<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 Section 240.14a-11(c) or Section 240.14a-12
SPORT CHALET
- --------------------------------------------------------------------------------
(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), 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:
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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):
-------------------------------------------------------------------------
(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[SPORT CHALET LOGO]
June 27, 1996
Dear Shareholder:
On behalf of your Company, I want to cordially invite you to attend the
Annual Meeting of Sport Chalet, Inc., to be held at the Pasadena Hilton Hotel,
150 S. Los Robles Avenue, Pasadena, California 91101, on Thursday, August 1,
1996 at 9:00 a.m. PDST.
The principal business of the Meeting is the election of the Company's Class
1 Director. The attached Notice of Annual Meeting and Proxy Statement fully
describes the business to be transacted.
The Directors and certain officers of the Company will be present to help
host the Meeting, respond to any questions that our shareholders may have, and
to discuss the Company's operating results and future. I therefore encourage
you to attend in order to meet your officers and Directors and to participate
in the business of the Meeting. However, if it is not possible for you to
attend, please sign, date and promptly return the enclosed proxy card
immediately to ensure that your shares will be voted.
Finally, you will find enclosed a 20% off coupon for your use at any of our
18 store locations. We encourage you to try our stores and join our ever-
growing circle of loyal customers. Please write me regarding your shopping
experiences, what you liked about our stores and any suggestions you may have
for improvement.
Sincerely,
/s/ NORBERT J. OLBERZ
Norbert J. Olberz
Chairman, Interim President and
Chief Executive Officer
<PAGE>
[SPORT CHALET LOGO]
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 1, 1996
----------------
Dear Shareholder:
The Annual Meeting of the Shareholders of Sport Chalet, Inc. will be held at
the Pasadena Hilton Hotel, 150 S. Los Robles Avenue, Pasadena, California
91101, Thursday, August 1, 1996 at 9:00 a.m., Pacific Daylight Standard Time.
A Proxy and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the following purposes:
1. To elect a Class 1 Director to serve for a three-year term expiring in
1999, or until his or her successor is elected and qualified.
2. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on June 7, 1996 as
the record date for determining shareholders entitled to notice of and to vote
at the Meeting or any adjournments thereof. For a period of at least ten days
prior to the Meeting, a complete list of shareholders entitled to vote at the
Meeting shall be open to the examination of any shareholder during ordinary
business hours at the Company's executive offices at 920 Foothill Boulevard,
La Canada, California 91011.
Information concerning the matters to be acted upon at the Meeting is set
forth in the accompanying Proxy Statement.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT IN PERSON AT THE MEETING ARE
URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. AN ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS
ENCLOSED FOR YOUR CONVENIENCE.
By order of the Board of Directors,
/s/ HOWARD K. KAMINSKY
Howard K. Kaminsky
Secretary
La Canada, California
June 27, 1996
<PAGE>
PROXY STATEMENT
---------------
SPORT CHALET, INC.
920 FOOTHILL BOULEVARD
LA CANADA, CALIFORNIA 91011
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 1, 1996
SOLICITATION AND REVOCABILITY OF PROXY
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of Sport Chalet, Inc., a Delaware corporation (the "Company"), for
use at the Annual Meeting of Shareholders to be held on August 1, 1996, or at
any adjournments thereof (the "Meeting").
Any shareholder who executes and delivers a Proxy may revoke it at any time
prior to its use upon (a) receipt by the Secretary of the Company of written
notice of such revocation; (b) receipt by the Secretary of the Company of a
duly executed Proxy bearing a later date; or (c) attending the meeting and
requesting that the Inspector of Elections return his or her Proxy prior to
the taking of any vote.
All shares represented by a Proxy in the accompanying form which is properly
signed, dated, returned and not revoked will be voted in accordance with the
instructions contained therein. Unless authority to vote for the election of
Director is withheld, Proxies will be voted for the Director proposed by the
Board. Discretionary authority is provided in the Proxy as to any matters not
specifically referred to in the Proxy. Management is not aware of any other
matters which are likely to be brought before the Meeting. However, if any
such matters properly come before the Meeting, it is understood that the Proxy
holder or holders are fully authorized to vote thereon in accordance with his
or their judgment and discretion.
The Company's Annual Report to Shareholders (the "Annual Report") for the
year ended March 31, 1996, including financial statements, is enclosed with
this Proxy Statement, which is being mailed to shareholders on or about June
27, 1996. The Annual Report does not constitute a part of this Proxy
Statement.
The cost of soliciting Proxies in the accompanying form has been, or will
be, paid by the Company. In addition, banks, brokers and other custodians,
nominees and fiduciaries will be requested to forward copies of the Proxy
material and Annual Report to their principals and to request authority for
the execution of Proxies. The Company will reimburse such persons for their
reasonable expenses in so doing.
RECORD DATE AND VOTING
The Board of Directors has fixed the close of business, 5:00 p.m., Pacific
Daylight Standard Time, on June 7, 1996, as the record date for the
determination of shareholders entitled to notice of, and to vote at, the
Meeting. As of the record date of the Meetings there were outstanding
6,500,000 shares of Common Stock. The outstanding shares of Common Stock
constitute the only outstanding voting securities of the Company entitled to
be voted at the Meeting. Each holder of Common Stock is entitled to one vote
for each share held by such person with respect to each matter to be voted on
at the Meeting. The vote of a majority of the shares cast in person or by
Proxy is required to elect the Nominee for Director.
The presence at the Meeting by person or by Proxy, of the holders of a one-
third of the outstanding Common Stock, is necessary to constitute a quorum.
Votes cast by Proxy or in person at the Meeting will be tabulated by the
Inspector of Elections appointed for the Meeting to determine whether or not a
quorum is present. The Inspector of Elections will treat abstentions as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum, but as unvoted for purpose of determining the approval of
1
<PAGE>
any matter submitted to the shareholders for a vote. If a broker indicates on
the Proxy that it does not have discretionary authority as to certain shares
to vote on a particular matter, those shares will not be considered as present
and entitled to vote with respect to that matter.
As of the June 7, 1996 record date, Norbert J. Olberz, Chairman of the Board
and Interim President and Chief Executive Officer, owns approximately 72% of
the Company's outstanding Common Stock. As a result, Mr. Olberz, as the
Company's Principal Shareholder ("Principal Shareholder"), has sufficient
voting power to determine the outcome of any matters submitted to the
Company's shareholders for approval. Thus, the Principal Shareholder has
sufficient voting power to elect the Nominee proposed by the Board of
Directors and he will vote his shares in favor of the election of such
Nominee. In that event, the other shareholders will be unable to elect any
other Director.
ELECTION OF DIRECTORS
NOMINEE
The Amended and Restated Certificate of Incorporation of the Company
provides that the members of the Company's Board of Directors shall be
classified into three classes, as nearly equal in number as possible, each of
which is to serve three years, with one class being elected each year. The
term of the sole Class 1 Director expires with this Meeting.
Each shareholder is entitled to one vote per share held as of the record
date. Shareholders will not be allowed to cumulate their votes in the election
of Directors.
The Board of Directors has nominated Eric S. Olberz for election of the sole
Class 1 Director at this Meeting to serve for three-year terms expiring at the
annual meeting in 1999 or until his successor is elected and qualified. Mr.
