SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE SPORTS AUTHORITY, INC.
(Name of Registrant as Specified in Its Charter)
THE SPORTS AUTHORITY, INC.
(Name of Persons(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions apply:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.: Reg. Section 240.14a-101
24,031
(3) Filing party: The Sports Authority, Inc.
(4) Date filed: April , 1997
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THE SPORTS AUTHORITY, INC.
3383 N. STATE ROAD 7
FT. LAUDERDALE, FLORIDA 33319
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1997
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To the Stockholders of
THE SPORTS AUTHORITY, INC.
Notice is hereby given that the Annual Meeting of Stockholders of The
Sports Authority, Inc., a Delaware corporation (the "Company"), will be
held at 9:00 a.m. on May 29, 1997 at the Company's corporate headquarters
located at 3383 North State Road 7, Fort Lauderdale, Florida 33319. Stockholders
who desire to attend the Meeting should mark the appropriate box on the enclosed
proxy. Persons who do not indicate attendance at the Meeting on the proxy will
be required to present acceptable proof of stock ownership for admission to the
Meeting.
The Meeting will be held for the following purposes:
1. To elect three Class III Directors of the Company, each to serve for a
term of three years, and to elect one Class I Director of the Company, to
serve for a remaining term of one year;
2. To act on a proposal to approve the Amended and Restated Director Stock
Plan;
3. To act on a proposal to ratify the appointment of Price Waterhouse LLP as
the Company's independent public accountants for the 1997 fiscal year; and
4. To transact such other business as may properly come before the Meeting.
Only stockholders of record at the close of business on March 31, 1997 are
entitled to notice of and to vote at the Meeting and at any and all adjournments
or postponements thereof. A list of stockholders entitled to vote at the Meeting
will be available for inspection at the office of the Secretary of the Company,
3383 North State Road 7, Fort Lauderdale, Florida for at least ten days prior to
the Meeting, and will also be available for inspection at the Meeting.
By Order of the Board of Directors,
FRANK W.BUBB, III
---------------------------------
Frank W. Bubb, III
Secretary
Ft. Lauderdale, Florida
April 23, 1997
YOUR VOTE IS IMPORTANT
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED
PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. RETURNING A SIGNED PROXY WILL NOT PREVENT YOU FROM ATTENDING THE
MEETING AND VOTING IN PERSON, IF YOU SO DESIRE.
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THE SPORTS AUTHORITY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 1997
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PROXY STATEMENT
------------------
This Proxy Statement is being mailed on or about April 23, 1997, and is
furnished to the stockholders of The Sports Authority, Inc., a Delaware
corporation (the "Company"), for the solicitation of proxies by the Board
of Directors (the "Board") of the Company for use at the Annual Meeting of
Stockholders of the Company (the "Meeting") to be held at 9:00 a.m. on
Thursday, May 29, 1997, at the Company's corporate headquarters located at 3383
North State Road 7, Fort Lauderdale, Florida 33319, and at any and all
adjournments or postponements thereof. Action will be taken at the Meeting upon
(i) the election of three Class III Directors, each to serve for a term of three
years, and one Class I Director to serve for a remaining term of one year, (ii)
a proposal to approve the Amended and Restated Director Stock Plan, and (iii) a
proposal to ratify the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the Company's fiscal year ending January 25,
1998 (the "1997 fiscal year").
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Company's common stock, par value $.01 per
share ("Common Stock"), at the close of business on March 31, 1997 (the
"Record Date") are entitled to notice of and to vote at the Meeting. At
the Record Date, there were 31,466,567 shares of Common Stock outstanding. The
presence, either in person or by proxy, of the holders of a majority of the
shares of Common Stock outstanding on the Record Date is necessary to constitute
a quorum at the Meeting. If a quorum is not present at the Meeting, the
stockholders entitled to vote at the Meeting, present in person or by proxy,
shall have power to adjourn the Meeting from time to time, without notice other
than announcement at the Meeting, until a quorum is present or represented. At
such adjourned Meeting at which a quorum is present or represented, any business
may be transacted which might have been transacted at the Meeting as originally
noticed. All abstentions and broker non-votes will be included as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum at the Meeting.
Each stockholder will be entitled to one vote per share, in person or by
proxy, for each share of Common Stock held in such stockholder's name as of the
Record Date on any matter submitted to a vote of stockholders at the Meeting.
