
provide notice of such Transfer to the other
Shareholder within ten (10) days following such
Permitted Transfer, together with a written
acknowledgment from its Transferee that it is bound
by the terms hereof, and
(E) if any Transferee subsequently ceases to be a direct
or indirect wholly-owned or controlled subsidiary of
TSA or JUSCO, as the case may be, TSA or JUSCO, as
the case may be, shall cause such Shares to be
transferred back to TSA or JUSCO or to any other
direct or indirect wholly-owned or controlled
subsidiary of TSA
or JUSCO prior to the Transferee ceasing to be a
direct or indirect wholly-owned or controlled
subsidiary of TSA or JUSCO.
(b) JUSCO JV Shareholder grants to TSA JV Shareholder the right
("Purchase Option") to purchase at any time and from time to time, but not more
than twice in a calendar year, a portion of the JUSCO JV Shareholder's Shares
("Option Shares");
(i) provided that:
(A) in no event may the TSA JV Shareholder exercise the
Purchase Option to purchase Option Shares to the
extent that the TSA JV Shareholder's Shares would
exceed thirty percent (30%) of the total issued and
outstanding Shares, and
(B) in any event, the Purchase Option shall expire at
such time as the TSA JV Shareholder's Shares equal
thirty percent (30%) of the total issued and
outstanding Shares, or at such time as the Joint
Venture Company becomes a publicly owned and traded
company, whichever is earlier, provided, however,
that expiration due to the latter cause is subject to
the TSA JV Shareholder having received notice of the
Joint Venture Company going public at least 120 days
prior to the closing date of such transaction.
(ii) To exercise the Purchase Option, the TSA JV Shareholder shall
in each instance deliver to the Jusco JV Shareholder written
notice (a "Purchase Notice") at least fifteen (15) days prior
to the requested date of purchase (in each case, an "Option
Closing Date") setting forth the number of Shares to be
purchased by the TSA JV Shareholder.
(iii) The purchase price ("Option Price") for the Option Shares to
be purchased on a particular Option Closing Date shall be:
(A) during the first three (3) years following the
Closing Date, the par value of the Option Shares to
be purchased plus an amount equal to five percent
(5%) per annum, compounded semiannually, of such
par value, calculated for the period from the Closing
Date to the Option Closing Date, using a 360 day
year, or
(B) at any time following the third anniversary of the
Closing Date, the Fair Market Value of such Option
Shares to be purchased, calculated in accordance with
an Appraisal as set forth in Section 11.5 below.
(iv) On the closing Date, the TSA JV Shareholder shall deliver the
Option Price to the JUSCO JV Shareholder's bank account by
wire transfer according to the JUSCO JV Shareholder's
instructions, and JUSCO and TSA shall cause the Joint Venture
Company to issue revised Share certificates to the TSA JV
Shareholder and the JUSCO JV Shareholder, respectively,
representing the Shares subscribed to by each of them as of
the Option Closing Date and complete the registration of
Shareholders in the Joint Venture Company's register of
Shareholders.
10.4 IMPERMISSIBLE TRANSFERS VOID. Any attempted sale, pledge, transfer,
encumbrance or disposition of Shares made in violation of this Agreement shall
be null and void. The Transferee of such Shares shall not be entitled to be
registered as a member of the Joint Venture Company and shall not be entitled to
vote such Shares or receive dividends thereon. The Parties agree to cause the
Joint Venture Company to take any actions necessary to give effect to this
provision.
10.5 LEGEND ON SHARES. An appropriate legend shall be placed on all certificates
representing Shares to the effect that the unanimous approval of the Board is
required for any Share transfer except a Share transfer to wholly owned or
controlled subsidiaries and that any transfer to a third party is subject to the
right of first refusal contained in this Agreement.
10.6 PROVISIONS RELATING TO TRANSFERS TO PERSONS OR ENTITIES OTHER THAN TO
WHOLLY-OWNED OR CONTROLLED SUBSIDIARIES.