Olberz is currently serving as Director and has consented to serve for a new
term.
The persons named in the enclosed form of Proxy, unless otherwise directed
therein, intend to vote such Proxy for the election of Eric S. Olberz as
Director for the term specified. The Proxies may also be voted for a
substitute nominee in the event Eric S. Olberz shall be unable to serve for
any reason or be withdrawn from nomination, a contingency not now anticipated.
2
<PAGE>
The following table, together with its footnotes, presents information
regarding the age, occupation, business experience furnished by Mr. Olberz.
TABLE 1
CERTAIN INFORMATION REGARDING NOMINEE DIRECTOR
<TABLE>
<CAPTION>
TERM TO DIRECTOR
DIRECTOR'S NAME AGE(1) EXPIRE(1) CLASS OCCUPATION/BACKGROUND(2)
--------------- ------ --------- -------- ------------------------
<S> <C> <C> <C> <C>
Eric S. Olberz.......... 33 1996 1 Director since 1992. Mr. Olberz is the
President and owner of Camp 7, Inc., a
soft goods manufacturing operation lo-
cated in Santa Ana, California and the
son of Norbert J. Olberz, the Principal
Shareholder. He was Vice Chairman of the
Company from October 1994 to July 1995,
Vice President from 1984 through October
1994 and Secretary from October 1992 to
July 1995. Mr. Olberz resigned as an of-
ficer and employee concurrently with
Camp 7, Inc.'s acquisition of the
Company's soft goods manufacturing oper-
ations in July 1995.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION AS DIRECTOR, THE NOMINEE LISTED ABOVE.
- --------
(1)Fiscal year during which term expires.
(2)Based on information provided to the Company by Director Eric S. Olberz.
3
<PAGE>
OTHER DIRECTORS
The following persons will continue to serve as Directors of the Company
after the Meeting until their terms of office expire (as indicated below) or
until they resign or their successors are elected and qualified:
TABLE 2
CERTAIN INFORMATION REGARDING DIRECTOR NON-NOMINEES
<TABLE>
<CAPTION>
DIRECTOR'S TERM TO DIRECTOR POSITIONS WITH THE COMPANY
NAME AGE(1) EXPIRE(1) CLASS AND PRINCIPAL OCCUPATION(2)
---------- ------ --------- -------- ---------------------------
<S> <C> <C> <C> <C>
Norbert J. Olberz....... 71 1998 3 The Company's founder and Chairman of
the Board since it was founded in 1959
and Interim President and Chief
Executive Officer since April 3, 1995.
Kenneth Olsen........... 78 1998 3 Mr. Olsen has been a Director of the
Company since June 1994. He has also
served as President and Chief Executive
Officer of the Vons Company, Inc., a
leading grocery store chain, from 1974
to 1983, at which time he retired from
full-time responsibilities after thirty-
eight years with that company. Mr. Olsen
currently serves as a director of
several nonprofit organizations and was
a trustee of Loyola Marymount
University.
John R. Attwood......... 66 1997 2 Director since February 1993. Mr.
Attwood is the President of Attwood
Enterprises, a consulting business. He
was the former Chairman of Coca-Cola
Bottling of Los Angeles and Senior Vice
President and a Group President at
Beatrice Companies, Inc., the parent
company of Coca-Cola Bottling of Los
Angeles until his retirement in 1986.
Mr. Attwood currently serves on the
board of directors of WB Bottling Corp.
and Verdugo Hills Hospital, a non-profit
hospital organization.
</TABLE>
- --------
(1) Fiscal year during which term expires.
(2) Based on information provided to the Company by each Director.
CHANGES IN DIRECTORS AND CERTAIN KEY EMPLOYEES DURING FISCAL 1996
On April 3, 1995, Joseph H. Coulombe resigned as Interim President and Chief
Executive Officer and Director of the Company and Chairman Olberz was then
appointed to the position of Interim President and Chief Executive Officer.
During the Board's continuing evaluation of the Company's strategic policies,
operations and management, the Board will consider whether and/or when to
initiate search activities for a new President and/or Chief Operating Officer.
The Board of Directors currently does not contemplate appointing a new Class 2
Director to fill the vacancy created by Mr. Coulombe's resignation.
On July 5, 1995 Eric S. Olberz agreed to resign his positions as Vice
Chairman and Secretary concurrently with the acquisition of the Company's soft
goods manufacturing operations by Camp 7, Inc., a California corporation under
the control of Eric S. Olberz. A description of this transaction is provided
below under the section captioned "Certain Transactions." Upon consummation of
this transaction, Mr. Olberz began to serve the Company solely in his capacity
as a non-employee Director.
4
<PAGE>
On November 29, 1995, Elizabeth A. Sanders resigned as a Class 1 Director.
The Board of Directors currently does not contemplate appointing a new Class 1
Director to fill the vacancy created by Ms. Sanders' resignation. On March 6,
1996, Kim D. Robbins resigned as the Company's Senior Vice President--
Merchandising. Many of Ms. Robbins' responsibilities have been outsourced to
an independent consulting firm.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board met six times during the last fiscal year. The Board's Audit and
Compensation Committees, each currently comprised of non-employee Directors
Attwood and Olsen both met six times, respectively, during the fiscal year
ending March 31, 1996. No Director attended less than 75% of the Board and
Committee meetings, as appropriate. The Directors also met informally with the
Company's management during the last fiscal year. Subject to his reelection as
Class 1 Director at the Meeting, the Board intends to appoint Eric S. Olberz
as an additional member of both Committees, effective August 1, 1996.
The Audit Committee, among other things, nominates the independent auditors,
reviews the financial statements and the report of independent auditors, and
reviews the scope and results of the Company's accounting practices and
internal accounting procedures. The Compensation Committee is responsible for
reviewing and recommending to the full Board of Directors the material terms
for executive officer employment and severance contracts and annual
compensation levels for executive officers not otherwise set by contract,
administering the Company's 1992 Incentive Award Plan (the "1992 Plan"),
establishing and periodically reviewing the Company's policies regarding non-
officer employee compensation and benefit policies and other matters related
to compensation and evaluation of Company personnel.
COMPENSATION OF DIRECTORS
A. Cash Compensation. Directors who are employees of the Company are
compensated as officers of the Company and receive no separate compensation
for serving as Directors. Directors receive a $15,000 annual retainer for
attending or participating in up to six formal Board and/or Committee meetings
during the fiscal year plus an additional $2,500 for each additional day they
attend or participate in formal Board and/or Committee meeting(s) and $500 for
each day that they attend or participate in an informal meeting with the
Company's management. Directors also receive reimbursement of expenses in
attending meetings. For the fiscal year ended March 31, 1996, each non-
employee Director received as a Director, the following cash compensation:
<TABLE>
<CAPTION>
DIRECTOR FEES PAID
-------- ---------
<S> <C>
John R. Attwood.................... $17,500
Kenneth Olsen...................... 18,000
Eric S. Olberz(1).................. 11,000
Elizabeth A. Sanders(2)............ 10,000
</TABLE>
- --------
(1) Eric S. Olberz resigned as a employee and officer of the Company in July
1995
(2) Elizabeth A. Sanders resigned as a Director in November 1995
In addition, Directors Attwood and Olsen have and will continue to advise
the Company regarding various areas in which they have significant
professional experience. These advisory services are in addition to the
services performed as Directors and, accordingly, each Director performing
advisory services will be entitled to additional compensation in an amount to
be negotiated from time to time by such Director and the Company and approved
by a majority of the disinterested Directors in conformity with the Company's
policies on conflicts of interest. For the fiscal year ended March 31, 1996,
Directors Attwood and Olsen did not receive compensation for services provided
as a consultant.