Shares of Common Stock represented by properly executed proxies received in time
for voting at the Meeting will, unless such proxy has previously been revoked,
be voted in accordance with the instructions indicated thereon. In the absence
of specific instructions to the contrary, the persons named in the accompanying
proxy intend to vote all properly executed proxies received by them (i) FOR the
election of the Board's nominees as Directors, (ii) FOR approval of the Amended
and Restated Director Stock Plan, and (iii) FOR the ratification of Price
Waterhouse LLP as the Company's independent public accountants for the 1997
fiscal year. No business other than as set forth in the accompanying Notice of
Annual Meeting is expected to come before the Meeting, but should any other
matter requiring a vote of stockholders be properly brought before the Meeting,
the persons named in the enclosed proxy will vote such proxy in accordance with
their best judgment.
Execution of the enclosed proxy will not prevent a stockholder from
attending the Meeting and voting in person. Any proxy may be revoked at any time
prior to the exercise thereof by delivering in a timely manner a written
revocation or a new proxy bearing a later date to the Secretary of the Company,
3383 North State Road 7, Fort Lauderdale, Florida 33319, or by attending the
Meeting and voting in person. Attendance at the Meeting will not, however, in
and of itself constitute a revocation of a proxy.
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This solicitation is being made by the Board and its cost will be borne by
the Company. Solicitation will be made by mail, and may be made personally or by
telephone by officers and other employees of the Company who will not receive
additional compensation for such solicitation. In addition, the Company has
retained Corporate Investor Communications, Inc. to aid in the solicitation of
proxies for a fee of $3,000. The Company will reimburse banks, brokerage firms,
voting trustees and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to beneficial owners of
shares of Common Stock.
For information with respect to advance notice requirements applicable to
stockholders who wish to propose any matter for consideration or nominate any
person for election as a Director at an annual meeting, see "Stockholder
Proposals and Nominations" on page 20.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board is divided into three classes, designated Class I, Class II and
Class III, each serving three-year terms. The Company's Certificate of
Incorporation requires that such classes be as nearly equal in number of
Directors as possible. There are currently eight Directors, of whom two are in
Class I, three are in Class II and three are in Class III.
The terms of the Company's three current Class III Directors, Carol
Farmer, Jack F. Kemp and Richard J. Lynch, Jr., expire at the Meeting. At the
Meeting, three Class III Directors are to be elected to serve three-year terms
commencing at the Meeting and ending in 2000 or until their respective
successors are elected and qualified or their earlier death, resignation or
removal. Each of the current Class III Directors is being nominated by the Board
to serve again as a Class III Director.
In addition, the Board has created one additional position as Class I
Director, effective on the date of the Meeting, thus increasing the number of
Class I Directors to three. At the Meeting, the additional Class I Director is
to be elected to serve a one-year term commencing at the Meeting and ending in
1998 (at the same time as the terms of the two incumbent Class I Directors) or
until his successor is elected and qualified or his earlier death, resignation
or removal. The Board has nominated Julius W. Erving to serve as a Class I
Director.
Each of the four nominees has consented to serve as a Director if elected
at the Meeting and, to the best knowledge of the Board, each of such nominees is
and will be able to serve if so elected. If any such nominee is unavailable to
stand for election at the Meeting, the persons named in the accompanying proxy
intend to vote for such other person, if any, as may be designated by the Board,
in the place of any nominee unable to serve.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE COMPANY'S
NOMINEES AS DIRECTORS. The election of the Directors nominated will require the
affirmative vote of a plurality of the shares of Common Stock represented and
voting in person or by proxy and entitled to vote at the Meeting. Abstentions
and broker non-votes will not be counted as votes cast in connection with
determining the plurality required to elect a Director and will have no effect
on the outcome of that vote.
Set forth below is a brief biography of each of the three nominees for
election as Class III Directors and the one nominee for election as a Class I
Director, and of all other Directors who will continue in office.
NOMINEES FOR ELECTION AS CLASS III DIRECTORS
TERM EXPIRING IN 2000
CAROL FARMER, AGE 52. Ms. Farmer has served as a Director of the Company
since January 1995. She is the founder of Carol Farmer Associates, Inc., a trend
forecasting and retail consulting firm, and has
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served as its President since the company's inception in 1984. Prior to that,
Ms. Farmer was Executive Vice President of Lerner Stores and Vice President of
American Can Company (now Primerica). She is also a director of The Lowes
Companies, Inc. (home improvement retailing).
