SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential for Use of the Commission Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
FIRST TEAM SPORTS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
FIRST TEAM SPORTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held
June 28, 1996
TO THE SHAREHOLDERS OF FIRST TEAM SPORTS, INC.:
The 1996 Annual Meeting of Shareholders of First Team Sports, Inc. will
be held at the Anoka-Hennepin Technical College, 1355 West Highway 10, Anoka,
Minnesota, at 10:00 a.m. (Minneapolis-time) on Friday, June 28, 1996, for the
following purposes:
1. To set the number of members of the Board of Directors at five (5).
2. To elect members of the Board of Directors.
3. To ratify the appointment of McGladrey & Pullen, LLP as the Company's
independent auditors for the fiscal year ending February 28, 1997.
4. To take action on any other business that may properly come before the
meeting or any adjournment thereof.
Accompanying this Notice of Annual Meeting is a Proxy Statement, form
of Proxy and the Company's 1996 Annual Report.
Only shareholders of record as shown on the books of the Company at the
close of business on May 3, 1996 will be entitled to vote at the Annual Meeting
or any adjournment thereof. Each shareholder is entitled to one vote per share
on all matters to be voted on at the Annual Meeting.
You are cordially invited to attend the Annual Meeting. Whether or not
you plan to attend the Annual Meeting, please sign, date and mail the enclosed
form of Proxy in the return envelope provided as soon as possible. Your
cooperation in promptly signing and returning your Proxy will help avoid further
solicitation expense to the Company.
BY ORDER OF THE BOARD OF DIRECTORS
May 24, 1996 John J. Egart
Anoka, Minnesota President and Chief Executive Officer
<PAGE>
FIRST TEAM SPORTS, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
to be held
June 28, 1996
The accompanying Proxy is solicited by the Board of Directors of First
Team Sports, Inc. (the "Company") for use at the Annual Meeting of Shareholders
of the Company to be held on Friday, June 28, 1996, at the location and for the
purposes set forth in the Notice of Annual Meeting, and at any adjournments
thereof.
The cost of soliciting proxies, including the preparation, assembly and
mailing of the proxies and soliciting material, as well as the cost of
forwarding such material to the beneficial owners of the Company's Common Stock,
will be borne by the Company. Directors, officers and regular employees of the
Company may, without compensation other than their regular remuneration, solicit
proxies personally or by telephone.
Any shareholder giving a Proxy may revoke it any time prior to its use
at the Annual Meeting by giving written notice of such revocation to the
Secretary or other officer of the Company or by filing a later-dated written
Proxy with an officer of the Company. Personal attendance at the Annual Meeting
is not, by itself, sufficient to revoke a Proxy unless written notice of the
revocation or a later-dated Proxy is delivered to an officer of the Company
before the revoked or superseded Proxy is used at the Annual Meeting. Proxies
will be voted as specified by the shareholders.
The presence at the Annual Meeting in person or by proxy of the holders
of a majority of the outstanding shares of the Company's Common Stock entitled
to vote shall constitute a quorum for the transaction of business. If a broker
returns a "non-vote" proxy, indicating a lack of voting instructions by the
beneficial holder and a lack of discretionary authority on the part of the
broker to vote on a particular matter, then the shares covered by such non-vote
shall be deemed present at the meeting for purposes of determining a quorum but
shall not be deemed to be represented at the Annual Meeting for purposes of
calculating the vote with respect to such matter. If a shareholder abstains from
voting as to any matter, then the shares held by such shareholder shall be
deemed present at the Annual Meeting for purposes of determining a quorum and
for purposes of calculating the vote with respect to such matter, but shall not
be deemed to have been voted in favor of such matter. An abstention as to any
proposal will, therefore, have the same effect as a vote against the proposal.
Proxies which are signed but which lack any such specification will be voted in
favor of the proposals set forth in the Notice of Meeting and in favor of the
number and slate of directors proposed by the Board of Directors and listed
herein.
- 1 -
<PAGE>
The mailing address of the principal executive office of the Company is
1201 Lund Boulevard, Anoka, Minnesota 55303. The Company expects that this Proxy
Statement, the related Proxy and Notice of Meeting will first be mailed to
shareholders on approximately May 24, 1996.
STOCK SPLIT
All information contained herein regarding the Company's Common Stock,
including information regarding options to purchase the Company's Common Stock,
has been adjusted, as necessary, to reflect the 3-for-2 stock split of the
Company's Common Stock which was effected on February 3, 1995.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed the close of business
on May 3, 1996 as the record date for determining shareholders entitled to vote
at the Annual Meeting (the "Record Date"). Persons who were not shareholders on
the Record Date will not be allowed to vote at the Annual Meeting. At the close
of business on the Record Date, 5,737,250 shares of the Company's Common Stock,
par value $.01 per share, were issued and outstanding. The Common Stock is the
only outstanding class of capital stock of the Company. Each share of Common
Stock is entitled to one vote on each matter to be voted upon at the Annual
Meeting. Holders of Common Stock are not entitled to cumulative voting rights.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT SHAREHOLDINGS
The following table provides information as of the Record Date
concerning the beneficial ownership of the Company's Common Stock by (i) persons
known to the Company to be the beneficial owners of more than 5% of the
Company's outstanding Common Stock as of the Record Date, (ii) each director and
nominee for director of the Company, (iii) the named executive officers in the
Summary Compensation Table and (iv) all directors and executive officers as a
group.
