<PAGE>
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 (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Global Sports, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(5) Total fee paid:
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[X] 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:
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(4) Date Filed:
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<PAGE>
[LOGO OF GLOBAL SPORT, INC.]
June 30, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
of Global Sports, Inc. ("Global" or the "Company") which will be held on
Tuesday, July 13, 1999 at 10:00 a.m. (Philadelphia Time) at the office of
Global, 555 S. Henderson Road, King of Prussia, PA 19406. The official notice
of the Annual Meeting together with a proxy statement and form of proxy are
enclosed. Please give this information your careful attention. At the meeting,
shareholders of Global are being asked to elect four directors of Global,
increase the number of shares issuable under the Company's equity incentive
plan, increase the number of authorized shares of common stock under the
Company's certificate of incorporation and approve the issuance of
approximately 30% of the issued and outstanding shares of the Company's common
stock to SOFTBANK America Inc. in a private placement.
Whether or not you expect to attend the meeting in person it is important
that your shares be voted at the meeting. I urge you to specify your choices
by marking the enclosed proxy and returning it promptly.
Sincerely,
/s/ Michael G. Rubin
Michael G. Rubin
Chairman of the Board and
Chief Executive Officer
555 S. Henderson Rd., King of Prussia, PA 19406 (610) 768-0900
<PAGE>
Global Sports, Inc.
555 S. Henderson Road
King of Prussia, PA 19406
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held July 13, 1999
----------------
TO OUR SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of GLOBAL SPORTS, INC. ("Global" or the "Company") will be held on
Tuesday, July 13, 1999, at 10:00 a.m. (Philadelphia Time), at the office of
Global, 555 S. Henderson Road, King of Prussia, PA 19406 for the following
purposes:
1. To elect four directors named herein to serve for terms described in
the accompanying Proxy Statement and until their successors are elected and
qualified, as more fully described in the accompanying Proxy Statement;
2. To approve an amendment to the Company's 1996 Equity Incentive Plan to
increase the number of shares of the Company's common stock, par value $.01
per share ("Common Stock"), issuable thereunder from 1,000,000 shares to
3,000,000 shares;
3. To approve an amendment to the Company's Certificate of Incorporation
increasing the number of authorized shares of Common Stock by 40,000,000
shares from 20,000,000 shares to 60,000,000 shares;
4. To approve the issuance of approximately 30% of the Company's issued
and outstanding shares of Common Stock to SOFTBANK America Inc., a Delaware
corporation ("SOFTBANK"), in a private placement; and
5. To act upon such other business as may properly come before this
meeting or any postponement or adjournment thereof.
The Board of Directors is not aware of any other business to come before the
Annual Meeting.
The Board has fixed May 14, 1999 as the record date for the determination of
shareholders entitled to vote at the Annual Meeting. Only shareholders of
record at the close of business on that date will be entitled to notice of,
and to vote at, the Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors,
/s/ Steven A. Wolf
Steven A. Wolf
Secretary
King of Prussia, Pennsylvania
June 30, 1999
<PAGE>
Global Sports, Inc.
555 S. Henderson Road
King of Prussia, PA 19406
----------------
PROXY STATEMENT
----------------
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Global Sports, Inc. ("Global" or the "Company") for use at the
Annual Meeting of Shareholders (the "Annual Meeting") to be held on Tuesday
July 13, 1999, at 10:00 a.m. (Philadelphia Time) at the office of Global, 555
S. Henderson Road, King of Prussia, PA 19406 and at any postponement or
adjournment thereof. The approximate date on which this proxy statement and
the accompanying form of proxy will first be sent or given to shareholders is
June 30, 1999.
Sending in a signed proxy will not affect the shareholder's right to attend
the annual meeting and vote in person since the proxy is revocable. Any
shareholder giving a proxy has the power to revoke it by, among other methods,
delivering a later dated proxy or giving written notice to the Secretary of
Global at any time before the proxy is exercised.
The expense of the proxy solicitation will be borne by Global. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or teletype by directors, officers or employees of Global and its
subsidiaries without additional compensation. Upon request by brokers,
dealers, banks or voting trustees, or their nominees who are record holders of
the Company's Common Stock, Global is required to pay the reasonable expenses
incurred by such record holders for mailing proxy materials and annual
shareholder reports to any beneficial owners of the Common Stock.
A form of proxy is enclosed. If properly executed and received in time for
voting, and not revoked, the enclosed proxy will be voted as indicated in
accordance with the instructions thereon. If no directions to the contrary are
indicated, the persons named in the enclosed proxy will vote all shares of the
Common Stock for election of all nominees for director hereinafter named and
for the amendment to the 1996 Equity Incentive Plan.
The Company had 12,116,253 shares of Common Stock outstanding at the close
of business on May 14, 1999 (the "Record Date"). In order for a quorum to be
present at the Annual Meeting, a majority of the outstanding shares of the
Company's Common Stock as of the close of business on the Record Date must be
present in person or represented by proxy at the Annual Meeting. All such
shares that are present in person or represented by proxy at the Annual
Meeting will be counted in determining whether a quorum is present, including
abstentions and broker non-votes.
Each share of Common Stock outstanding is entitled to one vote on each
matter which may be brought before the Annual Meeting. The election of
directors will be determined by a plurality vote. The affirmative vote of a
majority of the outstanding shares of Common Stock is required to approve the
amendment to the Company's Certificate of Incorporation. The affirmative vote
of a majority of the shares of Common Stock present or represented by proxy at
the meeting is required to approve the amendment to the 1996 Equity Incentive
Plan, the issuance of approximately 30% of the issued and outstanding shares
of the Company's Common Stock to SOFTBANK in a private placement and any other
business matters properly brought before the Annual Meeting. Under the
Delaware General Corporation Law, an abstention, withholding of authority to
vote or broker non-vote on any proposal, other than the election of directors,
will have the same legal effect as an "against" vote.
1
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of May 14, 1999, the beneficial ownership
of the Company's Common Stock: (i) by each person known by the Company to be
the beneficial owner of five percent or more of the Company's outstanding
Common Stock, (ii) by each director and nominee for director of the Company,
(iii) by the Company's chief executive officer and three most highly paid
executive officers during fiscal 1998 (the "Named Officers"), and (iv) by the
directors, director nominees and executive officers of the Company as a group.
Unless otherwise specified, all persons listed below have sole voting and
investment power with respect to their shares. The business address of the
officers and directors of Global is that of the Company.
<TABLE>
<CAPTION>
Name, Position and Address Number of Shares Percentage
of Beneficial Owner Beneficially Owned(1) of Class
-------------------------- --------------------- ----------
<S> <C> <C>
Michael G. Rubin.............................. 8,039,086 66.3%
Chairman of the Board and Chief Executive
Officer of Global
James J. Salter............................... 1,045,400(2) 8.6%
Chief Executive Officer of Off-Price and
Action Sports Division
David B. Newcombe............................. 19,167(3) *
Co-President and General Manager of Branded
Division
Steven A. Wolf................................ 25,625(4) *
Vice President and Chief Financial Officer
Kenneth J. Adelberg........................... 119,500(5) 1.0%
Director
Harvey Lamm................................... 80,000(6) *
Director
Jeffrey Rayport............................... 15,000(7) *
Director
DMJ Financial, Inc. (8)....................... 1,025,400 8.5%
All executive officers and directors as a
group (12 persons)........................... 9,372,778(9) 76.1%
</TABLE>
- --------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the SEC. Accordingly they may include securities owned by
or for, among others, the wife and/or minor children or the individual and
any other relative who has the same home as such individual, as well as
other securities as to which the individual has or shares voting or
investment power or has the right to acquire under outstanding stock
options within 60 days of the date of this table. Beneficial ownership may
be disclaimed as to certain of the securities.