B. Directors' Stock Option Plan. Under the 1992 Plan, which is described in
detail later in this Proxy Statement, each non-employee Director is granted
automatically upon becoming a Director, Automatic Option
5
<PAGE>
Grants ("AOGs") to purchase 3,000 shares of Common Stock at the fair market
value on the grant date. On each triennial date on which a non-employee
Director is reelected to the Board, AOGs for an additional 3,000 shares will
be automatically granted to the Director subject to an aggregate limit for any
one non-employee Director of options to acquire a total of 9,000 shares. All
AOGs are exercisable one-third upon grant and one-third on each of the first
and second anniversaries of the date of initial grant and all expire five
years from the date of grant. In accordance with the terms of the 1992 Plan,
Directors Attwood and Olsen each have been granted 6,000 AOGs. Former Director
Sanders previously had been granted 6,000 AOGs, all which were forfeited
following her resignation as a Director in November 1995.
C. Tax Indemnity Agreement. In November 1992, the Company entered into a Tax
Indemnity Agreement with the Principal Shareholder. That agreement provides,
among other things, for the indemnification of the Principal Shareholder
against any losses or liabilities with respect to any additional taxes
(including interest, penalties and legal fees) arising out of the Company's
operations during the periods in which the Company had elected S Corporation
status prior to the Company's initial public stock offering on November 19,
1992. As of the date of this Proxy Statement, the Company is unaware of any
such liability.
EXECUTIVE OFFICERS
The following persons are currently key executive officers of the Company
who are not identified in the Sections captioned "Election of Directors--
Nominees" or "Other Directors" and are "Named Officers" for purposes of the
Summary Compensation Table set forth below.
TABLE 3
CERTAIN INFORMATION REGARDING KEY OFFICERS
<TABLE>
<CAPTION>
KEY OFFICER'S NAME AGE POSITION WITH THE COMPANY AND BACKGROUND
------------------ --- ----------------------------------------
<S> <C> <C>
Dennis D. Trausch.......... 46 Executive Vice President since June 1988. Since
joining the Company in 1976, Mr. Trausch has
served in various positions within the Company.
He currently is responsible for all store
operations and leasing.
Howard K. Kaminsky......... 38 Chief Financial Officer since joining the
Company in 1985, Treasurer since October 1992
and Secretary since July 1995. Prior to joining
the Company, Mr. Kaminsky was employed in the
auditing division of Ernst & Young LLP. He is a
Certified Public Accountant and received his
Bachelor of Science degree in Business
Administration from California State University,
Northridge.
Robert W. Haueter.......... 44 Vice President--Marketing since 1989. Mr.
Haueter spent the previous ten years as a senior
aide in the California legislature. During this
period, he coordinated marketing and strategy
for a number of political campaigns.
</TABLE>
6
<PAGE>
OWNERSHIP OF SHARES BY CERTAIN BENEFICIAL OWNERS
The following table, with footnotes, reflects the Company's best knowledge
based on information filed with the Securities and Exchange Commission (the
"Commission") and information provided directly by the persons named below, of
certain information as of June 7, 1996 regarding the amount of Common Stock
beneficially owned by each Director and Director Nominee of the Company, each
executive officer that is a "Named Officer" (see "Executive Compensation--
Compensation Tables"), all such Directors and executive officers as a group
and by each holder of more than five percent of the outstanding shares of the
Company's Common Stock. All shares shown in the table reflect sole voting and
investment power.
TABLE 4
BENEFICIAL OWNERSHIP OF COMMON STOCK
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER POSITION WITH COMPANY OWNED OF CLASS
------------------- --------------------- ------------ --------
<S> <C> <C> <C>
Norbert J. Olberz............. Chairman of the Board and 4,660,979 72%
920 Foothill Boulevard Interim President and
La Canada, California 91011 Chief Executive Officer
John R. Attwood............... Director 7,000(1) *
200 West Glenoaks Boulevard
Glendale, California 91202
Eric S. Olberz................ Director 267,666(2) 4%
920 Foothill Boulevard
La Canada, California 91011
Kenneth Olsen................. Director 8,000(3) *
920 Foothill Boulevard
La Canada, California 91011
Dennis D. Trausch............. Executive Vice President 1,486(4) *
920 Foothill Boulevard
La Canada, California 91011
Howard K. Kaminsky............ Chief Financial Officer, 3,623(4) *
920 Foothill Boulevard Treasurer and Secretary
La Canada, California 91011
Robert W. Haueter............. Vice President--Marketing 3,307(5) *
920 Foothill Boulevard
La Canada, California 91011
Joseph H. Coulombe............ Former Interim President -0- 0%
c/o Sport Chalet, Inc. and Chief Executive
920 Foothill Boulevard Officer and Director
La Canada, California 91011
Kim D. Robbins................ Former Vice President-- -0- 0%
c/o Sport Chalet, Inc. Merchandising
920 Foothill Boulevard
La Canada, California 91011
All Directors and executive -- 4,952,061 76%
officers as a group
(9 persons)..................
</TABLE>
- --------
*Represents less than one percent
(1) Includes vested AOGs to purchase 5,000 shares of Common Stock and does not
include non-vested AOGs granted to Director Attwood to purchase 1,000
shares of Common Stock.
(2) Includes vested AOGs to purchase 1,000 shares of Common Stock and does not
include non-vested AOGs granted to Director Olberz to purchase 2,000
shares of Common Stock.
(3) Includes vested AOGs, to purchase 3,000 shares of Common Stock and does
not include non-vested AOGs granted to Director Olsen to purchase 3,000
shares of Common Stock.
(4) Does not include nonvested options granted to Named Officer to purchase
72,000 shares of Common Stock.
(5) Does not include nonvested options granted to Named Officer to purchase
60,000 shares of Common Stock.
7
<PAGE>
EMPLOYMENT AGREEMENTS AND TERMINATION ARRANGEMENTS
The Company traditionally has not entered into formal employment or
severance contracts with its executive officers. The Company recently departed
from this policy by entering into formal employment contracts with Mr.
Coulombe and Ms. Kim D. Robbins and Severance and General Release Agreements
with Ms. Robbins and Director Eric S. Olberz. A general description of the
material terms and conditions of each contract follows:
A. EMPLOYMENT CONTRACT FOR JOSEPH H. COULOMBE.
Mr. Coulombe was to receive an annual $180,000 salary and certain benefits
customarily provided to the Company's executive officers, including, without
limitation, vacation pay, sick leave, and reimbursement of certain business
expenses, and a limited entertainment fund. Upon his resignation on April 3,
1995, Mr. Coulombe received $18,863 in severance in accordance with the terms
of his employment contract representing an amount equal to $15,000 per month
from February 1, 1995 through March 31, 1995 less the $11,137 salary actually
paid and payable to Mr. Coulombe prior to his resignation.
