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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 2002.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to________________.
Commission File Number 1-10704
Sport Supply Group, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2241783
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 Diplomat Drive, Farmers Branch, Texas 75234 - 8914
------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 484-9484
Not Applicable
---------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicated below is the number of shares outstanding of each class of
the registrant's common stock as of July 30, 2002.
Title of Each Class of Common Stock Number Outstanding
----------------------------------- ------------------
Common Stock, $0.01 par value 8,917,244 shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
Index to Consolidated Financial Statements Page
------------------------------------------ ====
Consolidated Balance Sheets as of June 28, 2002 and
March 29, 2002 (Unaudited) 3
Consolidated Statements of Operations for the three
months ended June 28, 2002 and June 29, 2001 (Unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended June 28, 2002 and June 29, 2001 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 28, March 29,
2002 2002
(unaudited)
----------- -----------
CURRENT ASSETS :
Cash and equivalents $ 496,706 $ 586,911
Accounts receivable:
Trade, less allowance for doubtful
accounts of $497,000 at June 28,
2002 and $524,000 at March 29, 2002 13,825,865 18,824,829
Other 157,927 235,008
Inventories, net 17,848,409 18,368,392
Other current assets 759,611 560,362
Deferred tax assets 1,532,195 1,659,039
----------- -----------
Total current assets 34,620,713 40,234,541
----------- -----------
DEFERRED CATALOG EXPENSES 1,252,688 2,017,280
PROPERTY, PLANT AND EQUIPMENT :
Land 8,663 8,663
Buildings 1,605,102 1,605,102
Computer equipment & software 11,304,431 11,231,120
Machinery and equipment 6,369,290 6,358,546
Furniture and fixtures 1,644,290 1,673,683
Leasehold improvements 2,426,712 2,384,335
----------- -----------
23,358,488 23,261,449
Less -- Accumulated depreciation
and amortization (13,787,722) (13,310,710)
----------- -----------
9,570,766 9,950,739
----------- -----------
DEFERRED TAX ASSETS 3,841,186 3,841,186
COST IN EXCESS OF NET ASSETS ACQUIRED,
less accumulated amortization of $2,171,000
at June 28, 2002 and March 29, 2002 7,442,432 7,442,432
TRADEMARKS, less accumulated amortization
of $1,142,000 at June 28, 2002 and
$1,114,000 at March 29, 2002 3,018,796 3,044,888
OTHER ASSETS, less accumulated amortization
of $655,000 at June 28, 2002 and $589,000
at March 29, 2002 719,282 775,839
----------- -----------
$ 60,465,863 $ 67,306,905
=========== ===========
CURRENT LIABILITIES :
Accounts payable $ 7,171,777 $ 9,532,407
Other accrued liabilities 3,594,737 3,652,310
Notes payable and capital lease
obligations, current portion 76,796 73,132
----------- -----------
Total current liabilities 10,843,310 13,257,849
----------- -----------
NOTES PAYABLE AND CAPITAL LEASE
OBLIGATIONS, net of current portion 12,363,914 17,000,139
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY :
Preferred stock, par value $0.01, 100,000
shares authorized, no shares outstanding - -
Common stock, par value $0.01, 20,000,000
shares authorized, 9,362,397 shares
issued at June 28, 2002 and March 29, 2002,
8,917,244 shares outstanding at June 28,
2002 and March 29, 2002 93,624 93,624
Additional paid-in capital 48,101,331 48,101,331
Accumulated deficit (7,135,034) (7,344,756)
Treasury stock, at cost, 445,153 shares at
June 28, 2002 and March 29, 2002 (3,801,282) (3,801,282)
----------- -----------
37,258,639 37,048,917
----------- -----------
$ 60,465,863 $ 67,306,905
=========== ===========
The accompanying notes are an integral part of these financial statements.
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
-For The Three Months Ended-
June 28, 2002 June 29, 2001
----------- -----------
Net revenues $ 26,773,157 $ 27,955,231
Cost of sales 18,633,868 20,015,872
----------- -----------
Gross profit 8,139,289 7,939,359
Selling, general & administrative expenses 7,553,030 8,118,150
Internet expenses 73,619 87,053
----------- -----------
Operating income (loss) 512,640 (265,844)
Interest expense (168,129) (332,365)
Other income (expense), net (7,945) 75,378
----------- -----------
Income (loss) before income taxes 336,566 (522,831)
(Provision for) benefit from income taxes (126,844) 189,501
----------- -----------
Net income (loss) $ 209,722 $ (333,330)
=========== ===========
Earnings (loss) per share:
Net earnings (loss) - basic $ 0.02 $ (0.04)
=========== ===========
Net earnings (loss) - diluted $ 0.02 $ (0.04)
=========== ===========
Weighted average number of
common shares outstanding - basic 8,917,244 8,914,606
=========== ===========
Weighted average number of
common shares outstanding - diluted 8,918,258 8,914,606
=========== ===========
The accompanying notes are an integral part of these financial statements.
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-For The Three Months Ended-
June 28, 2002 June 29, 2001
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES :
Net income (loss) $ 209,722 $ (333,330)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 571,023 676,461
Provision for accounts receivable 96,386 108,586
Changes in assets and liabilities:
Decrease in accounts receivable 4,979,659 4,952,788
Decrease in inventories 519,983 1,410,189
Decrease in deferred catalog expenses
and other current assets 565,343 683,226
Decrease in accounts payable (2,360,630) (5,478,256)
(Increase) decrease in deferred
tax assets 126,844 (166,527)
Decrease in accrued liabilities (57,573) (107,553)
(Increase) in other assets (10,360) (7,897)
----------- -----------
Net cash provided by operating activites 4,640,397 1,737,687
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES :
Acquisitions of property, plant & equipment (98,041) (20,790)
----------- -----------
Net cash used in investing activities (98,041) (20,790)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES :
Payments of notes payable and capital
lease obligations, net (4,632,561) (2,524,708)
----------- -----------
Net cash used in financing activities (4,632,561) (2,524,708)
----------- -----------
NET CHANGE IN CASH AND EQUIVALENTS (90,205) (807,811)
Cash and equivalents, beginning of period 586,911 1,271,096
----------- -----------
Cash and equivalents, end of period $ 496,706 $ 463,285
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION :
Cash paid during the period for interest $ 157,418 $ 308,246
=========== ===========
Cash paid during the period for income taxes $ 66,603 $ 60,089
=========== ===========
The accompanying notes are an integral part of these financial statements.