(2) Includes 1,025,400 shares of Common Stock owned by DMJ Financial, Inc. of
which Mr. Salter is an officer and a 50% shareholder, and includes 20,000
shares of Common Stock issuable pursuant to options awarded to Mr. Salter
under the Company's 1996 Equity Incentive Plan, which options are
exercisable within 60 days of the date of this table. Does not include
80,000 shares of Common Stock issuable pursuant to options awarded to Mr.
Salter which are not exercisable within 60 days of the date of this table.
(3) Includes 5,334 shares of Common Stock issuable pursuant to options awarded
to Mr. Newcombe under the Company's 1996 Equity Incentive Plan, which
options are currently exercisable. Does not include 26,332 shares of
Common Stock issuable pursuant to options awarded to Mr. Newcombe which
are not exercisable within 60 days of the date of this table.
(4) Includes 25,625 shares of Common Stock issuable pursuant to options
awarded to Mr. Wolf under the Company's 1996 Equity Incentive Plan, all of
which options are currently exercisable. Does not include 24,375 shares of
Common Stock issuable pursuant to options awarded to Mr. Wolf which are
not exercisable within 60 days of the date of this table.
(5) Includes 46,250 shares of Common Stock issuable pursuant to options
awarded to Mr. Adelberg under the Company's 1996 Equity Incentive Plan,
all of which options are currently exercisable. Does not include 10,000
shares of Common Stock issuable pursuant to options awarded to Mr.
Adelberg which are not exercisable within 60 days of the date of this
table.
(6) Includes 80,000 shares of Common Stock issuable pursuant to options
awarded to Mr. Lamm under the Company's 1996 Equity Incentive Plan, all of
which options are currently exercisable. Does not include 70,000 shares of
Common Stock issuable pursuant to options awarded to Mr. Lamm which are
not exercisable within 60 days of the date of this table.
(7) Includes 15,000 shares of Common Stock issuable pursuant to options
awarded to Dr. Rayport under the Company's 1996 Equity Incentive Plan, all
of which options are currently exercisable. Does not include
2
<PAGE>
15,000 shares of Common Stock issuable pursuant to options awarded to Mr.
Rayport which are not exercisable within 60 days of the date of this table.
(8) The business address of DMJ Financial, Inc. is 25 Vanley Cresent, Toronto
Ontario M3J2B7 Canada.
(9) Includes an aggregate of 203,375 shares of Common Stock issuable pursuant
to options awarded to the Company's executive officers and directors,
which options are exercisable within 60 days of the date of this table.
Does not include an aggregate of 489,375 shares of Common Stock issuable
pursuant to options awarded to the Company's executive officers and
directors which are not exercisable within 60 days of the date of this
table.
* Less than one percent.
PROPOSAL I--ELECTION OF DIRECTORS
The Company's Bylaws, as amended, provide that the number of directors shall
be as established by the Board. The Board has set the number of directors at
four. The following table sets forth certain information regarding the
Company's nominees for election to the Board of Directors to serve for one-
year terms until the 2000 Annual Meeting and until their respective successors
are elected and qualified.
<TABLE>
<CAPTION>
Position(s) Held Director Term to
Name Age in the Company Since Expire
---- --- ---------------- -------- -------
<S> <C> <C> <C> <C>
Michael G. Rubin............... 26 Chairman of the Board and 1995 2000
Chief Executive Officer
Kenneth J. Adelberg............ 46 Director 1995 2000
Harvey Lamm.................... 63 Director 1998 2000
Jeffrey F. Rayport............. 39 Director 1999 2000
</TABLE>
The principal occupation of each director of the Company is set forth below.
Michael G. Rubin has served as Chairman of the Board and Chief Executive
Officer of the Company since July 31, 1995 and as President and Director of
KPR Sports International, Inc., Apex Sports International, Inc. and MR
Management, Inc. (the "KPR Companies") since their formation in 1990. Mr.
Rubin received the 1995 Entrepreneur of the Year Award for the Delaware Valley
Region, which is sponsored by Inc. magazine and Ernst & Young. Mr. Rubin
attended Villanova University, Villanova, Pennsylvania.
Kenneth J. Adelberg has served as President and Chief Executive Officer of
HiFi House Group of Companies, a privately-held company based in Broomall,
Pennsylvania, since 1987. Mr. Adelberg is a director and founding stockholder
of US Wats, Inc., a publicly-traded company specializing in business
telecommunications services, located in Bala Cynwyd, Pennsylvania, which was
established in 1989. Mr. Adelberg is a founding stockholder and director of
Republic Bank, Philadelphia, Pennsylvania, a publicly-traded bank which has
been in operation since 1989. Mr. Adelberg holds Bachelor of Science degrees
in Biophysics and Physiological Psychology from Pennsylvania State University
and attended the MBA program at Drexel University, Philadelphia, Pennsylvania.
Harvey Lamm was a founder of Subaru of America, Inc., a wholly-owned
subsidiary of Fuji Heavy Industries Ltd., and served as its Chairman of the
Board, Chief Executive Officer, President and Chief Operating Officer from its
inception until its acquisition by Fuji Heavy Industries Ltd. in August 1990.
Prior to that acquisition, Subaru of America, Inc. was the exclusive importer
of Subaru brand vehicles in the United States and was a publicly traded
company listed on the Nasdaq National Market. Mr. Lamm holds degrees from
Pennsylvania State University and Drexel University.
Jeffrey F. Rayport is an associate professor of business administration in
the Service Management Interest Group at the Harvard Business School. His
research focuses on the impact of new information technologies on services
marketing and management strategies for information-based products and
services. Dr. Rayport is also a founder and director of the Monitor
Marketspace Center, a technology and e-commerce media unit based at Monitor
Company, a global strategy consulting firm headquartered in Cambridge,
Massachusetts. Dr. Rayport earned an A.B. from Harvard College, an M.Phil. in
International Civilization at Harvard University and a Ph.D. at Harvard
University in Business History.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES FOR
DIRECTORS.
3
<PAGE>
Board, Committees and Attendance at Meetings
The Board of Directors of the Company held three meetings during the fiscal
year ended December 31, 1998. During fiscal 1998, no director attended fewer
than 75% of the aggregate of the total number of Board meetings and the total
number of meetings held by committees of the Board of Directors on which he
served. The following is a description of each of the committees of the Board
of Directors of the Company.
Audit Committee. The members of the Audit Committee are Messrs. Lamm and
Adelberg. The Audit Committee reviews the Company's audited financial
statements and makes recommendations to the Board concerning the Company's
accounting practices and policies and the selection of independent
accountants. The Audit Committee did not meet during the year ended December
31, 1998.
Compensation Committee. The members of the Compensation Committee are
Messrs. Rubin and Adelberg. The Compensation Committee is responsible for
establishing salaries, bonuses and other compensation for the executive
officers and administers the Company's stock option plans. The Compensation
Committee did not meet during the year ended December 31, 1998.
Compensation of Directors
Under the Company's current policy, commencing in fiscal 1999, upon election
to the Board, non-employee directors of the Company receive an option to
purchase 30,000 shares of the Company's Common Stock as compensation for their
services to the Company. The directors do not receive any cash compensation
for their services on behalf of the Company but are reimbursed for reasonable
travel and lodging expenses incurred in attending meetings of the Board of
Directors and any Committee. Mr. Rubin, the only director who is also an
officer of the Company, does not receive any separate fee for acting in his
capacity as a director.