B. EMPLOYMENT CONTRACT AND SEVERANCE AND GENERAL RELEASE AGREEMENT FOR KIM
D. ROBBINS.
Ms. Robbins' employment contract commenced effective March 6, 1995. She was
appointed to the newly created position of Senior Vice President--
Merchandising for an initial twelve (12) month term. Ms. Robbins received a
$150,000 annual salary, fringe benefits typically provided to other Company
executive officers and non-qualified stock options for 25,000 shares of Common
Stock. The Company did not renew Ms. Robbins' employment contract and instead
entered into a Severance and General Release Agreement pursuant to which Ms.
Robbins resigned her position with the Company effective March 6, 1996. Under
the severance agreement, Ms. Robbins received (i) severance payments in the
amount of $37,500 payable (net of tax withholding and other deductions) in
monthly installments over a three month period and (ii) continued health care
insurance benefits through June 30, 1996. Ms. Robbins is not eligible for any
bonus for the fiscal year ended March 31, 1996 and she forfeited her Non-
Qualified Stock Options for 25,000 shares of Common Stock.
C. SEVERANCE AND GENERAL RELEASE AGREEMENT WITH ERIC S. OLBERZ
In connection with his resignation on July 5, 1995 as Vice Chairman and
Secretary and as an employee of the Company, Eric S. Olberz entered into a
Severance and General Release Agreement. Mr. Olberz received $50,000 severance
payable (net of tax withholding and other deductions) in monthly installments
over a seven-month period and certain health insurance benefits for six months
following his resignation. In addition, Mr. Olberz was deemed to have
exercised his Performance Awards for which he received $37,867 in
compensation. Mr. Olberz was not eligible for any bonus for the fiscal year
ended March 31, 1996 and he forfeited his Non-Qualified Stock Options for
60,000 shares of Common Stock.
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Compensation Committee Report on executive compensation is set forth in
the following section below. As previously mentioned, the Compensation
Committee currently is comprised of two non-employee Directors of the Company,
Directors Attwood and Olsen. None of these Directors is a former officer or
employee of the Company or any of its subsidiaries or affiliates.
The Compensation Committee makes recommendations to and reviews in detail
aspects of executive compensation with the full Board of Directors, which has
the ultimate responsibility for all compensation decisions. During fiscal year
ended March 31, 1996, the Principal Shareholder, Eric S. Olberz, former Vice
Chairman and Secretary, and Joseph H. Coulombe, former Interim President and
Chief Executive Officer, served on the Board of Directors.
8
<PAGE>
COMPENSATION COMMITTEE REPORT OF THE BOARD OF DIRECTORS
The Compensation Committee has provided the following report on executive
compensation.
A. COMPENSATION POLICY AND EXECUTIVE COMPENSATION
This Compensation Committee of the Board of Directors (the "Committee") is
responsible for reviewing and making recommendations as to the annual
compensation of the Company's executive officers, including such components as
annual cash compensation, short and long term incentives, and supplemental
benefits.
The Company's compensation policy is based on linking executive compensation
to the Company's objectives of growth through increased earnings and
maximizing long-term shareholder value. This policy traditionally has been
carried out through a compensation program consisting of salaries and short
and long term incentives. The Committee monitors compensation levels for
comparable retail companies and evaluates annual compensation on the basis of
these compensation trends and the performance of the Company in order to
determine whether adjustments to base salaries and bonuses, or both, are
appropriate.
The Company traditionally has not had formal employment agreements with any
of its executive officers, but recently departed from this practice by
entering into formal contracts with Ms. Robbins and Mr. Coulombe. In addition,
the Company's recent practice has been to enter into formal severance
agreements with departing executives. See the discussion above under the
section captioned "Employment Agreements and Termination Arrangements." The
various elements of the Company's overall compensation program are more fully
discussed below.
B. ANNUAL SALARY AND BONUS
Annual compensation for Messrs. Trausch, Kaminsky, and Haueter and Eric S.
Olberz prior to his resignation as Vice Chairman and Secretary (collectively,
the "Executive Management Group") consists of a base salary and an annual
bonus. During the fiscal year ended March 31, 1996, the annual base salaries
for Messrs. Trausch, Kaminsky and Haueter, respectively, were $145,000,
$135,000, and $120,000. The annual base salary for Eric S. Olberz prior to his
resignation was $93,000. In view of the Company's disappointing operating
results during fiscal 1996 and resulting employee lay-offs, Messrs. Trausch,
Kaminsky and Haueter and Chairman Norbert J. Olberz agreed to accept a
temporary salary reduction of 10% during the quarter ending March 31, 1996.
The Company's policy is to pay bonuses to its Executive Management Group
based on a percentage of the Company's net income before taxes and accruals
for bonuses. Since the Company incurred a net loss during Fiscal 1996, no
bonuses were paid for this period. The summary of the base salary and bonuses
paid to the Named Officers during the last three years is set forth in the
Summary Compensation Table (Table 5).
The base salaries for the Executive Management Group, as compared with the
base salary for similar executives surveyed, traditionally has been
significantly below the surveyed market average. This result reflects the
Committee's philosophy that a significant portion of the overall annual
compensation package provided to the Executive Management Group be based on a
bonus program reflecting the Company's earnings performance during the
referenced period.
While a significant portion of the overall annual compensation package will
continue to be based on a bonus program tied to the Company's earnings
performance, starting in fiscal 1996, a greater proportion of overall
compensation will now be derived from the executives' base salary. This
adjustment conformed the Company's executive compensation policy more closely
with existing market practices and provides a more stable compensation level.
The Committee believes the base salaries will now be sufficiently competitive
to allow the Company to attract and retain well-qualified executives. Past
survey results support the Committee's conclusion that while executive base
salaries are still below the competitive market, if the Company performs to
profit levels similar to periods prior to Fiscal 1994, the Executive
Management Group's total compensation under this program will increase to
again fall within an acceptable range of industry averages for the defined
labor market.
9
<PAGE>
C. LONGER-TERM COMPENSATION
Longer-term compensation awards are provided by the Company's 1992 Plan
which provides for stock options and other forms of incentives. Under the 1992
Plan, certain key employees had been granted Performance Awards ("PAs"). Each
PA entitled the holder on exercise to the cash equivalent of 0.11% times the
difference between three times the book value of the Company on the grant date
excluding any increase attributable to the initial public offering in December
1992 or any subsequent equity offering. All outstanding PAs held by the
Executive Management Group were exercised during the 1996 fiscal year,
resulting in a payout to Messrs. Trausch, Kaminsky, and Haueter and Eric S.
Olberz, respectively, of $37,041, $61,461, $11,797 and $37,867. The Committee
acknowledges that PAs provided incentives to achieve long-term earnings growth
since their overall value was measured on a cumulative basis, but prefers to
utilize stock options to provide this incentive in the future.
The Company has also granted non-qualified stock options ("NQSOs") on shares
of Common Stock to certain employees, including senior executives, under the
1992 Plan. In November, 1992, Messrs. Trausch, Kaminsky and Haueter, and Eric
S. Olberz respectively, received NQSOs for 72,000, 72,000, 48,000 and 60,000
shares, exercisable at the Company's $9 1/4 initial public offering price in
November 1992 and vested at a rate of 20% per year over five years. The NQSOs
held by Eric S. Olberz were forfeited following his resignation in July 1995.