Name, Position(s)(and Number of shares Percent
Address of 5% Holders) Beneficially Owned(1) of Class(2)
John J. Egart 382,345(4) 6.6%
President, Chief Executive
Officer and Director
1201 Lund Boulevard
Anoka, MN 55303
David G. Soderquist 341,925(5) 5.9%
Vice Chairman and Director
1201 Lund Boulevard
Anoka, MN 55303
Joe Mendelsohn 81,000(6) 1.4%
Chairman and Director
Timothy G. Rath 21,000(7) *
Director
Stanley E. Hubbard 17,750(8) *
Director
Robert L. Lenius, Jr. 49,943(9) *
Vice President and
Chief Financial Officer
Susan L. Joch 25,380(10) *
Vice President-Marketing
Craig Zelinske 24,046(11) *
Vice President-Sales
All Executive Officers and 920,889(12) 16.0%
Directors as a Group
(8 persons)
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<PAGE>
*less than 1%
(1) Unless otherwise indicated, each person named or included in the group has
sole power to vote and sole power to direct the disposition of all shares listed
as beneficially owned by him or her.
(2) Under the rules of the SEC, shares not actually outstanding are deemed to be
beneficially owned by an individual if such individual has the right to acquire
the shares within 60 days. Pursuant to such SEC rules, shares deemed
beneficially owned by virtue of an individual's right to acquire them are also
treated as outstanding when calculating the percent of the class owned by such
individual and when determining the percent owned by any group in which the
individual is included.
(3) Includes: 1,521 shares of Common Stock held by Mr. Egart's wife; 17,349
shares of Common Stock held by either Mr. Egart or his wife as custodian for
their children; and 89,000 shares of Common Stock which may be acquired by Mr.
Egart within 60 days after the Record Date upon exercise of incentive stock
options issued June 9, 1992, May 3, 1993, January 25, 1994 and January 23, 1995.
(4) Includes 15,500 shares of Common Stock held by a partnership, of which Mr.
Egart and Mr. Soderquist are partners and with respect to which each, as a
partner, shares voting and investment power over the shares.
- 3 -
<PAGE>
(5) Includes 84,000 shares of Common Stock which may be acquired by Mr.
Soderquist within 60 days after the Record Date upon exercise of incentive stock
options issued June 9, 1992, May 3, 1993, January 25, 1994 and January 23, 1995.
(6) Includes 63,000 shares of Common Stock which may be acquired by Mr.
Mendelsohn within 60 days after the Record Date upon exercise of nonqualified
stock options issued July 23, 1992, May 3, 1993, January 25, 1994 and January
23, 1995.
(7) Includes 12,000 shares of Common Stock which may be acquired by Mr. Rath
within 60 days after the Record Date upon exercise of nonqualified stock options
issued July 23, 1992, August 6, 1993, August 5, 1994 and June 29, 1995.
(8) Includes 12,000 shares of Common Stock which may be acquired by Mr. Hubbard
within 60 days after the Record Date upon exercise of a nonqualified stock
options issued November 10, 1992, August 5, 1994 and June 29, 1995.
(9) Includes: 250 shares of Common Stock held by Mr. Lenius's son; 450 shares of
Common Stock held by Mr. Lenius's wife as custodian for their son; and 33,000
shares of Common Stock which may be acquired by Mr. Lenius within 60 days after
the Record Date upon exercise of an incentive stock options issued June 9, 1992,
May 3, 1993, January 25, 1994 and January 23, 1995.
(10) Includes 23,001 shares of Common Stock which may be acquired by Ms. Joch
within 60 days after the Record Date upon exercise of incentive stock options
issued June 9, 1992, May 3, 1993, January 25, 1994, May 9, 1994 and January 23,
1995.
(11) Includes 21,000 shares of Common Stock which may be acquired by Mr.
Zelinske within 60 days after the Record Date upon exercise of incentive stock
options issued June 9, 1992, May 3, 1993, May 9, 1994 and January 23, 1995.
(12) Includes: 337,001 shares of Common Stock which may be acquired within 60
days after the Record Date upon the exercise of outstanding options; 15,500
shares of Common Stock held by a partnership; and 19,570 shares of Common Stock
held by or for family members of executive officers.
ELECTION OF DIRECTORS
(Proposals #1 and #2)
The Bylaws of the Company provide that the number of directors shall be
the number set by the shareholders, which shall be not less than one. The Board
of Directors unanimously recommends that the number of directors be set at five,
which is the current number of directors, and that five directors be elected.
Unless otherwise instructed, the Proxies will be so voted.