On September 19, 1995, the Board of Directors adopted, and on November 15,
1995, the shareholders approved, the 1995 Non-Employee Directors' Stock Option
Plan (the "Directors' Plan"). Pursuant to the Directors' Plan, options
originally could be granted with respect to an aggregate of 12,500 shares of
Common Stock. Effective December 31, 1997, the Board of Directors terminated
the Directors' Plan, which remains in effect only as to unexercised options
granted thereunder.
4
<PAGE>
PROPOSAL II -- AMENDMENT TO 1996 EQUITY INCENTIVE PLAN
In March 1996, the Board of Directors adopted and in July 1996 the Company's
shareholders approved the Company's 1996 Equity Incentive Plan (the "Incentive
Plan"). The Incentive Plan originally permitted Awards to be granted for a
total of 100,000 shares of the Company's Common Stock. On September 24, 1996,
the Board of Directors approved an Amendment to the Incentive Plan that
increased the maximum number of shares issuable under the Incentive Plan to
1,000,000 shares. This amendment was approved by the shareholders at the
Company's annual shareholders meeting on December 4, 1997.
Subject to approval by the Company's shareholders, the Board of Directors
amended the Incentive Plan as of January 5, 1999 to increase the authorized
number of shares of Common Stock issuable thereunder by 2,000,000 shares and
to reserve the additional shares for issuance under the Incentive Plan,
bringing the total number of shares of Common Stock issuable under the
Incentive Plan to 3,000,000.
Approval of the amendment to the Incentive Plan will require the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
present or represented at the Annual Meeting. Proxies for which no specific
direction is included will be voted for the amendment to the Incentive Plan.
1996 Equity Incentive Plan Summary
The following summary of the Incentive Plan is qualified in its entirety by
the specific language of the Incentive Plan, a copy of which is available to
any shareholder upon request.
General. The purposes of the Incentive Plan are to attract and retain key
employees and certain other persons who are in a position to make significant
contributions to the success of the Company, to reward these employees and
other persons for their contributions, to provide additional incentive to
these employees and other persons to continue making similar contributions and
to further align the interests of these employees and other persons with those
of the Company's shareholders. To achieve these purposes, the Incentive Plan
permits grants of incentive stock options ("ISO's"), options not intended to
qualify as incentive stock options ("Non-ISO's"), stock appreciation rights
("SAR's"), restricted and unrestricted stock awards, performance awards,
loans, and supplemental cash awards and combinations of the foregoing (all
referred to as "Awards"). Shares issuable under Awards that terminate
unexercised, shares issuable under Awards that are payable in stock or cash
but are paid in cash and shares issued but later forfeited will be available
for future Awards under the Incentive Plan.
Eligibility. All current and future employees of the Company, and other
persons who, in the opinion of the Board of Directors, are in a position to
make significant contributions to the success of the Company, such as
consultants and non-employee directors, are eligible to receive Awards under
the Incentive Plan.
Administration. The Incentive Plan is administered by the Board of
Directors, which determines, among other things and subject to certain
conditions, the persons eligible to receive Awards, the persons who actually
receive Awards, the type of each Award, the number of shares of Common Stock
subject to each Award, the date of grant, exercise schedule, vesting schedule
and other terms and conditions of each Award, whether to accelerate the
exercise or vesting schedule or waive any other terms or conditions of each
Award, whether to amend or cancel an Award and the form of any instrument used
under the Incentive Plan. The Board of Directors has the right to adopt rules
for the administration of the Incentive Plan, settle all controversies
regarding the Incentive Plan or any Award, and construe and correct defects
and omissions in the Incentive Plan or any Award. The Incentive Plan may be
amended, suspended or terminated by the Board of Directors, subject to certain
conditions, provided that shareholder approval will be required whenever
necessary for the Incentive Plan to continue to satisfy the requirements of
certain securities and tax laws, rules and regulations.
Options. Recipients of stock options under the Incentive Plan will have the
right to purchase shares of Common Stock at an exercise price, during a period
of time and on such other terms and conditions as are determined by the Board
of Directors. For ISO's, the recipient must be an employee, the exercise price
must be at least 100% (110% if issued to a 10% or greater shareholder of the
Company) of the fair market value of the Company's Common Stock on the date of
grant and the term cannot exceed ten years (five years if issued to a
5
<PAGE>
10% or greater shareholder of the Company) from date of grant. If permitted by
the Board of Directors and subject to certain conditions, an option exercise
price may be paid by delivery of shares of the Company's Common Stock that
have been outstanding, a promissory note, a broker's undertaking to promptly
deliver the necessary funds or by a combination of those methods. If permitted
by the Board of Directors, options (other than those granted in tandem with
SAR's) may be settled by the Company paying to the recipient, in cash or
shares of Common Stock (valued at the then fair market value of the Company's
Common Stock), an amount equal to such fair market value minus the exercise
price of the option shares.
SARs. SARs may be granted under the Incentive Plan either alone or in tandem
with stock options. Generally, recipients of SARs are entitled to receive upon
exercise, cash or shares of Common Stock (valued at the then fair market value
of the Company's Common Stock) equal to such fair market value on the date of
exercise minus such fair market value on the date of grant of the shares
subject to the SAR, although certain other measurements also may be used. A
SAR granted in tandem with a stock option is exercisable only if and to the
extent that the option is exercised.
Stock Awards. The Incentive Plan provides for restricted and unrestricted
stock awards. Stock awards allow the recipient to acquire shares of the
Company's Common Stock for their par value or any higher price determined by
the Board of Directors. In the case of restricted stock awards, the shares
acquired are subject to a vesting schedule and other possible conditions
determined by the Board of Directors.
Performance Awrds. The Incentive Plan provides for performance awards
entitling the recipient to receive stock options, stock awards or other types
of Awards conditional upon achieving performance goals determined by the Board
of Directors. Performance goals may involve overall corporate performance,
operating group or business unit performance, personal performance or any
other category of performance determined by the Board of Directors. Financial
performance may be measured by revenue, operating income, net income, earnings
per share, Common Stock price, price-earnings multiple or other financial
factors determined by the Board of Directors.
Loans and Cash Awards. Under the Incentive Plan, loans or supplemental cash
awards may be granted to recipients of Awards to help defray taxes due as a
result of the Awards. The terms and conditions of loans and supplemental cash
awards, including the interest rate, which may be zero, and whether any loan
will be forgiven, are determined by the Board of Directors.
Termination of Awards. Except as otherwise agreed by the employee and the
Company, upon termination of a recipient's employment or other relationship
with the Company, (i) stock options and SARs remain exercisable for a period
of three months (one year if termination is due to death or disability) to the
extent that they were exercisable at the time of termination and (ii) unvested
shares under outstanding restricted stock awards vest immediately, except in
the case of a voluntary resignation or termination for cause (as defined in
the Incentive Plan). Stock options, SAR's and other Awards that are not
exercisable at the time of termination automatically terminate, and payments
or benefits under deferred stock awards, performance awards and supplemental
cash awards that are not irrevocably due at the time of termination are
forfeited.