While the Committee believes that it is important that all options be
granted at fair market value so that the interests of the executives receiving
options are as closely aligned to the Company's shareholders as possible, the
Committee recognized that the benefit of the NQSOs granted in November 1992 as
an effective means to retain key employees during the vesting period had
dissipated (1) because the Company's stock price was trading substantially
below the $9 1/4 exercise price and (2) the related vesting periods would soon
expire. Accordingly, effective March 1, 1996, the Compensation Committee
recommended, and the Board of Directors approved, a stock option exchange
pursuant to which all officers of the Company still holding NQSOs under the
1992 Plan (except Kim D. Robbins) were given an election to exchange all their
outstanding NQSOs ("Cancelled Options") for the grant of new NQSOs ("New
Options"), under the following terms:
(i) Exercise Price: The per share exercise price equals the Company's
closing stock price for its Common Stock in the National Market System
as reported by the NASDAQ on March 1, 1996, or $2 3/8 per share.
(ii) Number of Shares: The number of shares of Common Stock covered by the
New Options equal the number of shares covered by the Cancelled
Options. In addition, Robert W. Haueter was granted NQSOs for an
additional 12,000 shares of Common Stock in consideration of his
position and longevity with the Company and the number of NQSOs
granted to other members of the executive officer team.
(iii) Vesting Schedule and Term: The period over which the New Options
become exercisable or "vest", is the same as the vesting period of
the Cancelled Options (i.e., 20% per year over 5 years) with a ten
year term, both the vesting period and term to commence March 1,
1996.
10
<PAGE>
The following table shows as to Named Officers as a group, and current
officers as a group, (i) the number of shares and (ii) exercise prices covered
by the Cancelled Options and New Options granted:
<TABLE>
<CAPTION>
OPTIONS CANCELLED NEW OPTIONS GRANTED
ON 3/1/96 ON 3/1/96
------------------------------- --------------------------
NAME OF INDIVIDUAL, PER SHARE
GROUP AND NUMBER OF NUMBER OF SHARES PER SHARE NUMBER OF SHARES EXERCISE
PERSONS IN GROUP OF COMMON STOCK EXERCISE PRICE OF COMMON STOCK PRICE
------------------- ---------------- -------------- ---------------- ---------
<S> <C> <C> <C> <C>
Dennis D. Trausch....... 72,000 $9.25 72,000 $2 3/8
Howard K. Kaminsky...... 72,000 $9.25 72,000 $2 3/8
Robert W. Haueter....... 48,000 $9.25 60,000 $2 3/8
Named Officers as a
group (3 persons,
including the above)... 192,000 $9.25 204,000 $2 3/8
All other officers
except Named Officers
(1 person)............. 18,000 $9.25 18,000 $2 3/8
</TABLE>
More specific information on option grants is shown in Tables 7, 8 and 9 below
of this Proxy Statement.
The Committee has concluded that it is inappropriate at this time to offer
its key executives supplemental benefit programs. Instead, the focus will
remain on a short-term and long-term incentive based program in order to
achieve the Company's objectives of a greater earnings capacity and long-term
growth in share value. The Compensation Committee will continue to review the
Company's overall executive compensation program periodically and, if
appropriate, adjust existing compensation levels or policies in order to meet
market demands or changing corporate objectives.
D. COMPENSATION OF KIM D. ROBBINS
Ms. Robbins' compensation was determined through negotiations between Ms.
Robbins and the Committee. Her formal employment contract provided for a
$150,000 annual base salary and non-qualified stock options for 25,000 shares
of Common Stock. In establishing a base salary for Ms. Robbins, the Committee
considered her past salary history and successful track record at a major
department-store retailer, salary levels provided to similarly-situated retail
executives and the relatively small number of NQSOs granted to Ms. Robbins.
The Committee anticipates that in the future the Company will not enter into
formal employment contracts with executive officers (other than possibly Chief
Executive or Chief Operating Officers) and that the compensation provided to
new executive officers will be based on the criteria established for
compensation of the Executive Management Group in order to promote a team
approach.
E. CHIEF EXECUTIVE OFFICER COMPENSATION
The terms of the employment agreement with Joseph H. Coulombe were
determined through negotiation between Mr. Coulombe and the Committee and
included salary of $180,000 per annum which the Committee believes was
appropriate given Mr. Coulombe's previous retailing background, his prior
experience with the Company and the interim nature of his assignment. The
Agreement also provided Mr. Coulombe, upon termination in April 1995, with
$18,863 in severance, based on the difference between $15,000 for each month
of service provided and the salary paid prior to his resignation.
On April 3, 1995, the Board of Directors appointed Chairman Olberz to act as
Interim President and Chief Executive Officer to succeed Mr. Coulombe.
Chairman Olberz declined to accept any additional salary as a result of his
appointments, but will participate in the executive bonus program during the
periods in which he is employed in these additional management capacities. The
Committee believes that the $250,000 base salary paid to Mr. Olberz as
Chairman is reasonable when compared to the comparable companies whose
chairmen are actively involved in day to day operations and that his
participation in the executive bonus program appropriately exemplifies the
Company's pay-for-performance philosophy, since the value of this element of
his compensation package will be determined by the Company's profitability
during the period he serves as the Company's
11
<PAGE>
President and Chief Executive Officer. However, Chairman Olberz has not been
provided with any longer-term incentives, because, in the Committee's view,
his significant stock holdings in the Company already provide sufficient
motivation for him to achieve long-term profitability and maximum shareholder
value.
Because the Company incurred an operating loss during fiscal 1996, Chairman
Olberz accepted a temporary salary reduction, received no bonus payments and
suffered a diminution to the value of his significant stock holdings.
F. TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Internal Revenue Code of 1986 was amended in 1993 in order to limit the
deductibility for federal income tax purposes of non-performance based
compensation in excess of $1,000,000 provided to certain executive officers.
As the Company's current compensation structure does not provide for or
contemplate annual compensation to any executive in excess of the $1,000,000
threshold, the limitations placed on tax deductions will be inapplicable to
the Company in the foreseeable future.
COMPENSATION COMMITTEE
JOHN R. ATTWOOD
KENNETH OLSEN
June 27, 1996
INCENTIVE COMPENSATION PLANS
On April 1, 1990, the Board of Directors of the Company adopted a Stock
Appreciation Rights Plan (the "1990 Plan") authorizing the grant of Stock
Appreciation Rights ("SARs") to key Company employees. These SARs entitled the
holder upon exercise to receive cash in an amount equal to 0.11% of three
times the increase in aggregate book value of the Company from the grant date.
The purpose of the 1990 Plan was to provide an incentive to key employees in
a position to contribute to the successful operations of the Company by
linking a portion of such employees' compensation directly to the increase in
the Company's aggregate book value through the issuance of the SARs. In
October 1992, the Board adopted the 1992 Plan which authorized the granting of
certain incentive awards including new SARs, NQSOs, incentive stock options
("ISOs"), AOGs to non-employee Directors, restricted stock, dividend
equivalents, and PAs. Pursuant to the terms of the 1992 Plan, the SARs granted
under the 1990 Plan were converted to PAs at a conversion price established
under the 1992 Plan and the 1990 Plan was terminated.