SPORT SUPPLY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 28, 2002
(Unaudited)
Basis of Presentation
---------------------
These consolidated financial statements reflect all normal and
recurring adjustments that are, in the opinion of management, necessary to
present a fair statement of Sport Supply Group, Inc.'s ("SSG") consolidated
financial position as of June 28, 2002 and the results of its operations for
the three month periods ended June 28, 2002 and June 29, 2001.
The consolidated financial statements include the accounts of SSG and
its wholly-owned subsidiaries, Athletic Training Equipment Company, Inc., a
Delaware corporation and Sport Supply Group Asia Limited, a Hong Kong
corporation. All significant intercompany accounts and transactions have
been eliminated in consolidation. Effective March 2001, Sport Supply Group,
Inc. became a majority-owned subsidiary of Emerson Radio Corp. The
consolidated financial statements also include estimates and assumptions
made by management that affect the reported amounts of assets and
liabilities, the reported amounts of revenues and expenses, provisions for
and the disclosure of contingent assets and liabilities. Actual results
could materially differ from those estimates.
Note 1 - Inventories
--------------------
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out and weighted-average cost methods
for items manufactured by us and weighted-average cost for items purchased
for resale. As of June 28, 2002 and March 29, 2002, inventories consisted
of the following:
June 28, March 29,
2002 2002
----------- -----------
Raw materials $ 2,163,684 $ 2,153,634
Work-in-progress 290,190 257,653
Finished and purchased goods 16,701,063 17,121,730
----------- -----------
19,154,937 19,533,017
Less inventory allowance for obsolete
or slow moving items (1,306,528) (1,164,625)
----------- -----------
Inventories, net $ 17,848,409 $ 18,368,392
=========== ===========
Note 2 - Stock Options
----------------------
We maintain a stock option plan that provides up to 2,000,000 shares of
common stock for awards of incentive and non-qualified stock options to
directors and employees. Under the stock option plan, the exercise price of
options will not be less than: (i.) the fair market value of the common
stock at the date of grant; or (ii.) 110% of the fair market value for
incentive stock options granted to certain employees, as more fully
described in the Amended and Restated Stock Option Plan. Options expire ten
years from the grant date, or five years from the grant date for incentive
stock options granted to certain employees, or such earlier date as
determined by the Board of Directors (or a Stock Option Committee comprised
of members of the Board of Directors).
The following table contains transactional data for our stock option
plan.
For the Three months Ended
June 28, 2002 June 29, 2001
----------- -----------
Options outstanding - beginning of period 926,179 906,929
Options granted 0 20,000
Options exercised 0 0
Options forfeited (505,750) (1,375)
----------- -----------
Options outstanding - end of period 420,429 925,554
=========== ===========
Weighted average exercise prices $7.21 $7.57
=========== ===========
Stock Options Outstanding Stock Options Exercisable
------------------------------ -------------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Range of Remaining Exercise Exercise
Exercise Prices Shares Life Price Shares Price
--------------- ------ --------- --------- ------- ---------
$0.95 - $9.44 420,429 6.3 yrs. $7.21 397,094 $7.37
Note 3 - Notes Payable and Capital Lease Obligations
----------------------------------------------------
As of June 28, 2002 and March 29, 2002, notes payable and capital lease
obligations consisted of the following:
June 28, 2002 March 29, 2002
----------- -----------
Note payable under revolving line of credit,
Interest based on prime (4.75% at June
28, 2002 and March 29, 2002) and LIBOR,
as adjusted (4.39% at June 28, 2002 and
4.35% at March 29, 2002), due March 27,
2004, collateralized by substantially
all assets. $ 12,252,558 $ 16,838,905
Capital lease obligation, interest at
9.0%, payable in annual installments
of principal and interest totaling
$55,000 through August 2005. 117,963 158,682
Other 70,189 75,684
----------- -----------
Total 12,440,710 17,073,271
Less - current portion (76,796) (73,132)
----------- -----------
Long-term notes payable and capital
lease obligations, net $ 12,363,914 $ 17,000,139
=========== ===========
We have a Loan and Security Agreement with Congress Financial
Corporation to finance our working capital requirements through March 2004.
This agreement provides for revolving loans and letters of credit which, in
the aggregate, cannot exceed the lesser of $25 million or a "Borrowing Base"
amount based on specified percentages of eligible accounts receivable and
inventories. As of March 29, 2002, we had total available borrowings under
our senior credit facility of approximately $17.8 million of which
approximately $12.3 million were outstanding. Amounts outstanding under the
senior credit facility are secured by substantially all the assets of the
Sport Supply Group, Inc. and its subsidiaries. Pursuant to the Loan and
Security Agreement, we are restricted from, among other things, paying cash
dividends and entering into certain transactions without the lender's prior
consent and we are required to maintain certain net worth levels.
Note 4 - Capital Structure
--------------------------
As of June 28, 2002, our issued and outstanding capital stock consisted
solely of common stock. We have 420,429 options outstanding under the stock
option plan with exercise prices ranging from $0.95 to $9.44 per share. If
the options were exercised, all holders would have rights similar to common
shareholders.
Note 5 - Income (Loss) Per Common Share
----------------------------------------
Basic income (loss) per share is computed by dividing net income (loss)
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted income (loss) per share
reflects the potential dilution that could occur if securities convertible
or exercisable into shares of common stock were converted or exercised into
common stock.
The following table sets forth the computation of basic and diluted
income (loss) per share:
For the Three Months Ended
June 28, 2002 June 29, 2001
----------- -----------
Numerator:
----------
Net income (loss) $ 209,722 $ (333,330)
=========== ===========
Denominator:
------------
Weighted average common shares - basic 8,917,244 8,914,606
=========== ===========
Effect of dilutive securities:
Employee stock options 1,014 0
----------- -----------
Weighted average common shares - diluted 8,918,258 8,914,606
=========== ===========
Per Share Calculations:
-----------------------
Net income (loss) - basic $0.02 ($0.04)
=========== ===========
Net income (loss) - diluted $0.02 ($0.04)
=========== ===========
Securites excluded from weighted
average common shares diluted because
their effect would be antidilutive 411,054 1,925,554
=========== ===========
Note 6 - Income Taxes
---------------------
We have a net operating loss carryforward included in net deferred tax
assets that can be used to offset future taxable income and can be carried
forward for 15 to 20 years. We believe the net deferred tax assets will be
realized through tax planning strategies available in future periods and
future profitable operating results. Although realization is not assured,
we believe it is more likely than not that all of the net deferred tax
assets will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced or eliminated in the near term if
certain tax planning strategies are not successfully executed or estimates
of future taxable income during the carryforward period are reduced.