Summary of Federal Income Tax Consequences. This discussion, which is based
upon federal income tax law as in effect on the date of this Proxy Statement
generally summarizes certain federal income tax consequences associated with
the Incentive Plan. The tax consequences to executive officers may be
different from those summarized below. No taxable income is realized upon the
grant of a stock option, nor upon the exercise of an ISO except to the extent
that the exercise may result in alternative minimum tax liability. Upon the
exercise of a non-qualified option, the recipient realizes ordinary income
equal to the fair market value on the date of exercise minus the exercise
price of the option shares. If restricted shares of the Company's common stock
are used to settle a stock option, however, then the realization of income may
be deferred. Upon a disposition of shares acquired by exercise of a stock
option, the gain or loss generally constitutes a capital gain or loss. In the
case of a disposition of ISO shares within one year after the date of exercise
or within two years after the date of grant, the difference between the fair
market value on the date of exercise and the exercise price constitutes
ordinary income, and any additional gain or loss above or below the fair
market value on the date of exercise constitutes a capital gain or loss.
6
<PAGE>
Upon the grant of an unrestricted stock award, the recipient realizes
ordinary income equal to the fair market value on the date of grant minus the
price paid for the shares awarded. A recipient of a restricted stock award
realizes ordinary income only as of and when the shares vest. The ordinary
income realized on each vesting or transfer date equals the fair market value
on that date less the price paid for the shares. A recipient of a restricted
stock award may, however, choose or be required by the terms of the award to
elect under Section 83(b) of the Code to have the ordinary income associated
with all of the restricted shares realized and measured on the date of grant.
A recipient who makes such an election and later forfeits restricted shares
may not claim a loss for tax purposes. The tax consequences of a performance
award depend upon the nature of the underlying Award earned if and when the
performance goals are achieved. Generally, loans made under the Incentive Plan
do not result in taxable income to the recipient. If the interest rate is
lower than certain rates specified under the Code, however, then ordinary
income may be imputed to the recipient. Forgiveness of all or part of a loan
also results in ordinary income to the recipient. The recipient of a
supplemental cash award realizes ordinary income equal to the amount received.
Generally, whenever a recipient realizes ordinary income, a corresponding
deduction is available to the Company. Under Section 162(m) of the Code,
however, the Company will be denied a deduction for certain compensation
exceeding $1,000,000 paid to its chief executive officer and four other
highest paid executive officers, excluding (among other things) certain
performance-based compensation (see Report of the Compensation Committee).
New Plan Benefits
The following table sets forth the number of shares issuable upon the
exercise of options granted to the groups specified during fiscal 1998.
<TABLE>
<CAPTION>
1996 Equity Incentive Plan
Number of
Name and Position Units
------------------------------------ ---------
<S> <C>
Executive Group 184,000
Non-Executive Director Group 80,000
Non-Executive Officer Employee Group 253,416
</TABLE>
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT TO
THE COMPANY'S 1996 EQUITY INCENTIVE PLAN.
7
<PAGE>
PROPOSAL III--AMENDMENT TO CERTIFICATE OF INCORPORATION
Under the Company's Certificate of Incorporation, the Company currently is
authorized to issue up to 20,000,000 shares of Common Stock. As of May 14,
1999, there were approximately 4,837,947 authorized shares of the Company's
Common Stock that were not issued or reserved for future issuance. In June
1999, the Board of Directors approved an amendment to the Company's
Certificate of Incorporation that increases the maximum number of authorized
shares of Common Stock by 40,000,000 from a total of 20,000,000 shares to a
total of 60,000,000 shares, subject to approval by the stockholders of the
Company. The purpose of the amendment is to provide sufficient shares for the
issuance of shares of Common Stock in the SOFTBANK transaction as described in
Proposal IV below, as well as for future stock splits, stock dividends,
recapitalizations, acquisitions and other corporate transactions, although no
such use currently is planned other than the SOFTBANK transaction. Once
authorized, the additional shares of Common Stock may be issued with approval
of the Board of Directors but without further approval of the stockholders
unless stockholder approval is required by applicable law, rule or regulation.
Accordingly, this solicitation may be the only opportunity for stockholders to
approve such stock splits, stock dividends, recapitalizations, acquisitions
and other corporate transactions.
Stockholder approval of this proposal is required under Delaware law.
Approval of the amendment to the Company's Certificate of Incorporation
requires the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Company. Michael G. Rubin, Chairman of the Board
and Chief Executive Officer of the Company, who owns more than 65% of the
currently outstanding Common Stock, has agreed in connection with the SOFTBANK
transaction to vote in favor of the amendment to the Company's Certificate of
Incorporation. As a result of Mr. Rubin's agreement to vote in favor of this
proposal, passage of this proposal is assured.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION.
8
<PAGE>
PROPOSAL IV--APPROVAL OF ISSUANCE OF SHARES TO SOFTBANK IN A PRIVATE PLACEMENT
On June 10, 1999, the Company and SOFTBANK entered into a Stock Purchase
Agreement (the "Purchase Agreement") and related agreements for the sale of
6,153,850 shares of the Company's Common Stock to SOFTBANK, at a price of
$13.00 per share (the closing price on May 26, 1999, the day prior to the day
the Company and SOFTBANK agreed in principle to the transaction) for an
aggregate purchase price of $80,000,050. Upon completion of the contemplated
transactions, SOFTBANK will own approximately thirty percent (30%) of the
Company's Common Stock on a fully diluted basis. The Company intends to use
the proceeds from the sale of Common Stock to SOFTBANK for general corporate
purposes, including funding its e-Commerce operations. The transaction with
SOFTBANK is not intended to be the first step of a going private or other
similar transaction. Prior to the negotiation and execution of the Purchase
Agreement and related agreements, neither the Company nor Michael G. Rubin,
the Company's Chairman and Chief Executive Officer and holder of more than 65%
of the Company's common stock, had any affiliation with SOFTBANK. On June 21,
1999, the Company filed a Current Report on Form 8-K relating to the execution
of the SOFTBANK agreement, and copies of such agreements are attached as
exhibits to the Form 8-K.
The Company anticipates that an initial closing (the "First Closing") will
take place in July 1999 after which time SOFTBANK will have acquired 2,432,692
shares of Common Stock, and that a second closing (the "Second Closing") will
take place on the latest to occur of (i) the first business day following the
date on which the last to be fulfilled or waived of the conditions to the
Second Closing set forth in the Purchase Agreement takes place, (ii) such
other date as is mutually agreed to by the Company and SOFTBANK or (iii) the
date of the First Closing. After the Second Closing, SOFTBANK will have
acquired an additional 3,721,158 shares of Common Stock of the Company
increasing SOFTBANK's holdings to 6,153,850 shares.
The total consideration to be paid by SOFTBANK to the Company for the shares
is $80,000,050. The purchase price for the shares to be purchased at the First
Closing will be paid by automatic conversion of the Convertible Subordinated
Note (defined below) in the principal amount of $15,000,000 and by wire
transfer in immediately available funds of an amount equal to the product of
(i) the difference equal to (A) the number of shares to be purchased by
SOFTBANK at the First Closing (as set forth in the Schedule of Purchases
attached to the Purchase Agreement) minus (B) the number of shares issuable
upon conversion of the Convertible Subordinated Note, times (ii) $13.00. The
purchase price of the shares to be purchased at the Second Closing will be
paid by wire transfer of $48,375,054.
The Purchase Agreement provides, among other things, that on and after the
First Closing, SOFTBANK will have the right to designate (i) a number of
members of the Company's Board of Directors equal to the product of (A) the
total number of authorized directors and (B) the aggregate Proportionate Share
of SOFTBANK and the SOFTBANK Entities (as defined in the Purchase Agreement),
rounded up to the nearest whole number, but not to exceed two directors (the
"Board Composition Requirement"), and (ii) so long as SOFTBANK and the
SOFTBANK Entities collectively own 50% or more of the shares purchased
pursuant to the Purchase Agreement, one director to be a member of each
committee of the Company's Board of Directors. "Proportionate Share," as
defined in the Purchase Agreement, means, with respect to each Securityholder
(as defined in the Purchase Agreement), a fraction the numerator of which is
the total number of shares of Common Stock owned and the number of shares of
Common Stock issuable upon exercise of Rights (as defined in the Purchase
Agreement) owned by such Securityholder, and the denominator of which is the
total number of shares of Common Stock outstanding plus the number of shares
of Common Stock issuable upon exercise of all Rights outstanding.