As noted previously, each PA granted in the conversion entitled the holder
on exercise to the cash equivalent of 0.0011 times the difference between
three times the book value of the Company on the grant date of the original
SAR and three times the book value on the date of exercise, excluding such
increase as is attributable to the offering or any subsequent equity offering,
and will otherwise be subject to the same terms and conditions as the original
SAR it replaces. Prior to Fiscal 1993, 22 SARs had been issued to certain
executives under the 1990 Plan. In Fiscal 1993, these SARs were converted into
22 PAs including three, five, one and three PAs to Messrs. Trausch, Kaminsky
and Haueter and Eric S. Olberz, respectively all of which were exercised
during Fiscal 1996 resulting in payments to Messrs. Trausch, Kaminsky, and
Haueter, respectively, of $37,041, $61,461 and $11,797. In connection with Mr.
Olberz's Severance and General Release Agreement (see, "Employment Agreements
and Termination Arrangements" above), Eric S. Olberz was deemed to have
exercised his three (3) PAs for a total distribution of $37,867.
A total of 600,000 shares of Common Stock have been authorized and reserved
for stock options to be granted under the 1992 Plan. The 1992 Plan provides
for the grant of ISOs as defined in Section 422 of the Internal Revenue Code
of 1986, as amended, to employees of the Company. The 1992 Plan also provides
for the
12
<PAGE>
grant of NQSOs to the Company's officers, employees or consultants thereof. An
ISO may have certain tax advantages for the optionee as compared to a NQSO.
The exercise price of the ISOs may not be less than 100% of the fair market
value of the Company's Common Stock on the date of grant or 110% of such fair
market value in the case of holders of more than 10% of the Company's Common
Stock. The exercise price of the NQSOs may not be less than 100% of the fair
market value of the Company's Common Stock on the date of grant. Shares
subject to an option granted under the 1992 Plan may be purchased for cash
and/or its equivalent, including shares of Common Stock. The ISOs and NQSOs
expire ten years after the date of grant, with the exception of ISOs held by a
holder of 10% or more of the outstanding Common Stock, which expire five years
after the date of grant.
The Company granted NQSOs covering 378,000 shares of Common Stock under the
1992 Plan to certain employees immediately prior to the Company's initial
public offering in November 1992. Of this amount, NQSOs for 72,000, 72,000,
48,000 and 60,000 shares, respectively, were granted to Messrs. Trausch,
Kaminsky, and Haueter and Eric S. Olberz. These NQSOs were exercisable at the
Company's initial public offering price of $9.25 and vested at a rate of 20%
per year over five years. As noted previously in the Compensation Committee
Report, the Board of Directors authorized the issuance on March 1, 1996 of
NQSOs to certain of the Company's officers and these officers, including
Messrs. Trausch, Kaminsky and Haueter, agreed to terminate the existing NQSOs
that they had received prior to the Company's initial public offering in
March, 1996. Mr. Haueter also received NQSOs for 12,000 additional shares of
Common Stock. In addition, Ms. Robbins received in May 1995 NQSOs for 25,000
shares of Common Stock in accordance with the terms of her employment
contract, which were forfeited following her resignation from the Company.
NQSOs covering 222,000 shares of Common Stock remain outstanding as of the
date of this Proxy Statement. See Tables 7, 8 and 9 of this Proxy Statement.
Under the 1992 Plan, a total of 30,000 shares of Common Stock have been
reserved for grant of AOGs to non-employee Directors of the Company. AOGs
granted to Board of Directors members are discussed herein under the Section
captioned "Compensation of Directors."
13
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth, for the 1996, 1995, and 1994 fiscal years,
the cash compensation paid or accrued by the Company, as well as other
compensation paid or accrued for such year, as to the Company's Chief
Executive Officers during this period, Norbert J. Olberz and Joseph H.
Coulombe, and to each of the other key executive officers (collectively "Named
Officers") for which disclosure is required.
TABLE 5
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------- -----------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR ($) SALARY ($) BONUS(1) (#) OPTIONS/SARS(2) COMPENSATION(3)
- --------------------------- ----------- ---------- ------------ ------------------- ---------------
<S> <C> <C> <C> <C> <C>
Norbert J. Olberz, 1996 243,750 -0- -0- -0-
Chairman of the Board, 1995 250,000 -0- -0- -0-
Interim President and 1994 250,000 -0- -0- -0-
Chief Executive
Officer(4)
Joseph H. Coulombe, 1996 18,863(5) -0- -0- -0-
Former Interim 1995 11,137(5) -0- -0- -0-
President and Chief
Executive Officer
Dennis D. Trausch 1996 141,375 -0- 72,000 37,041
Executive Vice 1995 93,500 12,400 -0- -0-
President 1994 93,500 400 -0- -0-
Howard K. Kaminsky, 1996 131,625 -0- 72,000 61,461
Chief Financial 1995 80,400 12,400 -0- -0-
Officer, Treasurer and 1994 80,400 400 -0- -0-
Secretary
Robert W. Haueter, Vice 1996 117,000 -0- 60,000 11,797
President-- Marketing 1995 70,800 12,400 -0- -0-
1994 70,800 400 -0- -0-
Eric S. Olberz, Director 1996 73,250(6) -0- 3,000 37,867
and Former Vice 1995 76,350 12,400 -0- -0-
Chairman and Secretary 1994 70,800 10,999(7) -0- -0-
Kim D. Robbins, Former 1996 137,500(8) -0- 25,000 -0-
Senior Vice President-- 1995 12,500 -0- -0- -0-
Merchandising
</TABLE>
- --------
(1) All named executive officers besides Norbert J. Olberz (and Mr. Coulombe
and Eric S. Olberz and Kim D. Robbins during Fiscal 1996) were entitled to
receive bonuses based on the Company's net income for the fiscal year.
(2) Other than 3,000 AOGs issued to Eric S. Olberz, represents NQSOs issued to
key executive officers during fiscal 1996. See the discussion above under
the heading "Incentive Compensation Plans."
(3) Represents payments to Messrs. Trausch, Kaminsky and Haueter and Eric S.
Olberz upon exercise of their respective PAs of $37,041, $61,461, $11,797
and $37,867, respectively.
(4) The Board of Directors established Norbert J. Olberz' annual salary at
$250,000 effective as of October 1, 1992.
(5) Mr. Coulombe commenced employment with the Company effective February 1,
1995 and resigned on April 3, 1995. The amounts shown during Fiscal 1995
was salary paid to him between February 1, 1995 and March 31, 1995. Mr.
Coulombe received $18,863 in severance payments during Fiscal 1996. See
the discussion following the caption "Changes in Directors and Certain Key
Employees" above.
(6) Mr. Olberz relinquished his positions as Vice Chairman and Secretary on
July 5, 1995. The amount as shown includes $50,000 in severance payment.
See the discussion following the caption "Changes in Directors and Certain
Key Employees" above.
(7) Includes a $10,599 bonus attributable to the Company's soft goods
manufacturing operations in Fiscal 1994.
(8) Ms. Robbins resigned as Senior Vice President--Merchandising effective
March 7, 1996. Ms. Robbins shall receive $37,500 in severance payments
during Fiscal 1997 which are not included in the table above. See the
discussion following the caption "Changes in Directors and Certain Key
Employees" above.
14
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of the Company's total return to
shareholders from November 19, 1992, the date on which the Company's Common
Stock was first registered under the Securities Exchange Act of 1934, to March
31, 1996, as compared to total return for the MG Industry Group 529 Index and
the NASDAQ Market Index for the same period. This comparison assumes $100.00
was invested on November 19, 1992 in the Company's Common Stock under both
indexes.