Note 7 - Adoption of New Accounting Pronouncements
--------------------------------------------------
In August 2001, the Financial Accounting Standards Board issued
Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" (SFAS 144). This statement supersedes Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (SFAS 121), but carries over the key guidance from SFAS 121 in
establishing the framework for the recognition and measurement of long-lived
assets to be disposed of by sale and addresses significant implementation
issues. We have adopted SFAS 144 effective March 30, 2002. The adoption of
SFAS 144 did not significantly affect our financial statements.
In June 2001, the Financial Accounting Standards Board issued Statement
No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), which requires
that goodwill not be amortized but instead be tested for impairment at least
annually by reporting unit. SFAS 142 requires the recognition separate from
goodwill of identifiable intangible assets if certain criteria are met, and
eliminates the amortization of goodwill and certain identifiable intangible
assets. Under the provisions of SFAS 142, intangible assets, including
goodwill, that are not subject to amortization will be tested for impairment
annually at the reporting unit level using a two step impairment assessment.
Impairment testing must be performed more frequently if events or changes in
circumstances indicate that the asset might be impaired. We have adopted
SFAS 142 effective March 30, 2002. SFAS 142 provides for a transitional
period of up to twelve months. The first step is to identify potential
impairment by determining whether the carrying amount of a reporting segment
exceeds its fair value. This step must be completed within six months of
adoption. If an impairment is identified, the second step of the goodwill
impairment test is to measure the amount of impairment loss, if any. We are
still in the process of evaluating the relevant provisions of SFAS 142 and
have not yet determined whether SFAS 142 will have an immediate effect on
the financial statements upon adoption. However, we did cease amortization
of goodwill upon adoption of SFAS 142.
The proforma adoption of SFAS 142 for the three month period ended June
29, 2001, would have resulted in a decrease in net loss of approximately
$45,000 and a decrease in both basic and diluted loss per share of $0.01.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------
Results of Operations
---------------------
Net Revenues. Net revenues decreased approximately $1.2 million (4.2%) for
the three month period ended June 28, 2002 as compared to same period last
year. The decrease in net revenues was primarily the result of a general
slow-down in school and youth organization funding, and competitive
pressures in the marketplace.
Gross Profit. As a percentage of net revenues, gross profit increased to
30.4% from 28.4% for the three month period ended June 28, 2002 as compared
to the three month period ended June 29, 2001. This increase is primarily
the result of consolidating several of our plants, exiting certain
unprofitable product lines and improving product sourcing.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased approximately $565,000 (7.0%) for the
three month period ended June 28, 2002 as compared to the three month period
ended June 29, 2001. As a percentage of net revenues, selling, general and
administrative expenses decreased to 28.2% from 29.0% for the three month
period ended June 28, 2002 as compared to the three month period ended June
29, 2001. The decrease was primarily a result of the following:
(i.) A decrease in payroll related expense of approximately $258,000,
attributable to a reduced headcount.
(ii.) A decrease in depreciation and amortization expense of approximately
$99,000, primarily a result of assets reaching their full depreciation
levels and the discontinuation of amortization of goodwill.
(iii.) A decrease in legal fees of approximately $78,000.
(iv.) A decrease in facility expense of approximately $70,000, primarily
associated with a reduction in telecommunication expenses and various
other facility operating expenses.
Internet Expense. Internet related expenses decreased approximately $13,000
for the three month period ended June 28, 2002 as compared to the three
month period ended June 29, 2001. These expenses are related to the
continued support and enhancement of our websites and web development to
post electronic catalogs on our websites.
Interest Expense. Interest expense decreased approximately $164,000 (49.0%)
for the three month period ended June 28, 2002 as compared to the three
month period ended June 29, 2001. This decrease is due to lower overall
borrowing levels and lower interest rates.
Income Tax (Expense)Benefit. Income taxes for the three month period ended
June 28, 2002 were an expense of approximately $127,000 as compared to a
benefit of approximately $190,000 for the three month period ended June 29,
2001. We have a net operating loss carryforward included in net deferred tax
assets that can be used to offset future taxable income and can be carried
forward for 15 to 20 years. We believe the net deferred tax assets will be
realized through tax planning strategies available in future periods and
future profitable operating results. Although realization is not assured,
we believe it is more likely than not that all of the net deferred tax
assets will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced or eliminated in the near term if
certain tax planning strategies are not successfully executed or estimates
of future taxable income during the carryforward period are reduced.
Net Income. Net income increased to $210,000 for the three month period
ended June 28, 2002 as compared to a net loss of $333,000 for the three
month period ended June 29, 2001. Net income per share increased to $0.02
from a net loss per share of $(0.04) for the three month period ended June
28, 2002 as compared to the three month period ended June 29, 2001.
Liquidity and Capital Resources
-------------------------------
Our working capital decreased approximately $3.2 million during the
three month period ended June 28, 2002, from $27.0 million at March 29, 2002
to $23.8 million at June 28, 2002. The decrease in working capital is
primarily a result of a decrease in trade accounts receivable of
approximately $5.0 million and a decrease in inventories of approximately
$520,000. This decrease was partially offset by a decrease in trade payables
of approximately $2.4 million.
We have a credit agreement with Congress Financial Corporation to
finance our working capital requirements through March 2004. The credit
agreement provides for a $25 million revolving credit facility. Borrowings
under the Credit Agreement are subject to an accounts receivable and
inventory collateral base and are secured by substantially all of our
assets. We are required to maintain certain net worth levels and as of June
28, 2002 we were in compliance with this requirement. As of June 28, 2002,
we had total available borrowings under our senior credit facility of
approximately $17.8 million of which approximately $12.3 million were
outstanding.
We believe we can satisfy our short-term and long-term working capital
requirements to support our current operations from borrowings under our
credit facility and cash flows from operations. We have taken steps to
return to profitability, including revenue enhancement programs and cost
reductions. Revenue declines and future losses would negatively impact our
results of operations and impact our ability to support our working capital
needs.
We do not currently have any significant commitments for capital
expenditures.