On June 21, 1999, SOFTBANK, the Company and Mr. Rubin entered into a letter
agreement pursuant to which, among other things, the parties agreed that if
the First Closing has occurred prior to July 13, 1999, SOFTBANK will not have
the right to designate its directors until the earlier of (a) the completion
or adjournment of the Company's 1999 Annual Meeting of Shareholders and (b)
July 13, 1999.
The Company and SOFTBANK also entered into a Registration Rights Agreement,
dated June 10, 1999, under which the Company has granted SOFTBANK certain
"demand" and "piggy-back" registration rights with respect to the shares of
Common Stock purchased pursuant to the Purchase Agreement. In the Purchase
Agreement, the Company has also granted SOFTBANK certain preemptive rights.
9
<PAGE>
In conjunction with the execution of the Purchase Agreement, the Company and
SOFTBANK entered into the Subordinated Loan Agreement, dated as of June 10,
1999, pursuant to which, on such date, SOFTBANK loaned the Company $15,000,000
in order to provide the Company with capital until the First Closing. The loan
was evidenced in the form of a convertible subordinated note. Interest on the
Convertible Subordinated Note accrues on the outstanding principal amount of
the loan at the rate of 4.98% per annum. Upon the First Closing, all unpaid
principal and accrued but unpaid interest due on the Convertible Subordinated
Note will automatically convert into a number of shares of Common Stock equal
to the total amount of unpaid principal and accrued but unpaid interest
divided by $13.00, subject to adjustment under certain circumstances.
In connection with the Purchase Agreement, Michael G. Rubin, the Company's
Chairman and Chief Executive Officer and holder of more than 65% of the
Company's Common Stock, entered into a Voting Agreement, dated as of June 10,
1999, in favor of SOFTBANK, pursuant to which Mr. Rubin agreed, among other
things, that he will vote all of his shares of Common Stock (i) in favor of
this proposal; (ii) in favor of the amendment of the Company's Certificate of
Incorporation to increase the authorized number of shares of Common Stock; and
(iii) in favor of election to the Company's Board of Directors of the
directors which SOFTBANK is entitled to designate upon consummation of the
First and Second Closings.
SOFTBANK, as an inducement and a condition to consummating the Purchase
Agreement, entered into a Voting Agreement, dated as of June 10, 1999, in
favor of Mr. Rubin, pursuant to which SOFTBANK agreed, among other things,
that it will vote all of its shares of Common Stock in favor of any member of
the Board of Directors of the Company who was a member of the Board prior to
the date of the Purchase Agreement, and any director who is thereafter chosen
to fill any vacancy on the Board of Directors or who is elected as a director
(a "Continuing Director") and who, in either event, is not a director
designated by SOFTBANK pursuant to the Purchase Agreement and in connection
with his or her initial assumption of office is recommended for appointment or
election by a majority of the Continuing Directors then on the Board of
Directors.
The completion of the contemplated transactions with SOFTBANK is subject to
the expiration or termination of the waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, the approval of the holders of at
least a majority of the outstanding Common Stock of the Company at the Annual
Meeting, and certain other limited conditions.
Pursuant to Rule 4460(i)(1)(D) ("Rule 4460(i)(1)(D)") of the Nasdaq Stock
Market, Inc. ("Nasdaq"), the Company is required to obtain shareholder
approval in connection with any transaction, other than a public offering,
that involves the issuance by the Company of Common Stock (or securities
convertible into or exercisable or exchangeable for Common Stock) that equals
20% or more of the Common Stock of the Company outstanding before the issuance
of such securities at a price below market value (the "20% Limitation"). On
June 10, 1999, the date of the execution of the SOFTBANK agreements, the
closing sale price of the Company's Common Stock as reported on the Nasdaq
National Market was $18.875 per share and there were 12,165,719 shares of
Common Stock outstanding. Accordingly, the Board of Directors of the Company
has decided to seek shareholder approval of the issuance of shares of Common
Stock to SOFTBANK in order to satisfy Rule 4460(i)(1)(D).
The adoption of the proposal to approve the issuance by the Company to
SOFTBANK in a private placement of a number of shares of Common Stock in
excess of the 20% Limitation requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock present or represented by
proxy at the Annual Meeting. As stated above, Mr. Rubin, who owns more than
65% of the currently outstanding Common Stock, has agreed to vote in favor of
this proposal. As a result of Mr. Rubin's agreement to vote in favor of this
proposal, passage of this proposal is assured. Mr. Rubin has not, and will
not, receive any fee, payment or other consideration in connection with the
transactions contemplated by the Purchase Agreement and related agreements.
10
<PAGE>
The following table sets forth the capitalization of the Company as of March
31, 1999, (i) on an actual basis, and (ii) on a pro forma as adjusted basis to
give effect to the sale of 6,153,850 shares of Common Stock in the private
placement to SOFTBANK (which includes the conversion of principal and accrued
and unpaid interest of the interim loan) at an offering price of $13.00 per
share and the application of the estimated net proceeds therefrom, after
deducting offering expenses estimated at $50,000. The table should be read in
conjunction with the financial statements, including the notes thereto,
attached to the Company's Annual Report to Shareholders for the year ended
December 31, 1998 which was previously mailed to the shareholders on May 19,
1999.
<TABLE>
<CAPTION>
March 31, 1999
------------------------
Pro Forma
Actual As Adjusted
----------- ------------
<S> <C> <C>
Current portion of long term debt..................... $35,312,946 $ 10,870,271
----------- ------------
Subordinated notes payable............................ 3,305,143 3,305,143
Long term debt, less current portion.................. 4,787,727 4,787,727
Stockholders' equity:
Preferred Stock, $0.01 par value; 1,000,000 shares
authorized; 10,000 shares issued as mandatorily
redeemable preferred stock......................... 100 100
Common Stock $0.01 par value; 20,000,000 shares
authorized; 13,109,348 and 19,263,198 shares
issued, actual and pro forma, as adjusted;
12,040,262 and 18,194,112 shares outstanding,
actual and pro forma, as adjusted(1)............... 131,093 131,093
Additional paid-in capital............................ 15,737,522 95,676,033
Retained earnings..................................... 617,213 617,213
Treasury stock, at cost (213,817) (213,817)
----------- ------------
Total stockholders' equity........................ $16,272,011 $ 96,272,061
----------- ------------
Total capitalization.............................. $59,674,927 $115,232,302
=========== ============
</TABLE>
- --------
(1) Excludes shares of Common Stock issuable upon exercise of stock options
granted under the Company's 1987 Stock Option Plan, 1988 Stock Option Plan,
1990 Stock Option Plan, 1992 Stock Option Plan, 1993 Stock Option Plan,
1995 Stock Option Plan, 1995 Non-Employee Directors' Stock Option Plan and
1996 Equity Incentive Plan. See "Executive Compensation--Stock Option
Plans."
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ISSUANCE OF
APPROXIMATELY 30% OF THE ISSUED AND OUTSTANDING SHARES OF THE COMPANY'S COMMON
STOCK TO SOFTBANK IN A PRIVATE PLACEMENT.