TABLE 6
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SPORT CHALET, INC., PEER GROUP AND NASDAQ MARKET INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
NASDAQ
Measurement Period SPORT MARKET
(Fiscal Year Covered) CHALET, INC. PEER GROUP INDEX
- --------------------- ----------- ---------- ------
<S> <C> <C> <C>
Measurement Pt- 11/19/92 $100.00 $100.00 $100.00
FYE 3/31/93 $ 74.67 $101.36 $108.54
FYE 3/31/94 $ 48.00 $108.43 $125.40
FYE 3/31/95 $ 42.67 $111.42 $132.12
FYE 3/31/96 $ 24.00 $161.69 $179.00
</TABLE>
- --------
(1)Peer Group chosen was Media General Industry Group 529--Other Importers,
Wholesalers and Retailers.
15
<PAGE>
OPTION GRANTED IN FISCAL 1996
The following sets forth certain information concerning the grant of stock
options under the 1992 Plan to the Named Officers during Fiscal 1996. No other
stock options were granted to such Named Officers during this period.
TABLE 7
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------------------- ------------------
% OF TOTAL
OPTIONS
GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL 1996(2) ($/SH)(3) DATE 5%(4) 10%(4)
- ---- -------------- -------------- -------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Norbert J. Olberz....... -0- N/A N/A N/A N/A N/A
Joseph H. Coulombe...... -0- N/A N/A N/A N/A N/A
Dennis D. Trausch....... 72,000 29% 2.375 3/1/06 94,392 232,272
Howard K. Kaminsky...... 72,000 29% 2.375 3/1/06 94,392 232,272
Robert W. Haueter....... 60,000 22% 2.375 3/1/06 80,460 193,560
Eric S. Olberz.......... 3,000 1% 2.625 7/6/00 1,698 3,660
Kim S. Robbins.......... 25,000 10% 3.125 N/A[5] N/A N/A
</TABLE>
- --------
(1) Represents NQSOs which vest at a rate of 20% per year after grant over 5
years and 3,000 AOGs granted to Eric S. Olberz 1,000 of which immediately
vest with an additional 1,000 AOGs to be vested on the first and second
anniversary of the date of grant. Upon certain changes of control of the
Company or Shareholder approval of a reorganization, merger,
consolidation, liquidation, or dissolution of the Company or similar
transactions, the holder of an NQSO or AOG shall have the right to
exercise such option to the full extent not theretofore exercised. NQSOs
were granted to Messrs. Trausch, Kaminsky and Haueter in connection with
the cancellation of their previously outstanding NQSOs. See Table 9 "10-
Year Option Repricings" below.
(2) Based on an aggregate NQSOs representing 247,000 shares of Common Stock
and AOGs representing 3,000 shares of Common Stock granted during Fiscal
1996 to Named Officers under the 1992 Plan.
(3) All options were granted at the Company's closing stock price for its
Common Stock and the National Market System as reported by the NASDAQ on
the grant date.
(4) Calculated over a ten year period or five year period representing the
term of the NQSOs or AOGs, respectively.
(5) Ms. Robbins NQSOs representing 25,000 shares of Common Stock were
forfeited in connection with her resignation as an officer of the Company
in March 1996. See "Employment Agreements and Termination Agreements"
above.
16
<PAGE>
OPTION EXERCISES AND YEAR END VALUE
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during Fiscal 1995 and unexercised
options held at fiscal year end.
TABLE 8
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND 1996 FISCAL YEAR-END OPTION
VALUE
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
HELD AT FISCAL OPTIONS AT FISCAL
SHARES YEAR END (#) YEAR END(1)
ACQUIRED ON VALUE ------------------- -----------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) (2) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------------- -----------------
<S> <C> <C> <C> <C>
Norbert J. Olberz... -0- -0- 0/0 N/A
Joseph H. Coulombe.. -0- -0- 0/0 N/A
Dennis D. Trausch... -0- -0- 0/72,000 0/0
Howard K. Kaminsky.. -0- -0- 0/72,000 0/0
Robert W. Haueter... -0- -0- 0/60,000 0/0
Eric S. Olberz...... -0- -0- 1,000/2,000 0/0
Kim D. Robbins...... -0- -0- 5,000(2)/0 0/0
</TABLE>
- --------
(1) Represents the difference between the closing price of the Company's
Common Stock on March 31, 1996 in excess of the exercise price of the
options multiplied by the number of shares subject to exercisable and
unexercised options, respectively.
(2) As of June 6, 1996 Ms. Robbins' 5,000 shares were forfeited. See
"Employment Agreements and Termination Arrangements" and "Incentive
Compensation Plans" at pages 8 and 12, respectively, of this Proxy
Statement.
REPLACEMENT OPTIONS
As discussed in significant detail in the Compensation Committee Report set
forth above, the Company granted on March 1, 1996 new NQSOs to certain Named
Officers following the voluntary cancellation of NQSOs previously issued to
such Named Officers. The following table sets forth information with respect
to these Named Officers concerning the cancellation of their previously issued
NQSOs and the grant of replacement NQSOs in lieu thereof.
TABLE 9
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF MARKET PRICE OPTION TERM
SECURITIES OF STOCK AT EXERCISE PRICE REMAINING AT
UNDERLYING TIME OF AT TIME OF DATE OF
OPTIONS REPRICING REPRICING NEW EXERCISE REPRICING
NAME DATE REPRICED ($) ($) PRICE ($) (YEARS)
---- ------ ---------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Dennis D. Trausch....... 3/1/96 72,000 2 3/8 9 1/4 2 3/8 6.72
Howard K. Kaminsky...... 3/1/96 72,000 2 3/8 9 1/4 2 3/8 6.72
Robert W. Haueter....... 3/1/96 48,000 2 3/8 9 1/4 2 3/8 6.72
</TABLE>
17
<PAGE>
CERTAIN TRANSACTIONS
From time to time the Company has transacted business with entities in which
its management or the Principal Shareholder of the Company have an interest.
SALE OF SPORT CHALET MANUFACTURING
During February 1995, the Company's management formally recommended that the
Company's soft goods manufacturing operations (the "Manufacturing Operations")
be discontinued and liquidated. Management's recommendation was based on
several factors including, without limitation, (i) the Company's ability to
obtain comparable soft goods products from third party vendors at competitive
prices, (ii) the disproportionate share of working capital required to finance
materials inventories and operations, (iii) the excessive level of management
attention required to oversee production activities and (iv) consultation with
an independent consultant. In response to Management's recommendation, then
Vice Chairman and Secretary Eric S. Olberz, who had previously managed the
Manufacturing Operations, offered to purchase the assets used by the Company
in its Manufacturing Operations (the "Assets").
On June 23, 1995, the Company, Eric S. Olberz, and Camp 7, Inc., a
corporation owned by Mr. Olberz ("Camp 7"), entered into a series of
agreements pursuant to which the Company sold the Assets to Camp 7. The
purchase price equaled the book value of all the tangible assets (excluding
leasehold improvements) plus $2,000 for the fully amortized Camp 7 trademark
which is licensed back to the Company on a non-exclusive, royalty free basis.