In the absence of other instruction, the Proxies will be voted for each
of the following individuals. If elected, such individuals shall serve until the
next annual meeting of shareholders and until their successors shall be duly
elected and shall qualify. All of the nominees are currently members of the
Board of Directors. If, prior to the Annual Meeting, it should become known that
any one of the following individuals will be unable to serve as a director after
the Annual Meeting by reason of death, incapacity or other unexpected
occurrence, the Proxies will be voted for such substitute nominee(s) as is
selected by the Board of Directors. Alternatively, the Proxies may, at the
Board's discretion, be voted for such fewer number of nominees as results from
such death, incapacity or other unexpected occurrence. The Board of Directors
has no reason to believe that any of the following nominees will be unable to
serve.
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<PAGE>
Under applicable Minnesota law, setting the number of directors at five
and the election of each nominee requires the affirmative vote of the holders of
the greater of (1) a majority of the voting power of the shares represented in
person or by proxy at the Annual Meeting with authority to vote on such matter,
or (2) a majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the Annual Meeting.
<TABLE>
<S> <C> <C>
Name and Age Director
of Nominee Principal Occupations for the Past Five Years Since
John J. Egart - President and Chief Executive Officer of the 1986
46 Company since January 1994; Executive Vice
President of the Company from the Company's
inception in May 1986 until January 1994. Mr.
Egart also serves as a director of Kelly Russell
Studios, Inc.
David G. Soderquist - Vice Chairman of the Company since January 1986
47 1994; President and Chief Executive Officer of the
Company from the Company's inception in May 1986
until January 1994.
Joe Mendelsohn - Chairman of the Board of the Company since 1991
65 January 1991; consultant to various toy and
related product businesses since January 1987 and
to the Company since July 1988.
Timothy G. Rath - Consultant since February 1996; Chief Executive 1991
50 Officer of Kelly Russell Studios, Inc., a firm
engaged in production and marketing of sports
memorabilia, from October 1995 to February 1996,
prior to which he served as Chief Operating
Officer from March 1995 to October 1995 and as
General Manager from November 1994 to March 1995;
consultant to Anthony Industries, Inc., a
diversified manufacturer of recreational and
industrial products, from June 1992 to October
1993; Vice President of Sales & Marketing for
Stearns/Shakespeare Outdoor Products Group, a
manufacturer of outdoor sporting goods, from
October 1988 to May 1992. Mr. Rath is also a
director of Kelly Russell Studios, Inc.
Stanley E. Hubbard - Vice President of Hubbard Broadcasting, Inc., a 1992
35 broadcasting company, since July 1984; President
since March 1993 and Chief Executive Officer
since January 1996 of United States Satellite
Broadcasting Company, Inc., a satellite
broadcasting company, prior to which he served as
its Chief Operating Officer beginning in March
1993. Mr. Hubbard also serves as a director of
United States Satellite Broadcasting Company, Inc.
</TABLE>
- 5 -
<PAGE>
Board and Committee Meetings
During the fiscal year ended February 29, 1996, the Board of Directors
held six meetings and took action by unanimous written consent twice. Except for
Stanley Hubbard, each director attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors plus the total number of
meetings of all committees of the Board on which he served. The Board of
Directors has an Audit Committee, Compensation Committee and Stock Option
Committee. The Board does not have a nominating committee.
The Audit Committee recommends to the Board of Directors the selection
of independent accountants and reviews the activities and reports of the
independent accountants as well as the internal accounting controls of the
Company. The Audit Committee is comprised of Mr. Mendelsohn and Mr. Rath. During
fiscal 1996, the Audit Committee held two meetings.
The Compensation Committee recommends the compensation for executive
officers of the Company. The Compensation Committee is comprised of Mr. Rath and
Mr. Hubbard. During fiscal 1996, the Compensation Committee held one meeting and
took action by unanimous written consent once.
The Stock Option Committee administers the Company's 1987 Stock Option
Plan, 1990 Nonqualified Stock Option Plan, 1993 Employee Stock Purchase Plan and
the 1994 Stock Option and Incentive Compensation Plan. The Stock Option
Committee is comprised of Mr. Rath and Mr. Hubbard. During fiscal 1996, the
Stock Option Committee did not meet, but it took action by unanimous written
consent once.
Compensation of Directors
Directors' Fees. The Company pays each director who is not an employee
of the Company an attendance fee of $500 per Board of Directors and committee
meeting attended; provided, however, that no director may receive more than $500
per day.
- 6 -
<PAGE>
Stock Option Grants. Pursuant to either the Company's 1987 Stock Option
Plan or the Company's 1994 Stock Option and Incentive Compensation Plan, each
member of the Board of Directors who is neither an employee of, nor a paid
advisor or consultant to, the Company (a "Non-Employee Director") receives, upon
initial election to the Board, a nonqualified option to purchase 5,000 shares of
the Company's Common Stock at an option price per share equal to 100% of the
fair market value of the Company's Common Stock on the date of such election.