11
<PAGE>
EXECUTIVE COMPENSATION
Compensation Committee Report
The Company's Compensation Committee of the Board of Directors is comprised
of Messrs. Rubin and Adelberg. For 1998, the Board of Directors reviewed the
compensation of executive officers, made decisions regarding executive
compensation and administered the Company's employee stock option plans.
The Company's compensation policies for executive officers are to (i)
provide compensation packages to attract, motivate and retain executives, (ii)
link a significant portion of compensation to financial results to reward
successful performance, and (iii) provide long-term equity based compensation
to further align the interests of executives with those of the shareholders
and further reward success and performance. The principal components of the
Company's executive compensation are base salary, incentive compensation and
stock options.
In determining compensation levels, the Company considers compensation
packages offered by similar sized companies within the athletic footwear
industry. Compensation levels for individual executive officers may be more or
less than those offered by such other companies, depending on a subjective
assessment of individual factors, such as the executive's position, skills,
achievements, tenure with the Company and historical compensation levels.
The Company has employment agreements with the following Named Officers:
Michael G. Rubin, James J. Salter, David B. Newcombe and Steven A. Wolf.
Pursuant to the agreements, total compensation is divided into three primary
components: base salary, bonus and stock options. The award of bonuses and
stock options serve as incentives for superior performance and are based upon
both the performance of the executives and the Company. Compensation of the
Named Officers for fiscal 1998 was determined in accordance with these
employment agreements as described herein.
Under the stock option plans established by the Company, stock options are
periodically granted to employees at the discretion of the Board of Directors
or Compensation Committee. It is contemplated that executives of the Company
will be eligible to receive stock option grants, subject to individual
performance and the performance of the Company as a whole.
During 1998, the Company's Named Officers were granted a total of 130,000
options to purchase Common Stock at exercise prices ranging from $2.88 to
$6.88 per share.
Section 162(m) of the Internal Revenue Code generally denies a deduction to
any publicly held company, such as the Company, for certain compensation
exceeding $1,000,000 paid in any taxable year to the chief executive officer
and the four other highest paid executive officers, excluding, among other
things, certain performance-based compensation. The Board has not yet
recommended any change to the Company's executive compensation policies and
plans as a result of Section 162(m), but the Compensation Committee will
continue to evaluate the impact of recently finalized tax regulations to
ensure that the Company's executive compensation plans most effectively serve
the interests of the Company and its shareholders.
Michael G. Rubin
Kenneth J. Adelberg
12
<PAGE>
Summary Compensation Table
The following table sets forth information regarding compensation paid by
the Company and its subsidiaries to each Named Officer.
<TABLE>
<CAPTION>
Long Term
Annual Compensation(1) Compensation Awards
------------------------------------------- ------------------------------------
Securities
Restricted Underlying
Name and Fiscal Other Annual Stock Options/ All Other
Principal Position Year Salary Bonus Compensation(1) Award(s) SARS (#) Compensation
------------------ ------ -------- -------- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael G. Rubin........ 1998 $398,269 -- -- -- -- --
Chairman of the Board
and 1997 297,115(2) -- -- -- -- --
Chief Executive Officer
of Global 1996 593,924(2) -- -- -- -- --
James J. Salter(7)...... 1998 140,625 $100,000 -- -- 100,000(3) --
Chief Executive Officer
of Off- 1997 -- -- -- -- -- --
Price and Action Sports
Division 1996 -- -- -- -- -- --
David B. Newcombe(8).... 1998 130,058 -- -- -- 30,000(4) --
Co-president and 1997 -- -- -- -- -- --
General Manager-- 1996 -- -- -- -- -- --
Branded Division
Steven A. Wolf.......... 1998 124,481 20,000 -- -- -- --
Vice President and 1997 112,178 25,000 -- -- 50,000(5) --
Chief Financial 1996 101,563 -- -- -- --(6) --
Officer
</TABLE>
- --------
(1) Excludes perquisites and other personal benefits that do not exceed
$50,000 or 10% of each officer's total salary and bonus.
(2) Includes amounts paid by the KPR Companies until December 15, 1997, the
date of the Company's reorganization, and paid by the Company thereafter.
(3) Represents an option to purchase 100,000 shares of Common Stock granted
to Mr. Salter in fiscal 1998 at an exercise price of $6.875 per share.
Such option will vest at a rate of 20% per year over a five year period
with the first portion vesting on May 12, 1999, the first anniversary of
the date of grant.
(4) Represents options to purchase 20,000 shares and 10,000 shares of Common
Stock granted to Mr. Newcombe in fiscal 1998 at exercise prices of $2.88
per share and $3.20 per share, respectively. Such options will vest at a
rate of 25% per year over four year periods with the first portions
vesting on January 2, 1999 and October 19, 1999, the first anniversaries
of the respective dates of grant.
(5) Represents an option to purchase 32,500 shares of Common Stock granted to
Mr. Wolf in fiscal 1997 at an exercise price of $3.20 per share and
options to purchase 7,500 shares and 10,000 shares of Common Stock
granted to Mr. Wolf in prior periods which were repriced from $4.00 and
$9.375, respectively, to $3.20 in fiscal 1997. Such options vest at a
rate of 20%, 20% and 33 1/3%, respectively, over five, five and three
year periods.
(6) In fiscal 1996, Mr. Wolf was granted an option to purchase 7,500 shares
of Common Stock at an exercise price of $4.00 per share. Such option was
subsequently repriced to $3.20 in fiscal 1997 and is included in the
50,000 figure under fiscal 1997.
(7) Mr. Salter joined the Company on May 12, 1998.
(8) Mr. Newcombe joined the Company on January 2, 1998.
13
<PAGE>
Stock Options
The following table sets forth information regarding options to purchase
shares of Common Stock exercised by the Named Officers during fiscal 1998
under the Company's stock option plans and the values of options held by such
individuals at fiscal year end.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/ SARs at Options/SARs at
Fiscal Year End Fiscal Year End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable(1)
---- --------------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Michael G. Rubin........ -- -- -- --
Chairman of the Board
and Chief Executive
Officer of Global
James J. Salter......... -- -- --/100,000 --/$100,000(2)
Chief Executive Officer
of Off-Price and Action
Sports Division
David B. Newcombe....... -- -- --/ 31,666 --/$150,440(3)
Co-president and
General
Manager--Branded
Division
Steven A. Wolf.......... -- -- 25,625/ 24,375 $119,796/$113,953(4)
Vice President and
Chief Financial Officer
</TABLE>
- --------
(1) Represents the aggregate market value (market price of the Common Stock
less the exercise price) of the options granted based upon the closing
sales price per share of $7.875 on December 31, 1998.
(2) The exercise price of an option to purchase 100,000 shares held by Mr.
Salter is $6.875 per share. Such option vests at a rate of 20% of the
initial award per year over a five year period commencing on May 12, 1999.
(3) The exercise prices of options to purchase 20,000 shares and 10,000 shares
held by Mr. Newcombe are $2.88 per share and $3.20 per share,
respectively. Such options vest at a rate of 25% and 20%, respectively, of
the initial awards per year over four and five year periods commencing on
January 2, 1999, and October 19, 1999, respectively.
(4) The exercise price of options to purchase 32,500 shares, 7,500 shares and
10,000 shares held by Mr. Wolf are $3.20 per share. Such options vest at
rates of 20%, 20% and 33 1/3%, respectively, of the initial awards per
year over five, five and three year periods commencing on December 15,
1998.