The following table sets forth our contractual obligations at June 28, 2002
for the periods shown:
Due in Due in
Due within two to Four to
one year three years five years Thereafter Total
------------------------------------------------------------
Notes payable $ 53,563 $12,310,116 $ 25,202 $ -- $12,388,881
Capital lease 23,233 28,596 -- -- 51,829
obligations
Leases 1,935,988 2,472,415 16,085 -- 4,424,488
------------------------------------------------------------
Total $2,012,784 $14,811,127 $ 41,287 $ -- $16,865,198
============================================================
Contingencies
-------------
During the past several years, we have used the services of Strategic
Technologies, Inc. ("STI") to process our outbound truck freight bills. STI
audited freight bills submitted by our carriers and provided us a detailed
listing of invoices that were scheduled for payment at which time we
transferred funds to STI. STI was required to issue checks to the carriers
within forty-eight (48) hours of receipt of our funds. STI filed for
reorganization under Chapter 11 of the U. S. Bankruptcy Code on July 19,
2002 in the United States Bankruptcy Court in the District of New Jersey,
Case No. 02-37935 (NLW). The case was converted to Chapter 7 of the U. S.
Bankruptcy Code on July 31, 2002. It is not possible for us to currently
determine the amount of funds, if any, that were transferred to STI and not
subsequently forwarded to our carriers. In certain circumstances, we may
have to pay our freight carriers for invoices that we previously paid to STI
and attempt to recover such monies from STI. No assurance can be made that
we will be able to recover such money.
Critical Accounting Policies
----------------------------
For the quarter ended June 28, 2002, the significant changes to our
accounting policies from those reported in Form 10-K for the fiscal year
ended March 29, 2002 were as follows:
Intangible Assets. We have significant intangible assets related to
goodwill and other acquired intangibles. The determination of related
estimated useful lives and whether or not these assets are impaired involves
significant judgments. Changes in strategy and/or market conditions could
significantly impact these judgments and require adjustments to recorded
asset balances. We are still in the process of evaluating the relevant
provisions of SFAS 142 and have not yet determined whether SFAS 142
will have an immediate effect on the financial statements upon adoption.
However, we did cease amortization of goodwill upon adoption of SFAS 142.
If it were determined that there was an impairment of our intangible assets
related to goodwill and other acquired intangibles, additional write-downs
of these assets would be required.
Certain Factors that May Affect the Company's Business or Future Operating
Results
----------------------------------------------------------------------------
This report contains various forward looking statements and information
that are based on our beliefs as well as assumptions made by and information
currently available to us. When used in this report, the words
"anticipate", "believe", "estimate", "expect", "predict", "intend",
"project" and similar expressions are intended to identify forward looking
statements. Such statements are subject to certain risks, uncertainties
and assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those anticipated, expected or projected.
Among the key factors that may have a direct bearing on our results are set
forth below.
Future trends for revenues and profitability remain difficult to
predict. We continue to face many risks and uncertainties, including:
1. general and specific market and economic conditions;
2. budgetary restrictions of schools and government agencies;
3. unanticipated disruptions or slowdowns in operations;
4. high fixed costs;
5. competitive factors;
6. continuation of existing license agreement;
7. foreign supplier related issues;
8. use of deferred tax asset.
General and Specific Market and Economic Conditions
---------------------------------------------------
The general economic condition in the U.S. could affect pricing and
availability on raw materials such as metals, petroleum and other
commodities used in manufacturing certain products and certain purchased
finished goods as well as transportation costs. Any material price increases
to our customer could have an adverse effect on revenues and any price
increases from vendors could have an adverse effect on our costs.
Professional sports have a significant impact on the market conditions for
each individual sport. Collective bargaining, labor disputes, lockouts or
strikes by a professional sport (particularly Major League Baseball) could
have a negative impact on our revenues.
Budgetary Restrictions of Schools and Government Agencies
---------------------------------------------------------
Much of our business is dependent on the budgetary allowances of
schools, as well as, local, state and federal government agencies.
Restrictions to the budgeted spending of these entities could adversely
affect our result of operations.
Unanticipated Disruptions or Slowdowns in Operations
----------------------------------------------------
Our ability to provide high quality customer service, process and
fulfill orders and manage inventory depends on: (i.) the efficient and
uninterrupted operation of our call center, distribution center and
manufacturing facilities and our management information systems and (ii.)
the timely performance of vendors, catalog printers and shipping companies.
Any material disruption or slowdown in the operation of our call center,
distribution center, manufacturing facilities or management information
systems, or comparable disruptions or slowdowns suffered by our principal
service providers, could cause delays in our ability to receive, process and
fulfill customer orders and may cause orders to be canceled, lost or
delivered late, goods to be returned or receipt of goods to be refused.
We ship approximately 70% of our products using United Parcel Service
("UPS"). As experienced in 1997, a strike by UPS or any of our other major
carriers could adversely affect our results of operations due to not being
able to deliver our products in a timely manner and using other more
expensive freight carriers. UPS and the International Brotherhood of
Teamsters have reached a verbal agreement, subject to definitive
documentation, on a new contract to replace the five year agreement that
expires on July 31, 2002. Although we have analyzed the cost benefit effect
of using other carriers, we continue to utilize UPS for the majority of our
small package shipments and believe this is most advantageous to our
company.
In addition to the foregoing, the International Longshore and Warehouse
Union ("ILWU"), which is the union of dock workers that move the cargo (such
as import containers) along the West Coast, is in contract negotiations with
the Pacific Maritime Union, a group of global ship owners and terminal
operators. A strike by the ILWU would significantly slow the receipt of our
import products and could adversely affect our results of operations.
High Fixed Costs
----------------
Operations and maintenance of our call center, distribution center,
manufacturing facilities and management information systems involve
substantial fixed costs. Paper and postage are significant components of our
operating costs. Catalog mailings entail substantial paper, postage, and
costs associated with catalog development. Each of these is subject to
price fluctuations. We will be able to further reduce our paper and postage
costs if we continue to migrate a significant portion of our business to the
Internet because we will be less reliant on paper catalogs. If net revenues
are substantially below expectations, our results of operations will be
adversely affected.
Competitive Factors
-------------------
The institutional market for sporting goods and leisure products is
highly competitive and there are no significant barriers to enter this
market. The size of this market has encouraged the entry of new competitors
as well as increased competition from established companies. Competitors
include large retail operations that also sell to the institutional market,
other catalog and direct marketing companies, team dealers, and Internet
sellers. Increased competition could result in pricing pressures, increased
marketing expenditures and loss of market share and could have a material
adverse effect on our results of operations.
