DKS Dicks Sporting Goods Inc

On April 17, 2020, DICK’S Sporting Goods, Inc. (the “Company”) closed its previously announced issuance and sale of the Company’s 3.25% Convertible Senior Notes due 2025 (the “Notes”) in an aggregate principal amount of $500 million. The Company also granted the initial purchasers of the Notes (the “Initial Purchasers”) a 13-day option to purchase up to an additional $75 million aggregate principal amount of the Notes (the “Option”).

On April 20, 2020, the Initial Purchasers exercised the Option in full, and on April 22, 2020, the Company closed the issuance and sale of an additional $75 million aggregate principal amount of the Notes.

The aggregate net proceeds to the Company from the issuance and sale of the $575 million aggregate principal amount of the Notes were approximately $558 million, including payment by the Initial Purchasers of accrued interest and after deducting the Initial Purchasers’ discounts and commissions and the Company’s estimated offering expenses.

Indenture

The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of April 17, 2020, between the Company and U.S. Bank National Association, as trustee (the “Trustee”). The Notes will be the Company’s unsecured, unsubordinated obligations and will be (i) equal in right of payment with the Company’s existing and future unsecured, unsubordinated indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent that the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.

The Notes will accrue interest at a rate of 3.25% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2020. The Notes will mature on April 15, 2025, unless earlier repurchased, redeemed or converted. Prior to the close of business on the business day immediately preceding December 2, 2024 (the “Free Convertibility Date”), noteholders may convert their Notes at their option only in the following circumstances:

Noteholders may convert their Notes at their option at any time from, and including, the Free Convertibility Date until the close of business on the second scheduled trading day immediately before the maturity date, regardless of the foregoing conditions. The Company will settle conversions by paying or delivering, as applicable, at the Company’s election, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. If the Company elects to deliver cash or a combination of cash and shares of the Company’s common stock, then the consideration due upon conversion will be determined over an observation period consisting of 40 “VWAP Trading Days” (as defined in the Indenture). The initial conversion rate is 28.2618 shares of the Company’s common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $35.38 per share of the Company’s common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after April 17, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice and (ii) the trading day immediately before the date the Company sends such notice. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then noteholders will have the right to require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest thereon to, but excluding, the “Fundamental Change Repurchase Date” (as defined in the Indenture). The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

The Indenture does not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Company or any of its subsidiaries. The Indenture contains customary terms and covenants and events of default. If any event of default (other than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is continuing, then, the Trustee, by written notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by written notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. If an event of default involving certain events of bankruptcy, insolvency or reorganization occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consist exclusively of the right of the noteholders to receive special interest on the Notes for up to 365 calendar days during which such event of default has occurred and is continuing, at a specified rate for the first 180 days of 0.25% per annum, and thereafter at a rate of 0.50% per annum, on the principal amount of the Notes.

Convertible Note Hedge and Warrant Transactions

In connection with the issuance of the Notes, the Company entered into privately negotiated convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with certain of the Initial Purchasers and/or their respective affiliates and other financial institutions (in this capacity, the “Hedge Counterparties”). Concurrently with the Company’s entry into the Convertible Note Hedge Transactions, the Company also entered into separate, privately negotiated warrant transactions with the Hedge Counterparties collectively relating to the same number of shares of the Company’s common stock, subject to customary anti-dilution adjustments, and for which the Company received premiums that partially offset the cost of entering into the Convertible Note Hedge Transactions (the “Warrant Transactions” and, collectively with the Convertible Note Hedge Transactions, the “Convertible Note Hedge and Warrant Transactions”).

The Convertible Note Hedge Transactions cover, subject to customary anti-dilution adjustments substantially similar to those applicable to the Notes, the number of shares of the Company’s common stock initially underlying the Notes. The Convertible Note Hedge Transactions are intended to reduce the potential dilution with respect to the Company’s common stock or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, in the event that the market price of the Company’s common stock is greater than the strike price of the Convertible Note Hedge Transactions, which is initially $35.38 per share of the Company’s common stock. The Warrant Transactions could separately have a dilutive effect on the Company’s common stock to the extent that the market price of the Company’s common stock, as measured under the terms of the Warrant Transactions, exceeds the strike price of the warrants, which is initially $52.42, representing a premium of 100% to the $26.21 per share last reported sale price of the Company’s common stock on April 14, 2020.

The portion of the net proceeds to the Company from the offering of the Notes that was used to pay the premium on the Convertible Note Hedge Transactions (calculated after taking into account the proceeds to the Company from the Warrant Transactions) was approximately $55,832,500.

The Convertible Note Hedge and Warrant Transactions are not part of the terms of the Notes and will not affect any noteholder’s rights under the Notes. Noteholders will not have any rights with respect to the Convertible Note Hedge and Warrant Transactions.

The above description of the Indenture, the Notes and the Convertible Note Hedge and Warrant Transactions is a summary and is not complete. A copy of the Indenture and the form of the certificate representing the Notes are filed as Exhibits 4.1 and 4.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference, and the forms of the confirmations with respect to the (i) Convertible Note Hedge Transactions and (ii) Warrant Transactions are filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. The above summary is qualified in its entirety by reference to the terms of the Indenture, the Notes and forms of confirmations filed as exhibits hereto.