14
<PAGE>
The following table sets forth information regarding options to purchase
shares of Common Stock granted to the Named Officers during fiscal 1998. No
SAR's were granted during fiscal 1998.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Potential Realized Value at
Number of % of Total Assumed Annual Rates of
Securities Options/SARs Exercise Stock Price Appreciation for
Underlying Granted to or Base Option Term
Options/SARs Employees in Price Expiration ------------------------------
Name Granted (#) Fiscal Year ($/sh) Date 0% ($) 5% ($) 10% ($)
---- ------------ ------------ -------- ---------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael G. Rubin....... -- -- -- -- -- -- --
Chairman of the Board
and Chief Executive
Officer of Global
James J. Salter........ 100,000(1) 14.6% $6.875 5/13/08 -- $ 432,365 $ 1,095,697
Chief Executive
Officer of Off-Price
and Action Sports
Division
David B. Newcombe...... 20,000(2) 2.9% $2.88 1/02/08 -- $ 35,553 $90,731
Co-president and
General Manager--
Branded Division 10,000(3) 1.5% $3.20 10/19/08 $13,000 $41,300 $84,718
Steven A. Wolf......... -- -- -- -- -- -- --
Vice President and
Chief Financial
Officer
</TABLE>
- --------
(1) Such options vest at a rate of 20% of the initial award per year over a
five year period commencing May 12, 1999.
(2) Such options vest at a rate of 25% of the initial award per year over a
four year period commencing January 2, 1999.
(3) Such options vest at a rate of 20% of the initial award per year over a
five year period commencing October 19, 1999.
Employment Agreements
Michael G. Rubin. On September 25, 1996, the Company entered into an
agreement with Mr. Rubin for an initial term of five years commencing on
December 15, 1997, subject to automatic annual extensions, to serve as the
Company's Chairman and Chief Executive Officer. Pursuant to the terms of the
employment agreement, Mr. Rubin is entitled to receive (i) an annual base
salary of $450,000 during the fiscal year ending December 31, 1999, increasing
by $50,800 effective January 1, 2000 and $49,280 effective January 1, 2001,
(ii) an annual bonus based upon the achievements of Mr. Rubin and the results
of operations of the Company, (iii) other benefits similar to those provided
to Global's other officers. The agreement was entered into in anticipation of
the Company completing a reorganization on or about January 1, 1997, which
reorganization did not occur until December 15, 1997. The terms of the
agreement specified that in the event that the reorganization did not occur
prior to June 30, 1997, the agreement would become null and void. On the date
of the reorganization, the employment agreement was amended such that the
terms of the original agreement were adopted.
Mr. Rubin's employment agreement may be terminated by Global with cause,
which is defined to include, among other things, the willful failure or
refusal by Mr. Rubin to comply with explicit directions of the Board of
Directors or Executive Committee or to render the services required by the
employment agreement, willful breach or habitual neglect in the performance of
his duties, conviction of a felony or fraud or embezzlement involving assets
of Global. In the event of termination by Global for any other reason, Mr.
Rubin will be entitled to receive any unpaid salary and benefits through the
date of termination. Under the employment agreement, for a period of one year
following his termination, Mr. Rubin is prohibited from engaging in the
planning, research, development, production, manufacturing, marketing, sales
or distribution of athletic footwear, rugged outdoor footwear, sportswear,
licensed products, related products, equipment or services or any other line
of business
15
<PAGE>
engaged in or under demonstrable development by the Company. In addition, Mr.
Rubin is prohibited from enticing, inducing or encouraging other employees of
the Company to engage in any other activity which done by them would violate
any provision of the contract.
James J. Salter. On May 12, 1998, the Company entered into an employment
agreement with James J. Salter, Chief Executive Officer of the Company's Off-
Price and Action Sports Division, for an initial term of four years, subject
to automatic annual extensions after the initial term. Mr. Salter's
compensation is comprised of the following: (i) an annual base salary of
$315,000 during the first year of the agreement increasing by not less than 5%
each following year, (ii) stock option grants, (iii) incentive compensation of
up to $100,000 based upon the sales and profit levels of the Company's Off-
Price Division, and (iv) other benefits similar to those provided to Global's
other officers.
David B. Newcombe. On January 1, 1998, the Company entered into an
employment agreement with David B. Newcombe, Co-president and General
Manager--Branded Division, for an initial term of four years, subject to
automatic annual extensions after the initial term. Mr. Newcombe's
compensation is comprised of the following: (i) an annual base salary of
$150,000 during the fiscal year ending December 31, 1999 increasing by $12,500
effective January 1, 2000, (ii) stock option grants, (iii) incentive
compensation up to 40% of Mr. Newcombe's base salary based upon the
achievements of Mr. Newcombe and the results of operations of the Company, and
(iv) other benefits similar to those provided to Global's other officers.
Steven A. Wolf. On August 1, 1995, the Company entered into an employment
agreement with Steven A. Wolf, Vice President and Chief Financial Officer of
Global, for an initial term of three years, subject to automatic annual
extensions after the initial term. Mr. Wolf's compensation is comprised of the
following: (i) an annual base salary of $137,500 during the fiscal year ending
December 31, 1999 increasing by $12,500 effective January 1, 2000; $5,000
effective January 1, 2001 and $5,000 effective January 1, 2002, (ii) stock
option grants, (iii) incentive compensation up to 30% of Mr. Wolf's base
salary based upon the achievements of Mr. Wolf and the results of operations
of the Company, and (iv) other benefits similar to those provided to Global's
other officers.
Each of Mr. Salter's, Mr. Wolf's and Mr. Newcombe's employment agreements
may be terminated by Global with cause, which is defined the same as in Mr.
Rubin's agreement. In the event of termination by Global for any other reason,
they would also be entitled to receive any unpaid salary and benefits through
their respective dates of termination. All of their employment agreements
contain three year restrictive covenants similar to the one in Mr. Rubin's
agreement.
16
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows a comparison of the cumulative total return for
the Company's Common Stock, the NASDAQ Stock Market and the Peer Group Index
(defined below), assuming an investment of $100 in each on January 1, 1994,
and the reinvestment of all dividends. The data points used for the
performance graph are listed below.
The Peer Group Index reflects the performance of the following publicly
traded companies in industries similar to that of the Company: K-Swiss Inc.,
Rocky Shoes & Boots, Inc., Saucony, Inc., The Timberland Company and Wolverine
World Wide, Inc.
[Graph appears here]
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31//95 12/31/96 12/31/97 12/31/98
Performance Graph Data Points -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Global.................. $100.00 105.88 94.12 107.94 62.06 170.10
NASDAQ.................. $100.00 65.65 81.48 122.70 162.65 116.27
Peer Group Index........ $100.00 104.99 136.18 169.23 207.00 291.96
</TABLE>
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company does not have any formal policy concerning the direct or
indirect pecuniary interest of any of its officers, directors, security
holders or affiliates in any investment to be acquired or disposed of by the
Company or in any transaction to which the Company is a party or has an
interest. The Company will not enter into any such transactions unless
approved by a majority of the entire Board of Directors, not including any
interested director.
The Company's main executive offices and warehouse are located in King of
Prussia, Pennsylvania in a 75,000 square foot facility leased from Mr. Rubin.
Pursuant to the lease, the Company pays approximately $29,000 per month, plus
maintenance and utilities, for use of these facilities. Payments by the
Company to Mr. Rubin under the lease totalled $349,008 in fiscal 1998. The
lease expires on September 30, 2009.
As of December 31, 1998, the Company owed Mr. Rubin $1,829,935, including
accrued interest, in connection with a loan by Mr. Rubin to the Company.