Continuation of Existing License Agreement
------------------------------------------
In February 1992, we acquired two separate licenses to use several
trade names, styles, and trademarks (including, but not limited to,
MacGregor[R]). On December 21, 2000, the license relating to the use of
the MacGregor[R] trademark was amended and restated in its entirety (the
"License Agreement"). The License Agreement permits us to manufacture,
promote, sell, and distribute to designated customers throughout the world,
specified sports related equipment and products relating to baseball,
softball, basketball, soccer, football, volleyball, and general exercise.
The License Agreement requires us to pay royalties based upon sales of
MacGregor branded products, with the minimum annual royalty set at $100,000.
Futhermore, the License Agreement is exclusive with respect to certain
customers and non-exclusive with respect to others. The License Agreement
has an original term of forty (40) years, but will automatically renew for
successive forty (40) year periods unless terminated in accordance with the
terms of the license. We have converted a substantial portion of our
products to the MacGregor[R] brand, which is believed to be a widely
recognized trade name in the sporting goods industry. Termination of this
license agreement could have a material adverse effect on our results of
operations.
Foreign Supplier Related Issues
-------------------------------
We derive a significant portion of our revenues from sales of products
purchased directly from foreign suppliers located primarily in the Far East.
In addition, we believe foreign manufacturers produce many of the products
we purchase from domestic suppliers. We are subject to risks of doing
business abroad, including delays in shipments, adverse fluctuations in
foreign currency exchange rates, increases in import duties, decreases in
quotas, changes in custom regulations, acts of God (such as earthquakes),
war and political turmoil. The occurrence of any one or more of the
foregoing could adversely affect our operations.
Use of Deferred Tax Asset
-------------------------
We believe the net deferred tax assets will be realized through tax
planning strategies available in future periods and future profitable
operating results. Although realization is not assured, we believe it is
more likely than not that all of the net deferred tax assets will be
realized. The amount of the deferred tax asset considered realizable,
however, could be reduced or eliminated in the near term if certain tax
planning strategies are not successfully executed or estimates of future
taxable income during the carryforward period are reduced.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
There have been no significant changes from items disclosed in Form
10-K for the fiscal year ended March 29, 2002.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Periodically, we become involved in various claims and lawsuits
incidental to our business. In management's opinion, any ultimate liability
arising out of currently pending claims will not have a material adverse
effect on our financial condition or results of operations. However, any
claims substantially in excess of our insurance coverage, or any substantial
claim that may not be covered by insurance or any significant monetary
settlement, could have a material adverse effect on our financial condition
or results of operations.
Item 2. Changes in Securities and Proceeds
----------------------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
(a) Not applicable.
(b) Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibit
Nbr. Description of Exhibit
------------------------ ---------------------------------------------------
(a) (1) Exhibit 3.1 Amended and Restated Certificate of Incorporation
of the Company (incorporated by reference from
Exhibit 4.1 to the Company's Registration
Statement on Form S-8 (Registration No. 33-80028)).
(a) (2) Exhibit 3.1.1 Certificate of Amendment of Amended and Restated
Certificate of Incorporation to the Company
(incorporated by reference from Exhibit 4.1 to
the Company's Registration Statement on Form S-8
(Registration No. 33-80028)).
(a) (3) Exhibit 3.2 Amended and Restated Bylaws of the Company
(incorporated by reference from Exhibit 3.2 to the
Company's Report on Form 10-K for the year ended
November 1, 1996).
(a) (4) Exhibit 4.1 Specimen of Common Stock Certificate (incorporated
by reference from Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (Registration
No. 33-39218))
(a) (4) Exhibit 10.1 (*) Employment Agreement entered into by and between
the Company and Eugene J.P. Grant dated January 1,
2001.
(a) (4) Exhibit 10.2 (*) Amendment to Lease Agreement by and between
Athletic Training Equipment Company, Inc. and The
Northwestern Mutual Life Insurance Company, dated
January 29, 1999 regarding the property located in
Sparks, NV.
-----------------------------
( * ) = Filed Herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
We hereby certify that this Report on Form 10-Q fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that the information contained in this report fairly presents, in
all material respects, the financial condition and results of operations of
the Company.
Dated: August 2, 2002
SPORT SUPPLY GROUP, INC.
By: /s/ Geoffrey P. Jurick
--------------------------
Geoffrey P. Jurick
Chief Executive Officer
By: /s/ Robert K. Mitchell
--------------------------
Robert K. Mitchell
Chief Financial Officer
*******************************************************************************
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of January 1,
2001, by and between Sport Supply Group, Inc., a Delaware corporation
("Employer") and Eugene J. P. Grant ("Employee").
RECITALS:
WHEREAS, Employer desires to retain the services of Employee, and
Employee desires to provide services to Employer in accordance with the
terms, conditions, and provisions of this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements of the
parties herein contained, the parties to this Agreement agree as follows:
1. Term. Subject to the terms and conditions set forth in this
Agreement, Employer hereby employs Employee, and Employee hereby accepts
such employment from Employer, for a three year period commencing on January
1, 2001 (the "Effective Date") and expiring on December 31, 2003, except as
otherwise provided herein.
2. Duties. Employee will be employed as the Executive Vice
President-Sales and Marketing of Employer, and in such capacity will perform
the normal duties associated with such position and/or such other reasonable
duties as may be assigned from time to time by the Board of Directors or
Chairman of the Board of Employer. During the term of this Agreement,
Employee shall devote his full time, attention, and energies to the business
of Employer and its subsidiaries (including, without limitation, serving as
President of Athletic Training Equipment Company, Inc.) in order to
discharge his duties faithfully, diligently, to the best of his abilities,
and in a manner consistent with any and all policies and guidelines as may
be established by Employer from time to time. Employee shall report to the
Chairman of the Board and to the Board of Directors of Employer.
3. Compensation.
(a) Subject to the terms and conditions of this Agreement and as
compensation for the performance of his services hereunder, Employer will
pay Employee a fixed salary at a minimum annual rate of $205,000 (such rate
is referred to herein as "Salary"). Employee's Salary will accrue and be
payable to Employee in accordance with the payroll practices of Employer in
effect from time to time during the term of this Agreement.
(b) Employer will pay Employee a $500 per month allowance for car
and car related expenses payable in accordance with the payroll practices of
Employer in effect from time to time during the term of this Agreement.
(c) Employee shall be entitled to receive an annual formula bonus
equal to an amount up to thirty percent (30%) of the Salary based upon
attainment of objectives identified in a business plan for Employer
adopted by the Board of Employer .