(a) GENERAL. Subsequent to the third anniversary of the Closing Date, a
Shareholder may transfer all (but not less than all, unless pursuant to a
mutually agreed
sale by one Party to the other) of the Shares owned by it in accordance with
this Section 10.6.
(b) NEGOTIATIONS; NOTICE OF PROPOSED SALE. A Shareholder (the
"TRANSFERRING SHAREHOLDER") who desires to effect a direct or indirect sale of
all (but not less than all, unless pursuant to a mutually agreed sale by one
Party to the other) of the Shares owned by it other than a Permitted Transfer
shall first give written notice to the other Shareholder of its intentions, and
negotiate in good faith with the other Shareholder with respect to a sale of its
Shares to the other Shareholder. If a written definitive agreement with respect
to such a sale is not reached within sixty (60) days after the date on which
notice is given by the Transferring Shareholder, the Transferring Shareholder
may negotiate with third parties with respect to the sale of all of its Shares
solely for cash payable in full at the completion of such sale, subject to the
right of first refusal of the other Shareholder set forth below. If the
Transferring Shareholder receives a bona fide written offer from a third party
to purchase its Shares solely for cash payable in full at the closing of such
sale, the Transferring Shareholder shall serve notice (the "Transfer Notice") on
the other Shareholder, which Transfer Notice shall include the following:
(i) The Transfer Notice shall state that the Transferring
Shareholder has received a bona fide all cash (payable in full
at the closing) written offer to purchase all of its Shares
from a financially responsible third party, the purchase price
of the Shares and any additional material terms or conditions
of such offer (E.G. indemnification provisions), the name and
address of the prospective purchaser (the "Third Party"),
relevant financial statements of the Third Party and such
other information as to the identity and the business of the
Third Party so as to enable the other Shareholder to make an
informed decision with respect to the exercise of its rights
under this Section 10.6.
(c) OPTION TO PURCHASE SHARES.
(i) Upon receipt of the Transfer Notice, the other Shareholder
shall have the option to purchase all, but not less than all
(unless pursuant to a mutually agreed sale by one Party to the
other), of the Shares owned by the Transferring Shareholder.
The other Shareholder may purchase such Shares at the price
described in the Transfer Notice, which price shall be
payable in full at the closing in immediately available and
freely transferable funds, and in accordance with any other
material terms or conditions described in the Transfer Notice.
(ii) If the other Shareholder elects to exercise its option to
purchase the Shares, it shall do so by notifying the
Transferring Shareholder of such election within thirty (30)
days after receipt of the Transfer Notice from such
Shareholder. After such thirty (30) day period, the other
Shareholder's option shall expire.
(iii) In the event of any purchase and sale of Shares pursuant to
this paragraph (c), the closing of such purchase and sale
shall be held within ninety (90) days after the date on which
notice of exercise of an option is given by the other
Shareholder to the Transferring Shareholder.
(d) LAPSE OF OPTIONS. If the option specified in Section 10.6(c) shall
expire without exercise thereof, the Transferring Shareholder shall be entitled
to make the proposed sale of its Shares to the Third Party at the price (which
shall be payable in full in cash at the closing of such transfer) and in
accordance with any other material terms or conditions described in the Transfer
Notice, provided that the Third Party agrees, in form and substance reasonably
satisfactory to the other Shareholder, to be bound by the provisions of this
Agreement to the same extent as if such Third Party were originally a party
hereto. If the sale of the Transferring Shareholder's Shares is not completed
within sixty (60) days of the date of the expiration of the options set out in
Section 10.6(c) above, then such Shares shall again become subject to the
restrictions of this Agreement.
(e) DELIVERY OF CERTIFICATES. At the closing of any sale of Shares
pursuant to this Agreement, the Transferring Shareholder shall deliver to the
transferee the Share certificate(s) for the Shares. The Shares being transferred
shall be transferred free and clear of any lien or encumbrance, except for the
provisions of this Agreement. The Parties shall require that the Joint Venture
Company shall promptly effect the transfer of the Shares on its books upon any
transfer in accordance with the provisions of this Agreement.