Interest accrues on the loan at the Company's choice of prime plus 1/4% or
LIBOR (Adjusted Eurodollar Rate) plus two hundred seventy-five basis points.
The loan is subordinated to the Company's line of credit from its principal
lending bank.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors, executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1998 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with, except that none of
such officers, directors or greater than 10% beneficial owners, other than Mr.
Rubin, filed a Form 3 or Form 5.
SHAREHOLDER PROPOSALS
Pursuant to recent amendments to the proxy rules under the Exchange Act, the
Company's shareholders are notified that the deadline for providing the
Company timely notice of any shareholder proposal to be submitted outside of
the Rule 14a-8 process for consideration at the Company's 2000 Annual Meeting
of Shareholders (the "2000 Meeting") will be April 30, 2000. As to all such
matters which the Company does not have notice on or prior to March 19, 2000,
discretionary authority shall be granted to the persons designated in the
Company's proxy related to the 2000 Meeting to vote on such proposal. This
change in procedure does not affect the Rule 14a-8 requirements applicable to
inclusion of shareholder proposals in the Company's proxy materials related to
the 2000 Meeting. A shareholder proposal regarding the 2000 Meeting must be
submitted to the Company at its office located at 555 S. Henderson Road, King
of Prussia, Pennsylvania, 19406, by January 3, 2000 to receive consideration
for inclusion in the Company's 2000 proxy materials. Any such proposal must
also comply with the proxy rules under the Exchange Act, including Rule 14a-8.
INDEPENDENT PUBLIC ACCOUNTANTS
Based upon the recommendation of the Audit Committee, the Board of Directors
has selected Deloitte & Touche LLP to be the Company's independent certified
public accountants for fiscal 1999. A representative of Deloitte & Touche LLP
is expected to be present at the Annual Meeting to have the opportunity to
make a statement if he or she desires to do so and to be available to respond
to appropriate questions.
18
<PAGE>
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no other
business that will be presented for consideration at the Annual Meeting (other
than procedural matters). However, the enclosed proxy confers discretionary
authority to vote with respect to any and all of the following matters that
may come before the meeting: (i) matters that the Company's Board of Directors
does not know, a reasonable time before proxy solicitation, are to be
presented for approval at the meeting; (ii) approval of the minutes of a prior
meeting of shareholders, if such approval does not constitute ratification of
the action at the meeting; (iii) the election of any person to any office for
which a bona fide nominee is unable to serve or for good cause will not serve;
(iv) any proposal omitted from this Proxy Statement and the form of proxy
pursuant to Rules 14a-8 or 14a-9 under the Securities Exchange Act of 1934, as
amended; and (v) matters incident to the conduct of the meeting. If any such
matters come before the meeting, the proxy agents named in the accompanying
proxy card will vote in accordance with their judgment.
ANNUAL REPORT
The Annual Report to Shareholders for the year ended December 31, 1998 (the
"Annual Report") was previously mailed to Shareholders of the Company on May
19, 1999. The Annual Report contains the Company's audited financial
statements and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 REQUIRED TO BE
FILED WITH THE SEC WITHOUT CHARGE, EXCEPT FOR EXHIBITS TO THE REPORT, BY
SENDING A WRITTEN REQUEST THEREFOR TO:
Steven A. Wolf
Vice President, Chief Financial Officer and Secretary
555 S. Henderson Road
King of Prussia, PA 19406
By Order of the Board of Directors,
/s/ Steven A. Wolf
Steven A. Wolf,
Secretary
19
<PAGE>
GLOBAL SPORTS, INC.
1999 Annual Meeting of Shareholders -- July 13, 1999
SOLICITED ON BEHALF OF THE COMPANY AND APPROVED
BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael G. Rubin and Kenneth J. Adelberg to
act as attorneys and proxies for the undersigned, with full powers of
substitution, to appear at the Annual Meeting of Shareholders of Global
Sports, Inc. (the "Company") to be held on the 13th day of July, 1999 at the
office of the Company, 555 S. Henderson Road, King of Prussia, Pennsylvania
19406 and at any postponement or adjournment thereof, and to vote all of the
shares of the Company that the undersigned is entitled to vote, with all the
powers and authority the undersigned would possess if personally present. The
undersigned hereby directs that this proxy be voted as follows:
THE PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE AFOREMENTIONED NOMINEES AS
DIRECTORS, FOR THE INCREASE OF THE NUMBER OF SHARES ISSUABLE UNDER THE
COMPANY'S INCENTIVE PLAN, FOR THE INCREASE IN THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK UNDER THE COMPANY'S CERTIFICATE OF INCORPORATION AND FOR THE
APPROVAL OF THE ISSUANCE IN A PRIVATE PLACEMENT OF MORE THAN 20% OF THE ISSUED
AND OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK. A MAJORITY OF THE PROXY
AGENTS PRESENT AND ACTING IN PERSON OR BY THEIR SUBSTITUTES (OR IF ONLY ONE IS
PRESENT AND ACTING, THEN THAT ONE) MAY EXERCISE ALL THE POWERS CONFERRED
HEREBY. DISCRETIONARY AUTHORITY IS CONFERRED HEREBY AS TO CERTAIN MATTERS
DESCRIBED IN THE COMPANY'S PROXY STATEMENT.
Should the undersigned be present and choose to vote at the Meeting or at
any adjournments or postponements thereof, and after notification to the
Secretary of the Company at the Meeting of the shareholder's decision to
terminate this proxy, then the power of such attorneys or proxies shall be
deemed terminated and of no further force and effect. This proxy may also be
revoked by filing a written notice of revocation with the Secretary of the
Company or by duly executing a proxy bearing a later date.
Receipt of the Company's 1998 Annual Report to Shareholders and the Notice
of the 1999 Annual Meeting and Proxy Statement relating thereto is hereby
acknowledged.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
(Continued and to be SIGNED on Reverse Side)
<PAGE>
X Please mark your
votes as in this
example using dark ink only.
<TABLE>
<CAPTION>
FOR THE WITHHOLD AUTHORITY TO FOR AGAINST ABSTAIN
NOMINEES VOTE FOR ALL THE [ ] [ ] [ ]
LISTED BELOW NOMINEES LISTED BELOW
<S> <C> <C> <C> <C>
1. Election of [ ] [ ] The Board of Directors recommends a 2. The approval of an
Directors: vote "FOR" the election of the amendment to the
nominees listed below. Company's 1996
Equity Incentive Plan
to increase the
number of shares of
Common Stock
issuable thereunder
from 1,000,000 shares
to 3,000,000 shares.
Nominees: For the election of Michael G. Rubin, Kenneth J. Adelberg, Harvey Lamm and Jeffrey F.
Rayport to serve as directors for one-year terms.
(Instruction: To withhold authority to vote for any individual nominee, write that nominee's name in
the space provided below.
- ----------------------------------------------------------------------------------------------------
3. To approve an amendment to the Company's FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Certificate of Incorporation increasing the [ ] [ ] [ ] [ ] [ ] [ ]
number of authorized shares of Common Stock 4. To approve the
by 40,000,000 shares from 20,000,000 to issuance of approximately 30%
60,000,000 shares. of the issued and outstanding
shares of the Company's
such Common Stock to
SOFTBANK America Inc. in a
private placement.
_________________________________________________ Date: ___________________________, 1999
(Signature(s) of Shareholder(s)) (Please date this Proxy)
Please sign exactly as your name(s) appear(s) to the left. When signing as attorney, executor, administrator, trustee or guardian,
please give your full title. If shares are held jointly, each holder should sign.
</TABLE>