At its sole discretion the Board of Directors of Employer may develop
such other incentive compensation arrangements, including but not limited to
additional bonus incentives, as may be determined to be appropriate for the
conduct of Employer's business and Employee's duties in connection
therewith.
(d) At its sole discretion, the Board of Directors of Employer
may give additional bonuses to Employee, but is not required to do so under
any circumstances. Employee is not entitled to participate in any bonus
plan offered by Employer to its employees unless expressly provided for in
writing.
(e) Employee will be traveling between Reno, Nevada and Dallas,
Texas on an as-needed basis in order to fulfill his responsibilities.
Employer will reimburse Employee for his travel, lodging, and other business
expenses incurred in connection with his employment under this Agreement in
accordance with the policies of Employer in effect from time to time.
(f) All payments to Employee pursuant to this Agreement will be
subject to deduction and withholding authorized or required by applicable
law.
4. Confidentiality
(a) In exchange for and in consideration for the promises made by
Employee herein, including promises made by Employee regarding
noncompetition in Section 5 herein, Employer promises and agrees to provide
Employee with confidential, nonpublic information (in addition to any such
information previously obtained by Employee in the course of his employment)
consistent with the duties of an individual in Employee's position,
including but not limited to Employer's customer, supplier, and distributor
lists, trade secrets, plans, manufacturing techniques, sales, marketing and
expansion strategies, and technology and processes of Employer and/or its
affiliates, as they may exist from time to time, and information concerning
the products, services, production, development, technology and all
technical information, procurement and sales activities and procedures,
promotion and pricing techniques and credit and financial data concerning
customers of, and suppliers to, Employer and/or its affiliates (referred to
hereinafter as "Confidential Information"). Employee acknowledges that such
Confidential Information constitutes valuable, special and unique assets of
the Employer and that his access to and knowledge of the Confidential
Information is essential to the performance of his duties under this
Agreement. In consideration for Employer's promises herein, Employee agrees
that all Confidential Information previously provided or known to Employee
in the course of his employment with Employer and all such Confidential
Information made available and provided to Employee pursuant to the terms of
this Agreement will be considered Confidential Information owned by Employer
and Employee agrees that Employee will not (i) disclose any Confidential
Information to any person or entity other than in connection with his
employment for Employer in accordance with Employer's policy, or (ii) make
use of any Confidential Information for his own purposes or for the benefit
of any other person or entity, other than Employer. Employee further
represents and warrants that, on or prior to the date of this Agreement, he
has not (i) disclosed any Confidential Information to any person or entity
other than in connection with his employment for Employer in accordance with
Employer's policy or (ii) made use of any Confidential Information for his
own purposes or for the benefit of any other person or entity, other than
Employer.
(b) Employee acknowledges and agrees that all manuals, drawings,
blueprints, letters, notes, notebooks, reports, financial records
(including, without limitation, budgets, business plans and financial
statements), computers, computer equipment, computer disks, hard drives,
electronic storage devices, books, procedures, forms, documents, records or
paper, or copies thereof, pertaining to the operations or business of
Employer made or received by Employee or made known to him in any way in
connection with his employment and any other Confidential Information are
and will be the exclusive property of Employer. Employee agrees not to copy
or remove any of the above from the premises and custody of Employer, or
disclose the contents thereof to any other person or entity except in the
ordinary course of business consistent with Employer's policies. Employee
acknowledges that all such papers and records will at all times be subject
to the control of Employer, and Employee agrees to surrender the same upon
request of Employer, and will surrender such no later than any termination
of his employment with Employer, whether voluntary of involuntary.
5. Non-Compete Covenant. Employee acknowledges that the Confidential
Information specified above is valuable to the Employer and that, therefore,
its protection and maintenance constitutes a legitimate interest to be
protected by the Employer by the enforcement of this covenant not to
compete. Therefore, in consideration for the promises made by Employer
herein, including but not limited to the provision of Confidential
Information set forth in Section 4 herein, Employee covenants and agrees
that, (i) during the term of his employment by the Employer (or an
affiliate of Employer) and (ii) for a period commencing upon the termination
of Employee's employment by Employer (or an affiliate of Employer) and
ending upon the first anniversary thereof, Employee will not, directly or
indirectly, either as an individual or as an employer, employee, consultant,
partner, officer, director, shareholder, substantial investor, trustee,
agent, advisor, or consultant or in any other capacity whatsoever, of any
person or entity (other than the Employer):
(a) conduct or assist others in conducting any business in any
market area in the United States related to (i) the promotion, marketing,
distribution, manufacturing, sourcing, importing and/or sale of (A) sports
related equipment and/or supplies marketed to institutional customers
through direct mail catalogs or the Internet, (B) baseball/softball pitching
machines, or (ii) any other business that generates more than 10% of
Employer's revenues at the time of termination (the "Employer's Business");
(b) recruit, hire, assist others in recruiting or hiring, discuss
employment with or refer to others for employment (collectively referred to
as "Recruiting Activity") any person who is, or within the 24 month period
immediately preceding the date of any such Recruiting Activity was, at any
time, an employee of the Employer or its affiliates; or
(c) (i) communicate to any competing entity or enterprise any
competitive non-public information concerning any past, present or
identified prospective client or customer of, or supplier to, Employer; or
(ii) call on, solicit or take away or attempt to call on, solicit or take
away any of the customers, suppliers, clients, licensors, licensees,
manufacturers, distributors, dealers or independent salespersons of the
Employer or any of its affiliates that are engaged in the Employer's
Business or that conduct business with Employer in the United States; or
induce, attempt to induce or assist any other person or entity in inducing
or attempting to induce, directly or indirectly, any such customer,
supplier, client, licensor, licensee, manufacturer, dealer, distributor or
independent salesperson to discontinue their relationship with the Employer
or its affiliates.
The existence of any claim or cause of action of Employee against
Employer, or any officer, director, or shareholder of Employer, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement by Employer of the covenants of Employee contained in this
Section 5.
If Employee violates any covenant contained in this Section 5 and
Employer brings legal action for injunctive or other relief, Employer shall
not, as a result of the time involved in obtaining the relief, be deprived
of the benefit of the full period of any such covenant. Accordingly, the
covenants of Employee contained in this Section 5 shall be deemed to have
durations as specified above, which periods shall commence upon the later of
(i) the termination of Employee's employment with Employer, and (ii) the
date of entry by a court of competent jurisdiction of a final, non-
appealable judgment enforcing the covenants of Employee in this Section 5.