Such option is immediately exercisable to the extent of 1,000 shares and to the
extent of an additional 1,000 shares on each of the first, second, third and
fourth anniversaries of the date of grant. Each Non-Employee Director who is
re-elected as a director of the Company or whose term of office continues after
a meeting of shareholders at which directors are elected receives a nonqualified
option to purchase 2,000 shares of Common Stock at an option price per share
equal to 100% of the fair market value of the Common Stock on the date of such
re-election or shareholder meeting, which option is immediately exercisable in
full. However, a Non-Employee Director who receives a 5,000-share option upon
initial election to the Board may not receive the 2,000-share option for a
period of at least ten (10) months. All options granted pursuant to these
provisions expire on the earlier of (i) three months after the optionee ceases
to be a director (except by disability or death) or (ii) ten (10) years after
the date of grant. In the event of disability or death of a NonEmployee
Director, any option granted to such Non-Employee Director may be exercised at
any time within twelve (12) months of the disability or death of such
Non-Employee Director or prior to the date on which the option, by its terms,
expires, whichever is earlier.
Report of Compensation Committee and Stock Option Committee
The Compensation Committee's executive compensation policies are
designed to enhance the financial performance of the Company, and thus
shareholder value, by significantly aligning the financial interests of the
Company's key executives with those of the Company's shareholders. Compensation
of the Company's executive officers is comprised of four parts: base salary,
annual incentive bonuses, fringe benefits and long-term incentive opportunity in
the form of stock options. The Compensation Committee believes, but has not
conducted any formal survey, that the base salaries of the Company's executive
officers are generally less than executive officers of comparable publicly-held
companies. These relatively low base salaries are combined with the opportunity
to earn substantial cash bonuses if certain Company financial performance goals
are met. Long-term incentives are based on stock performance through stock
options. Although the Company's 1994 Stock Option and Incentive Compensation
Plan also gives the Compensation Committee the flexibility to grant other types
of incentives, including restricted stock, stock appreciation rights,
performance shares and/or cash, only stock options have been granted under such
Plan. The Compensation Committee believes that stock ownership by the Company's
executive officers is beneficial in aligning management's and shareholders'
interests in the enhancement of shareholder value. Overall, the intent is to
have more significant emphasis on variable compensation components and less on
fixed cost components. The Compensation Committee believes this philosophy and
structure are in the best interests of the Company's shareholders.
Bonuses. The Compensation Committee recommended, and the Board of
Directors unanimously approved, a fiscal 1996 bonus plan for the Company's
executive officers, as well as other officers and key managers of the Company,
which provided for the creation of a bonus pool ranging from $249,000 to
$600,000 based on the Company attaining pre-tax earnings ranging from
$11,487,000 to $13,549,000. Pursuant to the plan, the following executive
officers received the following percentages of such bonus pool based on
achievement of individual objectives determined by the Compensation Committee:
Mr. Egart - 32.0%; Mr. Soderquist - 16.0%; Mr. Lenius - 21.3%; Ms. Joch - 17.3%;
and Mr. Zelinske - 13.3%.
- 7 -
<PAGE>
For fiscal 1997, the Compensation Committee recommended, and the Board
of Directors unanimously approved, a fiscal 1997 bonus plan for the Company's
executive officers which provides for the creation of a bonus pool ranging from
$200,000 to $650,000 based on the Company attaining pre-tax earnings ranging
from $11,500,000 to $14,260,000 and pre-tax earnings as a percentage of sales
from 11.5% to 12.4%. Pursuant to the plan, the following executive officers will
be eligible to receive up to the following percentage of such bonus pool based
on achievement of individual objectives determined by the Compensation
Committee: Mr. Egart - 30.0%; Mr. Soderquist - 16.7%; Mr. Lenius - 20.0%; Ms.
Joch - 16.7%; and Mr. Zelinske - 16.7%.
Stock Options and Other Incentives. The Company's stock option program
is the Company's long-term incentive plan for executive officers and key
managers. The objectives of the program are to align executive and shareholder
long-term interests by creating a strong and direct link between executive pay
and shareholder return, and to enable executives to develop and maintain a
significant, long-term ownership position in the Company's Common Stock.
The Company's 1987 Stock Option Plan and 1994 Stock Option and
Incentive Compensation Plan authorize the Stock Option Committee of the Board of
Directors to award stock options to executive officers and other employees. The
1994 Plan also permits the Compensation Committee to award other forms of
long-term incentives, including stock appreciation rights, stock and restricted
stock, performance shares and/or cash. To date, however, only stock options have
been granted under the 1994 Plan. Stock options are generally granted each year,
at an option price equal to the fair market value of the Company's Common Stock
on the date of grant, and vest over a period of three years. The amount of stock
options awarded is generally a function of the recipient's salary and position
in the Company. Awards are intended to be generally competitive with other
companies of comparable size and complexity, although the Stock Option Committee
has not conducted any thorough comparative analysis.
Benefits. The Company provides the same health and disability insurance
benefits to its executive officers as are available to Company employees
generally, except that executive officers receive additional long-term
disability insurance beyond that available to Company employees generally. The
Company also provides automobiles to Mr. Egart and Mr. Soderquist. The amount of
perquisites, as determined in accordance with the rules of the SEC relating to
executive compensation, did not exceed 10% of salary for fiscal 1996.
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<PAGE>
Chief Executive Officer Compensation. The Compensation Committee
believes, but has not conducted any formal survey, that Mr. Egart's fiscal 1996
base salary of $175,000 is substantially less than the base salaries of chief
executive officers of comparable publicly-held companies. For fiscal 1997, Mr.