SECTION XI
TERM AND TERMINATION
11.1 TERM. This Agreement shall be deemed effective as of the date hereof and
shall remain in effect for as long as each of the JUSCO JV Shareholders and TSA
JV Shareholders directly own Shares of the Joint Venture Company unless sooner
terminated in accordance with Section 11.2.
11.2 TERMINATION. This Agreement may be terminated at any time.
BY TSA OR JUSCO, AS THE CASE MAY BE, IF:
(a) The other Party shall materially default in the performance of any
of the covenants, terms and conditions of this Agreement and shall fail to cure
such default within sixty (60) calendar days after receipt of notice in writing
from the terminating Party of such default, giving reasonable particulars of
such default and of the intention of the Party serving the notice to terminate
this Agreement unless such default is cured; provided, however, that if such
default cannot reasonably be cured within sixty (60) calendar days, no
termination shall occur so long as the Party against which default has been
declared continues to use its best efforts to cure such default;
AUTOMATICALLY, IF:
(b) Either Party shall be judicially declared bankrupt or insolvent,
make an assignment for the benefit of, or enter into a compromise with, its
creditors; initiate bankruptcy or insolvency proceedings of any kind or
proceedings for the appointment of a receiver, manager, judicial manager or
similar official with respect to it or any of its assets or become a party to
dissolution proceedings; provided, however, that no termination shall occur if
any such action is stayed, dismissed or reversed within sixty (60) calendar days
of the initiation of such action and the subject Party provides satisfactory
evidence of the same within such period.
BY TSA, IF:
(c) The Fair Trade Commission of Japan raises any material objection to
any provision of this Agreement or any of the Operative Documents and such
objection
affects the enforceability of this Agreement or any of the Operative Agreements
or otherwise materially ▇▇▇▇▇ TSA's interest and such objection is not withdrawn
or resolved within thirty (30) calendar days of receipt by TSA of written notice
of the objection.
11.3 EFFECT OF TERMINATION UNDER SECTION 11.2(A) OR 11.2(C). Upon a termination
of this Agreement under Section 11.2(a) or 11.2(c) and in addition to any other
remedy as may be provided for in this Agreement or by law, the Party exercising
the right of termination (which shall be TSA in the case of termination under
Section 11.2(c)) shall have the right (but not the obligation) to purchase all
(but not less than all) of the Shares then owned and held by the other Party or
any of its direct or indirect wholly-owned or controlled subsidiaries by serving
written notice to the other Party within thirty (30) calendar days of the date
of termination. The price that a terminating Party (the "PURCHASER") shall pay
for the Shares held by the other Party or any of its direct or indirect
wholly-owned or controlled subsidiaries (the "SELLER"), in the event that the
Purchaser acquires and elects to exercise a right to purchase the Shares of the
Seller under this Section 11.3, shall be the Fair Market Value of the Shares
held by the Seller determined in accordance with an Appraisal. The purchase
price of the Shares purchased under this Section 11.3 must be paid in Japanese
Yen in immediately available and freely transferable funds through a transfer of
funds to a banking account to be designated at that time by the Seller to the
Purchaser. The closing of any purchase and sale Shares under this Section 11.3
shall be completed within thirty (30) calendar days of the Parties' receipt of
the final appraisal of the Shares. As a condition of closing, the Seller shall
deliver to the Purchaser or its nominees the related share certificate(s) for
these Shares. The Shares so delivered shall be duly endorsed and free and clear
of any lien or encumbrance of any nature whatsoever.