During any period of time in which Employee is in breach of this covenant
not to compete, the parties agree that the time period of this covenant
shall be extended for an amount of time that Employee is in breach hereof.
Employee understands and agrees that the scope of this covenant
contained in this Section 5 is reasonable as to time, area, and persons and
is necessary to protect the proprietary and legitimate business interests of
the Employer, and but for such covenant the Employer would not have agreed
to enter into the transactions contemplated by this Agreement. Employee
agrees that this covenant is reasonable in light of the compensation and
other benefits Employee has accepted pursuant to this Agreement. It is
further agreed that such covenant will be regarded as divisible and will be
operative as to time, area, and persons to the extent that it may be so
operative. If any part of this Section is declared invalid, unenforceable,
or void as to time, area, or persons, the validity and enforceability of the
remainder will not be affected. Should a court of competent jurisdiction
determine this covenant unenforceable as written, the parties agree that the
court shall modify this covenant to the extent necessary to make it
enforceable. The alleged breach of any other provision of this Agreement
asserted by Employee shall not be a defense to claims arising from
Employer's enforcement of this covenant.
6. Proprietary Information. Employee hereby assigns to Employer
all of Employee's right, title and interest to, and shall promptly disclose
to Employer, all ideas, inventions, products, services, discoveries or
improvements (whether or not patentable) conceived or developed solely or
jointly by Employee during the term of this Agreement (a) that relate to the
Employer's Business or the actual or anticipated research or development of
Employer, (b) that result from any work performed by Employee for Employer,
or (c) for which equipment, supplies, facilities or Confidential Information
of Employer was used. Employee agrees to execute any further documents
and/or patents that Employer requests and will otherwise assist Employer (at
Employer's expense) in protecting Employer's rights to such ideas,
inventions, products, services, discoveries or improvements. Employee
hereby appoints Employer as his attorney-in-fact, with full power of
substitution, to execute and deliver such documents or patents on behalf of
Employee. This appointment is coupled with an interest in and to the ideas,
inventions, products, services, discoveries and improvements conceived or
developed by Employee and shall survive Employee's death or disability.
Employee hereby waives and quitclaims to Employer any and all claims of any
nature whatsoever that Employee may now or may hereafter have for
infringement of any patents or copyrights resulting from or relating to any
applications for any United States or foreign letters, patent or copyright
registrations assigned hereunder to Employer. Employee represents to
Employer that Employee has not conceived or reduced to practice any ideas,
inventions, products, services, discoveries or improvements at the time of
signing this Agreement.
7. Termination
(a) Employer's obligations under this Agreement shall be
terminated if Employee is discharged by Employer for cause. For the
purposes of this Agreement, a discharge for cause shall mean a discharge
resulting from a determination by the Chairman of the Board of Employer that
Employee: (i) has been convicted of a crime involving fraud, theft or
embezzlement; (ii) has failed and/or refused to follow the written policies,
practices, directives, or orders established by Employer's Board of
Directors and such failure or refusal is not cured within fifteen (15) days
of the date Employer sends a written notice to Employee requesting that
Employee cure such failure or refusal; (iii) has committed acts of gross
negligence to the detriment of Employer; (iv) has persistently failed or
refused to perform his duties hereunder and such failure or refusal is not
cured within fifteen (15) days of the date Employer sends a written notice
to Employee requesting that Employee cure such failure or refusal; (v) has
been insubordinate; or (vi) has breached any of the material terms or
provisions of this Agreement (including, but not limited to, a breach of
Section 4, 5 or 6 hereof). Notwithstanding anything to the contrary
contained herein, the 15-day cure period referenced in subsections (ii) and
(iv) of this Section shall not apply if Employee has been given the
opportunity to cure an alleged default under either of these subsections on
a prior occasion. Any termination for cause shall be appealable to the
Board of Directors of the Company.
(b) If Employee is absent from employment, or unable to render
services herein, by reason of physical or mental illness or disability for
more than three (3) months in the aggregate in any twelve (12) month period,
and the Employee is unable to perform his essential job functions with or
without reasonable accommodation, then Employee shall be considered
permanently disabled, and this Agreement may be immediately terminated by
Employer without any further obligation to Employee.
(c) If Employee dies, this Agreement shall immediately and
automatically terminate, without further obligation to Employee or
Employee's estate.
(d) In the event Employee resigns from the employ of Employer,
all of Employer's obligations under this Agreement shall be terminated.
(e) If Employee is terminated without cause prior to December 31,
2003 (and so long as Employee continues to abide by the Sections of this
Agreement that survive after such termination), then Employer will continue
to pay Employee his Salary through December 31, 2003 as if the Employee was
not terminated. Except as set forth in the immediately preceding sentences,
Employer will have no other obligations to Employee if Employee is
terminated without cause. However, in the event Employee is terminated
without cause in the last twelve (12) months of employment, the provisions
of Section 5 shall continue only so long as Employer continues to pay
Employee his Salary in accordance with Employer's payroll practices in
effect at such time.
(f) The provisions of Sections 4, 5, 6, 7, 8, 9, 10, 11, 12, 13,
14, 17, 18 and 19 shall survive any termination or expiration of this
Agreement.
8. Injunctive Relief. Each party acknowledges that a remedy at law
for any breach or attempted breach of this Agreement will be inadequate,
agrees that each party will be entitled to specific performance and
injunctive and other equitable relief in case of any breach or attempted
breach and agrees not to use as a defense that any party has an adequate
remedy at law. This Agreement shall be enforceable in a court of equity, or
other tribunal with jurisdiction, by a decree of specific performance, and
appropriate injunctive relief may be applied for and granted in connection
herewith. Such remedy shall not be exclusive and shall be in addition to
any other remedies now or hereafter existing at law or in equity, by statute
or otherwise. No delay or omission in exercising any right or remedy set
forth in this Agreement shall operate as a waiver thereof or of any other
right or remedy and no single or partial exercise thereof shall preclude any
other or further exercise thereof or the exercise of any other right or
remedy.
9. Binding Nature. The rights and obligations of Employer under
this Agreement will inure to the benefit of and will be binding upon the
successors and assigns of Employer.
10. Severability. If any provision of this Agreement is declared or
found to be illegal, unenforceable or void, in whole or in part, then both
parties will be relieved of all obligations arising under such provision,
but only to the extent it is illegal, unenforceable or void. The intent and
agreement of the parties to this Agreement is that this Agreement will be
deemed amended by modifying any such illegal, unenforceable or void
provision to the extent necessary to make it legal and enforceable while
preserving its intent, or if such is not possible, by substituting therefor
another provision that is legal and enforceable and achieves the same
objectives. Notwithstanding the foregoing, if the remainder of this
Agreement will not be affected by such declaration or finding and is capable
of substantial performance, then each provision not so affected will be
enforced to the extent permitted by law.