Egart's base salary will remain the same at $175,000. In fiscal 1996, Mr. Egart
also received a bonus of $120,000 pursuant to the Company's fiscal 1996 bonus
plan based on the Company's achievement of pre-tax earnings of $12,149,857,
which falls approximately in the middle of the pre-tax earnings target range
under the 1996 bonus plan, and achievement of Mr. Egart's individual goals of
(i) a specified amount of net sales, (ii) a specified amount of earnings per
share, (iii) strengthening the Company's balance sheet, and (iv) assisting other
members of management to achieve their respective goals. The stock options to
purchase 45,000 shares of Company Common Stock granted to Mr. Egart during
fiscal 1996 are consistent with the design of the overall compensation program
and are shown in the Summary Compensation Table.
Members of the Compensation Committee
and Stock Option Committee:
Timothy G. Rath
Stanley E. Hubbard
- 9 -
<PAGE>
MANAGEMENT COMPENSATION
Summary Compensation Table. The following table sets forth certain
information regarding compensation paid or accrued during each of the Company's
last three fiscal years to the Company's Chief Executive Officer and the
Company's other four executive officers (referred to as the "named executive
officers"), whose total annual salary and bonus exceeded $100,000 during fiscal
1996.
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------
Awards Payouts
Restricted Options/ LTIP All Other
Name and Principal Fiscal Stock SARs Payouts Compen-
Position Year Annual Compensation Awards ($) (#)(2) ($) sation($)(3)
- ------------------ ------ -------------------------------- ---------- ------ ----- ------------
Salary($) Bonus($)(1) Other ($)
--------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John J. Egart, 1996 $175,000 $120,000 -- -- 45,000 -- $22,500
President and Chief1995 $135,000 $128,000 -- -- 45,000 -- $19,483
Executive Officer 1994 $125,000 -- -- 60,000 -- $ 9,744
--
David G. Soderquist, 1996 $150,000 $ 60,000 -- --- 30,000 -- $22,500
Vice Chairman 1995 $135,000 $ 73,000 -- -- 30,000 -- $19,483
1994 $125,000 -- -- -- 60,000 -- $ 9,916
Robert L. Lenius, 1996 $ 95,200 $ 80,000 -- -- 30,000 -- $22,500
Jr., 1995 $ 85,200 $ 73,000 -- -- 30,000 -- $10,792
Vice President and 1994 $ 80,000 -- -- -- 30,000 -- $ 5,994
Chief Financial
Officer
Susan L. Joch, 1996 $ 85,625 $ 65,000 -- -- 15,000 -- $22,500
Vice President - 1995 $ 75,625 $ 73,000 -- -- 22,500 -- $ 9,562
Marketing 1994 $ 60,500 -- -- -- 22,500 -- $ 5,251
Craig Zelinske, 1996 $ 90,000 $ 50,000 -- -- 15,000 -- $22,500
Vice President - 1995 $ 80,000 $ 60,000 -- -- 22,500 -- $11,678
Sales(4)
</TABLE>
(1) Reflects bonus earned during the fiscal year. In some instances all or a
portion of the bonus was paid during the next fiscal year.
(2) Options to acquire shares of Common Stock.
(3) Represents contributions to the Company's Profit Sharing Plan.
(4) Craig Zelinske became Vice President - Sales on December 1, 1994; disclosure
of compensation prior to fiscal 1995 is not required.
- 10 -
<PAGE>
Option Grants During 1995 Fiscal Year. The following table provides
information related to options granted to the named executive officers during
fiscal 1996.
<TABLE>
<CAPTION>
Individual Grants
- -----------------------------------------------------------------
Potential Realizable
% of Total Value at Assumed
Options/ Annual Rates of
Options/ SARs Stock Price
SARs Granted to Exercise or Appreciation
Granted Employees in Base Price Expiration for Option Term (1)
-------------------------------------
Name (#)(2)(4) Fiscal Year ($/Sh)(3) Date 0% 5% ($) 10%($)
- ---- ---------------------- ----------- ------ -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Egart 45,000 27.4% $12.625 01/23/03 -- $231,284 $538,990
David G. 30,000 18.3% $12.625 01/23/03 -- $154,189 $359,327
Soderquist
Robert L. 30,000 18.3% $12.625 01/23/03 -- $154,189 $359,327
Lenius, Jr.
Susan L. Joch 15,000 9.1% $12.625 01/23/03 -- $ 77,095 $179,663
Craig Zelinske 15,000 9.1% $12.625 01/23/03 -- $ 77,095 $179,663
</TABLE>
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior to
the expiration of their term, assuming the specified compounded rates of
appreciation on the Company's Common Stock over the term of the options. These
numbers do not take into account provisions of certain options providing for
termination of the option following termination of employment,
nontransferability or vesting over periods of up to three years.
(2) Options to acquire shares of Common Stock.
(3) The option exercise price may be paid in shares of Common Stock owned by the
executive officer, in cash, or in any other form of valid consideration or a
combination of any of the foregoing, as determined by the Stock Option Committee
in its discretion.