11.4 EFFECT OF TERMINATION UNDER SECTION 11.2(B). Upon a termination of this
Agreement under Section 11.2(b), the Parties agree that the Joint Venture
Company shall be voluntarily dissolved and liquidated, provided that no
dissolution and liquidation shall occur upon such a termination (or as otherwise
provided in the Joint Venture Company's Articles of Incorporation) if the
non-bankrupt holders of all of the remaining Shares elect to continue the
existence of the Joint Venture Company, in which case the bankrupt holders shall
vote with the non-bankrupt to approve such continuance (including any necessary
amendment of the Articles of Incorporation to effect such continuance) and the
non-bankrupt holders shall purchase all (but not less than all) of
the Shares then owned by the bankrupt Party or any of its direct or indirect
wholly-owned or controlled Subsidiaries by serving written notice to such Party
and paying for such Shares in accordance with Section 11.3. As a part of a
dissolution and liquidation, the non-bankrupt Party shall have the right (but
not the obligation) to purchase all, but not less than all, of the assets of the
Joint Venture Company at a price equal to the Fair Market Value thereof
determined in accordance with an appraisal. The Party exercising its rights
under this Section 11.4 shall do so by serving written notice to the other Party
and the Joint Venture Company within thirty (30) calendar days after the date of
termination. The closing shall be held within fortyfive (45) days of the
Parties' receipt of the final appraisal of the assets of the Joint Venture
Company unless otherwise agreed by the Parties. The purchase price of the assets
purchased under this Section 11.4 must be paid in Japanese Yen in immediately
available and transferable funds through a transfer of funds to a banking
account to be designated at that time by the Joint Venture Company. As a
condition to the closing, the Parties shall procure that the Joint Venture
Company shall deliver to the Party exercising its rights hereunder such
instruments of transfer as such Party may reasonably request, transferring the
assets free and clear of any lien or encumbrance other than, with respect to
real estate, encumbrances of record that do not materially interfere with the
use of the property for the conduct of a retail store.
11.5 DEFINITIONS. For the purposes of this Section 11, the following terms shall
have the meanings ascribed to them below:
"Fair Market Value" of the (i) Shares held by the Seller means (A) the
value of the Shares, considering the company as a going concern being sold as an
entirety, taking into account net worth, past, present and prospective earnings
and cash flow, market conditions and prices paid in previous acquisitions of
similar businesses in Japan (without giving disproportionate weight to any one
acquisition) multiplied by (B) a fraction, the numerator of which is the number
of Shares held by the Seller and the denominator of which is the total number of
Shares outstanding on a fully diluted basis (i.e., taking into account
outstanding options, convertible debt and securities, etc.); and (ii) of the
assets of the Joint Venture Company means the value of the assets of the Joint
Venture Company, taken as a whole, considering the sale of all of such assets in
a single transaction and on a going concern basis.
"Appraisal" means the following procedure to determine Fair Market
Value: JUSCO and TSA shall each select an Appraiser, each at its own expense,
within a thirty (30) calendar day period following the date on which a Party
notified the other Party of its intent to exercise the right conferred upon the
notifying Party under Section 11.3 or 11.4. If JUSCO or TSA fails to select an
appraiser within the thirty (30) calendar day period, the Fair Market Value
shall be the amount determined by the Appraiser selected by the other Party. The
Appraisers selected by TSA and JUSCO each shall determine the Fair Market Value
within a period of thirty (30) calendar days from the date of their selection.
In the event of a difference of ten percent (10%) or less between the Fair
Market Value determined by each Appraiser, the Fair Market Value shall be the
average obtained by dividing (i) the sum of the Fair Market Value determined by
the two Appraisers by (ii) two. However, in the event of a difference of more
than ten percent (10%) between the Fair Market Value determined by each
Appraiser, then JUSCO and TSA shall agree on the selection of a third Appraiser
within ten (10) calendar days from the date the Appraisers selected by TSA and
JUSCO render their valuations of the Fair Market Value as set forth above. If
JUSCO and TSA fail to agree on the selection of the third Appraiser within the
above ten (10) calendar day term, the third Appraiser shall be selected by the
Appraisers selected by JUSCO and TSA. Upon its selection, the third Appraiser
shall, within a period of sixty (60) calendar days from the date of its
selection, select one of the two Fair Market Value amounts previously determined
by the Appraisers. The expenses and other amounts to be paid to the third
Appraiser shall be paid in equal parts by JUSCO and TSA. The decision of the
third Appraiser shall in the absence of manifest error be conclusive evidence
and binding upon the Parties, and there shall be no appeal from such decision.