Management believes that the consideration paid for these Assets exceeds the
net proceeds which would have been obtained had they been sold through an
orderly liquidation process to third parties. The purchase price was paid
through a $400,000 cash downpayment, with the principal balance due and
payable in a lump sum on the first day of the thirteenth (13th) month
following the effective date of the sale. Interest is due and payable monthly
on the outstanding balance at the rate of prime plus 1/8%, the same rate as
charged by the Company's lender under its then existing line of credit. Camp
7's obligations to the Company under the agreements are secured by a first
priority security interest in certain Assets and the personal guarantee of
Eric S. Olberz. The guarantee is secured by 266,666 shares of the Company's
Common Stock owned by Mr. Olberz.
The Company also assigned the leasehold interest in the Manufacturing
Operation's facility in Santa Ana, California, to Camp 7 and in the process
was relieved of further liability for the remaining eight year term of that
lease. Mr. Olberz resigned his positions as an employee and the Company's
Vice-Chairman and Secretary effective upon the completion of the sale. In
recognition of his twenty years of service with the Company, his agreement to
resign his positions with the Company, and as an inducement to enter into the
Severance and General Release Agreement, Mr. Olberz received $50,000 in
severance. A description of the Severance and General Release Agreement is set
forth above under the caption "Employment Agreements and Termination
Arrangements." The Company recognized a net pre-tax loss of $102,000 in
connection with these transactions, representing $50,000 in severance
payments, a $54,000 write off of leasehold improvements and an offsetting
$2,000 gain on the sale of the remaining Assets. The Company currently
purchases soft goods products from Camp 7 as well as other qualified vendors.
PROPERTY LEASES
The Company leases or leased from the Principal Shareholder its corporate
office space in La Canada, its warehouse and distribution facility in
Montclair, its soft goods manufacturing space in Huntington Beach (until
January 1993), and its stores in La Canada and Huntington Beach. The Company
has incurred rental expense of $1.4 million, $1.6 million, and $1.7 million
payable to the Principal Shareholder in Fiscal 1996, 1995, and 1994,
respectively. The Company believes that the occupancy costs to the Company
under each lease are no higher than those which would be charged by an
unrelated third party under similar circumstances.
In August 1994, the Company's Board by a vote of its non-employee Directors
approved a proposal to relocate the Huntington Beach store. In August 1995,
the existing store lease was terminated and the store
18
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relocated to a facility developed by and leased from Huntington Beach
Properties, Inc., a California corporation under the control of Chairman
Olberz. The new rental rate is the amount by which four percent times monthly
gross sales exceeds the $41,667 monthly minimum rent. Management believes that
the new facilities are more advantageous given certain logistical problems
associated with the prior store location and the reduction in rent which would
be achieved at anticipated store sales levels and also that the occupancy
costs under the new lease are no higher than those which would be charged by
an unrelated third party under similar circumstances.
A portion of the property in La Canada leased by the Company from the
Principal Shareholder was, until the late 1970s, used as a gas station and
contained underground storage tanks. In June 1991, petroleum hydrocarbon
pollution at the site was detected in connection with the removal of the
underground storage tanks. The Company has received regular approval of a site
investigation work plan for the property. Site remediation costs cannot be
accurately estimated until the site investigation work is completed. However,
a visual inspection of the storage tanks conducted with the tanks removed
showed no obvious leaks or damage. This suggests that site contamination may
have been the result of spillage during filling of the tanks and is not
extensive. Based on the visual inspection, Management believes that the clean-
up costs will not be material. The Principal Shareholder has agreed to
indemnify the Company against all investigation and remediation costs relating
to the property.
TAX INDEMNIFICATION AGREEMENT
Prior to the Company's initial public offering, on November 19, 1992, the
Company elected to be taxed as an S Corporation under the provisions of
Subchapter S of the Internal Revenue Code of 1986, as amended, and, in order
to provide cash to the Principal Shareholder to pay taxes on the Company's
income, the Company paid cash distributions. In Fiscal 1992, the Company
declared and subsequently paid distributions totalling $725,000. During Fiscal
1993, the Company paid cash distributions totalling $493,000 from amounts
previously accrued and declared. The Company does not anticipate that any
further cash distributions will be declared or paid.
As noted previously, the Company has entered into a tax indemnification
agreement with the Principal Shareholder which provides for, among other
things, the indemnification of such shareholder for any losses or liabilities
with respect to any additional taxes (including interest, penalties and legal
fees) resulting from the Company's operations during the period in which it
was an S Corporation. See "Compensation of Directors" above.
GENERAL
REQUIRED COMMISSION FILINGS
Based on Company records and other information, the Company believes that
all Commission filing requirements applicable to its Directors and officers
with respect to the Company's fiscal year ended March 31, 1996 were complied
with.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be considered at the 1997 Meeting of
Shareholders must be received by the Corporate Secretary of the Company not
less than sixty days nor more than ninety days prior to August 7, 1997.
FORM 10-K
The Company will furnish without charge to each person whose Proxy is being
solicited, upon request of any such person, a copy of the Annual Report to
Shareholders of the Company on Form 10-K for the fiscal year ended March 31,
1996 as filed with the Securities and Exchange Commission, including the
financial statements. Such report was filed with the Securities and Exchange
Commission on or about June 27, 1996. Requests for
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<PAGE>
copies of such reports should be directed to Sport Chalet, Inc., Attention:
Mr. Robert Haueter, 920 Foothill Boulevard, La Canada, California 91011.
Please date, sign and return the enclosed Proxy at your earliest convenience
in the enclosed envelope. No postage is required for mailing in the United
States. A prompt return of your Proxy will be appreciated.
By Order of the Board of Directors,
/s/ HOWARD K. KAMINSKY
Howard K. Kaminsky
Secretary
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<PAGE>
SPORT CHALET, INC.
920 FOOTHILL BOULEVARD
LA CANADA, CALIFORNIA 91011
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 1, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned shareholder(s) hereby appoints Norbert J. Olberz and John R.
Attwood, and each of them, with power of substitution, as attorneys and
proxies for and in the name and place of the undersigned, and hereby
authorizes them to represent and to vote all of the shares of Common Stock of
SPORT CHALET, INC. to be held of record as of June 7, 1996 which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of SPORT
CHALET, INC. to be held on August 1, 1996 at the Pasadena Hilton Hotel, 150 S.
Los Robles Avenue, Pasadena, California 91101, at 9:00 a.m. PDST, and at any
adjournment thereof.
(Continued and to be signed on other side)
<PAGE>
Please mark
your votes
as in this
example [X]
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 NOMINEES AND FOR PROPOSAL 2.
1. Election FOR WITHHOLD
For nominee listed below [_] [_]
(except as marked to the contrary below)
Withhold Authority to vote
for the nominee listed below
Eric S. Olberz (term to expire in 1999)
2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting. [_] [_]
IMPORTANT: PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE
I PLAN TO ATTEND THE ANNUAL MEETING. [_]
____________________________________ Dated: _____________________________
Signature
____________________________________ Dated: _____________________________
Signature (if held jointly)
Note: Signature should agree with name hereon. When signing as attorney,
executor, administrator, trustee, guardian, or corporate officer, please
give full title as such. All joint owners should sign. If you sign for a
partnership, please sign in partnership name by an authorized person.