(4) Options become exercisable with respect to 1/3 of the shares covered thereby
on each of January 22, 1997, 1998 and 1999. However, in the event of a change of
control of the Company, any unexercisable portion of the options will become
immediately exercisable. See "Change of Control Arrangements." The exercise
price was equal to the fair market value of the Common Stock on the date of
grant.
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<PAGE>
Option Exercises During Fiscal 1996 and Fiscal Year-End Option Values.
The following table provides information related to options and warrants
exercised by the named executive officers during fiscal 1996 and the number and
value of options held at fiscal year-end. The Company does not have any
outstanding stock appreciation rights ("SARs").
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised
Acquired Options/SARs In-the-Money
on Value at FY-End(#) Options/SARs
Exercise Realized Exercisable Unexercisable at FY-End($)(3)
Name (#)(1) ($)(2) Exercisable Unexercisable
- -------------- ----------- ----------- -------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
John J. Egart -- -- 73,000 107,000 $429,001 $297,875
David G. -- -- 68,000 82,000 $429,001 $277,250
Soderquist
Robert L. 5,000 -- 25,000 64,000 $ 96,500 $159,250
Lenius, Jr.
Susan L. Joch -- -- 16,502 40,497 $ 91,601 $144,602
Craig Zelinske -- -- 19,000 39,250 $113,250 $133,792
</TABLE>
(1) Each of the options exercised by the named executive officers during fiscal
1996 was held by the named individual for a period of at least two years.
(2) Value is calculated based on the amount, if any, by which the closing price
for the Common Stock as quoted on the Nasdaq National Market on the date of
exercise exceeds the option exercise price, multiplied by the number of shares
to which the exercise relates.
(3) The closing price for the Company's Common Stock as quoted on the Nasdaq
National Market on February 29, 1996 was $14.00. Value is calculated on the
basis of $14.00 minus the option exercise price and multiplying the result (if
greater than zero) by the number of shares of Common Stock underlying the
option.
Employment Agreements and Severance Arrangements
On January 23, 1996, the Company entered into an Employment Agreement
(an "Agreement") with each of the named executive officers in the Summary
Compensation Table, and the basic terms of each Agreement are set forth below.
The Agreements between the Company and each of John Egart, President
and Chief Executive Officer, and David Soderquist, Vice Chairman, have a
three-year term, with automatic two-year renewals unless a nonrenewal notice is
given by the officer or the Company. If the Company gives the officer a
nonrenewal notice, the officer is entitled to a payment equal to such officer's
annual base salary; provided, however, if such nonrenewal notice is given within
one year after a change of control, the officer is entitled to an amount equal
to two times the sum of such officer's annual base salary and any bonus such
officer could have earned during the fiscal year in which the officer's
employment ceases under the Agreement. The current annual base salary is
$175,000 for Mr. Egart and $150,000 for Mr. Soderquist. If the Agreements are
terminated by the Company without cause or if the officer resigns for good
reason, the officer is entitled to an amount equal to the greater of (i) salary
and bonus for the remainder of the term of the Agreement or (ii) annual base
salary and bonus earned during the preceding fiscal year; provided, however, if
such termination or resignation occurs within one year after a change of
control, the officer is entitled to an amount equal to the greater of (i) salary
and bonus for the remainder of the term of the Agreement or (ii) two times the
annual base salary and bonus earned during the preceding fiscal year, subject to
reduction if total compensation received upon a change of control would
constitute an excess parachute payment under I.R.C. ss. 280G.
- 12 -
<PAGE>
The Agreement between the Company and Robert Lenius, Vice President and
Chief Financial Officer, has a one-year term, with automatic one-year renewals
unless a nonrenewal notice is given by the officer or the Company. If the
Company gives the officer a nonrenewal notice, the officer is entitled to a
payment equal to such officer's annual base salary; provided, however, if such
nonrenewal notice is given within one year after a change of control, the
officer is entitled to an amount equal to two times the sum of such officer's
annual base salary and any bonus such officer could have earned during the
fiscal year in which the officer's employment ceases under the Agreement. The
current annual base salary is $95,200 for Mr. Lenius. If the Agreement is
terminated by the Company without cause or if the officer resigns for good
reason, the officer is entitled to an amount equal to his annual base salary and
bonus earned during the preceding fiscal year; provided, however, if such
termination or resignation occurs within one year after a change of control, the
officer is entitled to an amount equal to his annual base salary and bonus
earned during the preceding fiscal year, subject to reduction if total
compensation received upon a change of control would constitute an excess
parachute payment under I.R.C. ss. 280G.
The Agreement between the Company and each of Susan Joch, Vice
President Marketing, and Craig Zelinske, Vice President - Sales, has a one-year
term, with automatic one-year renewals unless a nonrenewal notice is given by
the officer or the Company. If the Company gives the officer a nonrenewal
notice, the officer is entitled to a payment equal to one-half of such officer's
annual base salary; provided, however, if such nonrenewal notice is given within
one year after a change of control, the officer is entitled to an amount equal
to such officer's annual base salary and any bonus such officer could have
earned during the fiscal year in which the officer's employment under the
Agreement ceases. The current annual base salary is $85,625 for Ms. Joch and
$90,000 for Mr. Zelinske. If the Agreements are terminated by the Company
without cause or if the officer resigns for good reason, the officer is entitled
to an amount equal to the greater of (i) salary and bonus for the remainder of
the term of the Agreement or (ii) one-half of the annual base salary and bonus
earned during the preceding fiscal year; provided, however, if such termination
or resignation occurs within one year after a change of control, the officer is
entitled to an amount equal to such officer's annual base salary and bonus
earned during the preceding fiscal year, subject to reduction if total
compensation received upon a change of control would constitute an excess
parachute payment under I.R.C. ss. 280G.