"Appraiser" means a major accounting firm or a major investment banking
firm having substantial experience in the valuation of Japan enterprises similar
in size and structure to the Joint Venture Company, other than the accountants
or auditors of the Joint Venture Company.
The Joint Venture Company shall disclose and make available to the
Appraisers selected pursuant to this Section 11.5 all of the information
regarding the operations and financial condition of the Joint Venture Company
and its Subsidiaries, as may be requested by such Appraisers in order to conduct
and conclude their Appraisals within the time periods set forth herein.
11.6 FAILURE TO PURCHASE UNDER SECTION 11.3 OR 11.4. If the Shares or assets as
the case may be, fail to be purchased under Section 11.3 or 11.4 within the
periods provided in such Sections, the TSA and JUSCO JV Shareholders shall take
all steps necessary to dissolve the Joint Venture Company pursuant to applicable
law and shall cooperate in good faith with each other for such purpose.
11.7 SURVIVAL. The termination of this Agreement for any reason shall not
release either Party from its liability to pay any sums of money accrued, due
and payable to the other Party or to discharge its then accrued and unfilled
obligations. The non-competition obligations under Section 1.3, indemnification
obligations under Section 4.5, confidentiality obligations under Section 12.1,
governing law, arbitration and language provisions under Section 13.2 and the
obligations of the Parties under this Section 11 are among the obligations and
provisions which shall survive any termination of this Agreement.
SECTION XII
CONFIDENTIALITY PROVISIONS
12.1 GENERAL CONFIDENTIALITY PROVISIONS/PUBLIC DISCLOSURE. Except as may be
mutually agreed in writing between the Parties, neither JUSCO nor TSA shall, nor
shall either of them permit any of its Related Companies, during the term of
this Agreement or any time thereafter, except as may be required by stock
exchange or securities law requirements in the U.S. or Japan, to: (i) disclose
to third parties the terms and conditions of this Agreement or the other
Operative Documents, except to those of its Related Companies, attorneys,
accountants and other consultants who need to know the information for the
purposes of operating the Joint Venture Company and carrying out transactions
related thereto; or (ii) disclose to third parties (i.e. persons or entities
other than TSA or JUSCO), any confidential or proprietary information obtained
from the other Party or any Related Company of the other Party. Neither Party
shall issue any press release or otherwise make any public disclosure concerning
the details of the Operative documents and the carrying out of transactions
related thereto without the written consent of the other Party unless required
by law.
SECTION XIII
ADDITIONAL COVENANTS
13.1 EXPENSES. Each Party shall bear its own expenses in connection with the
transactions contemplated hereby.
13.2 GOVERNING LAW, ARBITRATION AND LANGUAGE.
(a) This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of Japan. Any controversy or claim arising out of
or relating to this Agreement, or the breach thereof or relationship created
thereby, shall be settled exclusively by arbitration in the State of Hawaii,
U.S.A., in accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce then in effect. The arbitration shall be heard
before three arbitrators, one to be chosen by TSA, one to be chosen by JUSCO and
the third to be chosen by those two arbitrators. The arbitration shall be final,
binding on the Parties, not subject to any appeal, and shall deal with the
question of costs of the arbitration. Judgment on the award of the arbitrators
may be entered by any court having jurisdiction to do so. Notwithstanding any
other provision of this Agreement, either Party shall be entitled to seek
injunctive or other provisional relief from any court of competent jurisdiction
pending the final decision or award of the arbitrators.