11. Waiver. No delay or omission by either party to this Agreement
to exercise any right or power under this Agreement will impair such right
or power or be construed as a waiver thereof. A waiver by either of the
parties to this Agreement of any of the covenants to be performed by the
other or any breach thereof will not be construed to be a waiver of any
succeeding breach thereof or of any other covenant contained in this
Agreement. All remedies provided for in this Agreement will be cumulative
and in addition to and not in lieu of any other remedies available to either
party at law, in equity, or otherwise.
12. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Texas without giving effect to
any principle of conflict-of-laws that would require the application of the
law of any other jurisdiction.
13. Notices. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Employee: If to Employer:
Eugene J. P. Grant Sport Supply Group, Inc.
[deleted for confidentiality] Attention: Chief Executive Officer
1901 Diplomat Drive
Farmers Branch, Texas 75234
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
14. Submission to Jurisdiction. All parties hereto hereby
irrevocably submit to the jurisdiction of the state and federal courts of
the State of Texas and agree and consent that service of process may be made
upon it in any proceeding arising out of this Agreement by service of
process as provided by Texas law. All parties hereto hereby irrevocably
waive, to the fullest extent permitted by law, any objection which it may
now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement brought in the
District Court of Dallas County, State of Texas, or in the United States
District Court for the Northern District of Texas, and hereby further
irrevocably waive any claims that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
16. Assignment. The rights and obligations of Employer may, without
the consent of Employee, be assigned by Employer to any parent, subsidiary,
affiliate, or successor of Employer. Employee may not assign any of his
rights or obligations under this Agreement.
17. Entire Agreement. This Agreement and the Option Agreement
constitute the entire agreement between the parties to this Agreement with
respect to the subject matter of this Agreement and there are no
understandings or agreements relative to this Agreement (other than the
Option Agreement) which are not fully expressed in this Agreement. All
prior or contemporaneous agreements between the parties with respect to the
subject matter of this Agreement (other than the Option Agreement) being
expressly superseded by this Agreement. No change, waiver, or discharge of
this Agreement will be valid unless in writing and signed by the party
against which such change, waiver, or discharge is to be enforced.
18. Attorneys' Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to receive from the other its reasonable attorneys' fees,
costs, and necessary disbursements in addition to any other relief to which
such party may be entitled.
19. Representations, Warranties and Covenants. Employee understands
as part of the consideration for the offer of employment extended to
Employee by Employer and of his employment or continued employment by
Employer, that Employee has not brought and will not bring with him to
Employer or use in the performance of his responsibilities at Employer any
materials or documents of a former employer (other than Athletic Training
Equipment Company, Inc., a Nevada corporation) that are not generally
available to the public, unless Employee has obtained express written
authorization from the former employer for their possession and use.
Employee represents and warrants to Employer that the execution, delivery,
and performance of Employee of and under this Agreement does not and will
not with the passage of time or the giving of notice or both violate the
terms and conditions of any other written or oral agreement to which
Employee is a party or by which Employee is bound. Employee represents and
warrants that he is not a party to any employment, non-competition,
proprietary information or confidentiality agreement with any former
employer that remains or may remain in effect as of the date hereof.
Employee has not entered into, and Employee agrees not to enter into, any
oral or written agreement that is in any way inconsistent with the terms of
this Agreement. Employee also understands that, in his employment with
Employer, Employee is not to breach any obligation of confidentiality that
Employee has to former employers.
Employee further represents and warrants that he has never been:
(i) convicted or indicted in a criminal proceeding and is not a named
subject of a pending criminal proceeding (excluding minor traffic
violations); (ii) the subject of any investigation, order, judgment or
decree, not subsequently reversed, suspended or vacated, of any court,
permanently or temporarily enjoining him from, or otherwise limiting,
Employee's engagement in any (A) activity in connection with the purchase or
sale of any security or commodity or in connection with any violation of
Federal or State securities laws or (B) type of business practice; or
(iii) found, whether formally or informally, by a court in a civil action or
by the Securities and Exchange Commission to have violated any Federal or
State securities laws.
IN WITNESS WHEREOF, the parties to this Agreement have executed and
delivered this Agreement on the date first above written.
EMPLOYER:
SPORT SUPPLY GROUP, INC.,
a Delaware corporation
By:
-------------------------
John P. Walker
President
EMPLOYEE:
-------------------------
Eugene J. P. Grant
*******************************************************************************
EXHIBIT 10.2
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO THE LEASE AGREEMENT DATED January 29, 1999
("First Amendment") is entered into by and between The Northwestern Mutual
Life Insurance Company dba Sparks Industrial as Landlord and Athletic
Training Equipment Company, Inc., as Tenant, as of the 12th day of March,
1999. The above described Lease Agreement shall be modified as follows:
Paragraph 38 shall be amended and shall read:
38. MONTHLY RENTAL
--------------
Months 1-60: $18,125.50 per month ($0.29 PSF)
Months 61-89: $18,750.00 per month ($0.30 PSF)
The above Base Rental Rates and Lease Term shall supersede any possible
contradictory items in the Lease Document.
Paragraphs 48 and 49 shall be added and shall read:
48. TENANT IMPROVEMENTS
-------------------
As per item 39. TENANT IMPROVEMENTS of the Lease Document, Landlord
shall increase the Tenant Improvement Allowance of $360,000 to $440,000.
All other items of this paragraph shall remain the same.
49. EARLY TERMINATION/BUYOUT SCHEDULE
---------------------------------
New Early Termination/Buyout Amortization Schedules, referred to in
Paragraphs 43 and 45 of the Lease, shall be attached as "Exhibits D and E"
and made part of this document reflecting the increased Tenant Improvement
Allowance from $360,000 to $440,000.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
First Amendment this 25th day of March, 1999.
"LANDLORD"
Northwestern Investments Management Company dba Sparks Industrial
By: /s/ Bruce C. Behnke 3/19/99
------------------------- -------
Its: Director-Field Asset Date
Management
"LANDLORD'S AGENT" "TENANT"
Trainor & Associates Athletic Training Equipment Company, Inc.
By: /s/ John I. Trainor 3/25/99 By: /s/ Eugene Grant 3/17/99
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Its: President Date Its: President Date