- 13 -
<PAGE>
Stock Performance Chart
The following graph compares the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock during the
five fiscal years ended February 29, 1996 with the cumulative total return on
the S&P 500 Composite Stock Index and the S&P Leisure Time Composite Index, an
index of leisure product manufacturers. The comparison assumes $100 was invested
on February 28, 1991 in the Company's Common Stock and in each of the foregoing
indices and assumes reinvestment of dividends.
[Performance Graph Included Here]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
02/28/91 02/29/92 02/28/93 02/28/94 02/28/95 02/29/96
-------- -------- -------- -------- -------- --------
First Team $100.00 $450.00 $499.98 $369.98 $1,117.39 $236.61
Sports, Inc.
S&P Leisure $100.00 $ 99.82 $103.60 $129.71 $ 120.83 $201.08
Time Index
S&P 500 $100.00 $133.00 $147.17 $159.44 $ 171.18 $174.91
Composite
Stock Index
</TABLE>
- 14 -
<PAGE>
Change of Control Arrangements
1987 Stock Option Plan. In May 1989, the Board of Directors adopted
resolutions amending the Company's 1987 Stock Option Plan (the "1987 Plan") and
providing that all options outstanding thereunder, including options held by the
Company's executive officers, and all nonqualified stock options granted outside
of the 1987 Plan to consultants to the Company, which are not then otherwise
exercisable in full shall become fully exercisable upon the occurrence of any of
the following events: (i) any person or group becomes the beneficial owner of
25% or more of the Company's Common Stock; (ii) at any time during any
consecutive two-year period, the directors of the Company at the beginning of
the period (and any new director whose election to the Board was approved by the
vote of at least two-thirds of the directors still in office) cease to
constitute a majority of the directors then in office; (iii) the consummation of
a merger or consolidation (whether or not the Company is the surviving
corporation), other than a merger or consolidation in which the holders of the
Company's stock immediately prior thereto hold immediately thereafter securities
representing more than 70% of the combined voting power of the voting securities
of the merged or consolidated entity; or (iv) the consummation of a sale of all
or substantially all of the Company's assets or a plan of complete liquidation
of the Company.
1994 Stock Option and Incentive Compensation Plan. Following a "change
of control," the 1994 Stock Option and Incentive Compensation Plan (the "1994
Plan") provides that all restrictions on restricted stock awarded under the 1994
Plan will immediately lapse, all performance share objectives for outstanding
performance share or cash Incentives shall be deemed to have been met and all
outstanding options and stock appreciation rights shall immediately become
exercisable. However, all change of control compensation to a participant must
be less than the amount which would be considered a "parachute payment" under
I.R.C. ss. 280G. Section 280G provides that, if payments which are contingent
upon a change of control equal or exceed three times such participant's "base
amount" (average annual compensation over the five taxable years preceding the
taxable year in which the change of control occurs), then such payments
constitute a "parachute payment" and the excess of such "parachute payment" over
such participant's "base amount" will not be deductible by the Company and will
be subject to an excise tax payable by the participant. To the extent that
change of control compensation would equal or exceed three times a participant's
"base amount," the participant must designate which payments should be reduced
or eliminated so as to avoid receipt of a "parachute payment."
For purposes of these provisions, a "change of control" refers to any
of the following events: (i) the acquisition of at least 25% beneficial
ownership of any of the Company's equity securities by any person or group of
persons other than the Company's current shareholders; (ii) the approval of a
merger, consolidation or sale of substantially all of the Company's assets by
the shareholder, other than a merger or consolidation in which the Company's
shareholders immediately prior to such merger or consolidation hold immediately
thereafter more than 70% of the voting securities of the merged or consolidated
entity, or (iii) certain changes in the composition of the Company's Board of
Directors.
- 15 -
<PAGE>
Compensation Committee Interlocks and Insider Participation
During the Company's fiscal year 1996, John Egart, President and Chief
Executive Officer of the Company, served as a director and a member of the
Compensation Committee of Kelly Russell Studios, Inc. ("KRSI"), and Tim Rath,
who served as an executive officer of KRSI during the same time, served as a
director and a member of the Company's Compensation Committee.
Certain Transactions
The Company's lease on a former facility, an approximately 7,500
square-foot office/warehouse facility located at 2141 - 108 Lane N.E.,
Minneapolis, Minnesota, expired on April 30, 1993; however, the Company
continued to rent such facility on a month-to-month basis until November 15,
1995. The Company's former facility is owned by B.D.I. Partnership, a Minnesota
general partnership of which John J. Egart and David G. Soderquist, officers of
the Company, are partners. The rental on the Company's former facility was
$2,997 per month plus taxes, special assessments, insurance, utilities and
similar charges.