(b) The English language version of this Agreement and of the other
Operative Documents shall control the rights, obligations and relationships of
the Parties and the construction and interpretation of this Agreement and the
other Operative Documents, and shall also be the controlling language for all
future communications between the Parties concerning the Operative Documents. As
to the Articles of Incorporation, the Japanese language version shall control.
13.3 NOTICES.
(a) Any notice or request with respect to this Agreement shall be in
writing and shall be delivered personally, by registered mail, or by airborne
express courier, in each such case directed by each Party to the other, with
evidence of transmission, to its respective addresses as follows:
JUSCO: JUSCO Co. Ltd.
1-5-1, 1 Chome
Nakase, Mihama-Ku
Chiba-Shi, Chiba ▇▇▇, ▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: PRESIDENT AND REPRESENTATIVE DIRECTOR
TSA: The Sports Authority, Inc
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.▇.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: CHIEF EXECUTIVE OFFICER
(b) Any notice or request shall be deemed to be given when actually
received. Either Party, by written notice to the other Party, may change the
address to which notices or requests shall be directed.
13.4 SUCCESSORS. This Agreement shall inure to the benefit of and be binding
upon each of the Parties and their respective permitted successors and assigns,
but neither the rights nor the obligations of either Party hereunder may be
voluntarily assigned, in whole or in part, without the prior written consent of
the other Party, which consent may be withheld at the other Party's sole
discretion.
13.5 SEVERABILITY; CONFLICT WITH ARTICLES OF INCORPORATION. If any term or
provision of this Agreement is held to be unenforceable or in conflict with any
law or regulation of any kind, either by arbitration as provided herein or by
court of law with competent jurisdiction, then this Agreement, except for such
part or parts thereof, shall continue to be in full force and effect, provided,
however, that such remaining terms and provisions of this Agreement shall be
construed to reflect the original intent of the Parties and remain as a workable
instrument for the purposes of carrying out the original intentions of the
Parties. In the event of any conflict between the provisions of this Agreement
and the Articles of Incorporation of the Joint Venture Company, the provisions
of this Agreement shall prevail.
13.6 ENTIRE AGREEMENT. The Operative Documents constitute the complete and final
agreement between the Parties with respect to the subject matter hereof and
supersede all previous negotiations, agreements, commitments and understandings,
whether written or oral.
13.7 AMENDMENT; WAIVER. The provisions hereof may not be amended, waived,
modified or superseded except by an instrument in writing signed by a duly
authorized officer or representative of each of the Parties.
13.8 ACTION OF THE JOINT VENTURE COMPANY. Each Party agrees to take all such
steps as lie within its power, and to cause its respective JV Shareholder and
the members of the Board that it appoints to take such steps as lie within their
power, including, but not limited to, the exercise of voting rights in the Joint
Venture Company and all Subsidiaries, to make certain that the Joint Venture
Company and all Subsidiaries take all such action as may be necessary to
effectuate the terms of the Operative Documents.
13.9 HEADINGS. Descriptive headings in this Agreement are for convenience only
and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.
13.10 PREPARATION FOR BEING LISTED AS A PUBLIC COMPANY. The Parties agree on the
business strategy to have the Joint Venture Company become a public company
(either listed on a stock exchange or traded in the over-the-counter market) as
soon as it is practical and economically favorable. The Parties acknowledge that
certain provisions in certain agreements and other legal documents including the
Operative Documents and Articles of Incorporation may be in conflict and
inapplicable for a public company under the applicable Japanese laws, rules and
regulations (including any rules established by relevant stock exchanges). Thus,
the Parties agree to cooperate in good faith and discuss in good faith the
revision, modification and/or elimination of such provisions following a
resolution by the Board of the Joint Venture Company to cause the Joint Venture
Company to become a public company.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed as of the date first above written by its duly authorized officer or
officers.
THE SPORTS AUTHORITY, INC. JUSCO CO. , LIMITED
By:_________________________ By:_________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Chairman and CEO Title: Chairman and CEO