The Company has a consulting agreement with Joe Mendelsohn, Director
and Chairman of the Board, pursuant to which Mr. Mendelsohn received $3,000 per
month for his consultation with, and advice to, management of the Company during
fiscal 1996. The agreement also provides for a contingent consulting fee
pursuant to which, if the Company achieves certain pre-tax earnings, Mr.
Mendelsohn will receive additional fees. Mr. Mendelsohn received $65,000 as a
contingent consulting fee with respect to the Company's fiscal 1996 performance.
For fiscal 1997, such contingent consulting fee will range from $32,000 to
$110,000 based on the Company attaining pre-tax earnings from $11,500,000 to
$14,260,000, respectively. The agreement, with annual contingent payment target
updates, continues through February 28, 1998.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than tenpercent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
March 1, 1995 through February 29, 1996, all filing requirements applicable to
its officers, directors, and greater than tenpercent beneficial owners were
complied with.
- 16 -
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal #3)
The Board of Directors unanimously recommends that the shareholders
ratify the appointment of McGladrey & Pullen, LLP as independent auditors for
the Company for the fiscal year ending February 28, 1997. Unless otherwise
instructed, the Proxies will be so voted. McGladrey & Pullen, LLP provided
services in connection with the Company's registration statement filed with the
SEC in August 1987 and has served as the Company's independent accountants since
such time. Representatives of McGladrey & Pullen, LLP are expected to be present
at the Annual Meeting, will be given an opportunity to make a statement
regarding financial and accounting matters of the Company if they so desire, and
will be available to respond to appropriate questions from the Company's
shareholders. The ratification of the appointment of McGladrey & Pullen, LLP as
independent auditors for the Company for the fiscal year ending February 28,
1997 requires the affirmative vote of the holders of the greater of (1) a
majority of the voting power of the shares represented in person or by proxy at
the Annual Meeting with authority to vote on such matter, or (2) a majority of
the voting power of the minimum number of shares that would constitute a quorum
for the transaction of business at the Annual Meeting.
OTHER BUSINESS
Management knows of no other matters to be presented at the 1996 Annual
Meeting. If any other matter properly comes before the Annual Meeting, the
appointees named in the Proxies will vote the Proxies in accordance with their
best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 1997 Annual Meeting must be received by the
Company by January 7, 1997, to be included in the Company's proxy statement and
related proxy for the 1997 Annual Meeting.
- 17 -
<PAGE>
FORM 10-K
THE COMPANY WILL PROVIDE AT NO CHARGE A COPY OF ITS ANNUAL REPORT ON
FORM 10-K, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, TO ANY
BENEFICIAL OWNER OF SHARES ENTITLED TO VOTE AT THE 1996 ANNUAL MEETING. PLEASE
ADDRESS YOUR REQUEST TO THE ATTENTION OF ROBERT L. LENIUS, JR., VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER, FIRST TEAM SPORTS, INC., 1201 LUND BOULEVARD,
ANOKA, MINNESOTA 55303. YOUR REQUEST MUST CONTAIN A REPRESENTATION THAT AS OF
MAY 3, 1996, YOU WERE A BENEFICIAL OWNER OF SHARES ENTITLED TO VOTE AT THE
ANNUAL MEETING OF SHAREHOLDERS.
BY ORDER OF THE BOARD OF DIRECTORS
John J. Egart
President and Chief Executive Officer
Dated: May 24, 1996
Anoka, Minnesota
- 18 -
<PAGE>
[FRONT] FIRST TEAM SPORTS, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John J. Egart and David G. Soderquist
and each of them, with power to appoint a substitute, to vote all shares the
undersigned is entitled to vote at the Annual Meeting of Shareholders of First
Team Sports, Inc. to be held on June 28, 1996, and at all adjournments thereof,
as specified below on the following matters which are further described in the
Proxy Statement related hereto and, in their discretion, upon any other matters
which may be brought before the meeting.
1. PROPOSAL TO SET THE NUMBER OF DIRECTORS AT FIVE (5).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS. NOMINEES: John J. Egart, David G. Soderquist,
Joe Mendelsohn, Timothy G. Rath
and Stanley E. Hubbard
[ ] VOTE FOR all nominees listed above (except vote withheld from the
following nominees, if any, whose names are written below)
-----------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
3. PROPOSAL TO RATIFY APPOINTMENT OF McGLADREY & PULLEN, LLP AS
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING FEBRUARY 28,
1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued and to be dated and signed on other side)
[BACK]
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. This proxy, when properly
executed, will be voted in the manner directed herein by the undersigned
shareholder. If no direction is made, this proxy will be voted for all directors
named in Item 2 and for Proposals 1 and 3.
Please sign exactly as name appears at left. When shares are
held as joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
have signed in full corporate name by President or other
authorized officer. If a partnership, please have signed in
partnership name by authorized person.
---------------------------------------------------------
Signature
---------------------------------------------------------
Signature if held jointly
Dated: , 1996
---------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY, USING THE ENCLOSED ENVELOPE