JACK F. KEMP, AGE 61. Mr. Kemp was elected by the Board as a Director,
effective March 31, 1997. Mr. Kemp was the Republican Party's candidate for
Vice President of the United States in the 1996 general election. Mr. Kemp is a
co-director of Empower America, a public policy and advocacy organization he
co-founded in 1993. Prior to founding Empower America, he served for four years
as Secretary of Housing and Urban Development. From 1971 to 1989, Mr. Kemp
represented the Buffalo area and western New York in the United States House of
Representatives, and for seven of those years he served as Chairman of the House
Republican Conference. Mr. Kemp is also a director of American Bankers Insurance
Group (insurance).
RICHARD J. LYNCH, JR., AGE 45. Mr. Lynch has served as President and Chief
Operating Officer of the Company since February 1996 and as a Director of the
Company since June 1990. He previously served as Senior Vice President and Chief
Financial Officer of the Company from January 1991 to February 1996. Mr. Lynch
joined the Company as Vice President and Chief Financial Officer in June 1988
after serving as Chief Financial Officer for The SportsClub, Inc. from 1986 to
1987, and as Chief Financial Officer at various retail divisions of W. R. Grace
and Co. from 1978 to 1986.
NOMINEE FOR ELECTION AS A CLASS I DIRECTOR
TERM EXPIRING IN 1998
JULIUS W. ERVING, AGE 47. Mr. Erving engages in various product
endorsements and promotions, which are managed by The Erving Group, Inc., of
which he is the founder and President, a position he has held since 1979. Mr.
Erving is a director of LCI International, Inc. (long distance telephone
service), Converse, Inc. (athletic shoes) and Philadelphia Coca-Cola Bottling
Company.
INCUMBENT CLASS I DIRECTORS
TERM EXPIRING IN 1998
JACK A. SMITH, AGE 61. Mr. Smith founded the Company and has served as
Chairman of the Board since the Company's initial public offering on November
23, 1994 (the "Initial Public Offering"), and as Chief Executive Officer
and a Director of the Company since its inception in 1987. He also served as
President of the Company from its inception to February 1996. Prior to joining
the Company, Mr. Smith served in various senior management positions, including
Chief Operations Officer, with Herman's Sporting Goods, Inc. from 1981 to 1987.
He is also a director of Darden Restaurants, Inc. (restaurants), Marks Bros.
Jewelers, Inc. (specialty jewelry retailing), the National Sporting Goods
Association (of which he is Chairman-elect) and the National Retail Federation,
and he is a member of the Board of Governors of the Nova University School of
Business and Entrepreneurship.
W. MITT ROMNEY, AGE 50. Mr. Romney has served as a Director of the Company
since March 1995. Mr. Romney is the founder of Bain Capital, Inc. and its
predecessor partnerships which manage five investment funds and which have
initiated or invested in the acquisition of over 70 companies. Mr. Romney has
been the Managing Partner of the first Bain Capital partnership since 1984, and
of all subsequent Bain Capital partnerships, and Chief Executive Officer of Bain
Capital, Inc. since 1990. He has also operated in the capacity of Chief
Executive Officer and Chairman for Bain and Company, an international management
consulting firm, from 1991 to 1993 and as a director of that company since 1993.
Mr. Romney previously served on the Company's original Board of Directors until
March 1990, when Kmart Corporation acquired the Company. Mr. Romney is also a
director of Marriott International (hotels, food service and facilities
management, retirement communities) and Staples, Inc. (office supply retailing).
In addition, he is a member of the Visiting Committee of Harvard Business
School, the Executive Board of the Boy Scouts of America, the National Advisory
Council of the Brigham Young University School of Business, the Board of
Trustees of the Belmont Hill School, the Board of City Year, and the Board of
The Points of Light Foundation.
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INCUMBENT CLASS II DIRECTORS
TERM EXPIRING IN 1999
NICHOLAS A. BUONICONTI, AGE 56. Mr. Buoniconti has served as a Director of
the Company since January 1996. Since 1992, Mr. Buoniconti has served as Vice
Chairman, Chief Operating Officer and a director of Columbia Laboratories
(pharmaceutical research and development). Mr. Buoniconti is also a director of
American Bankers Insurance Group (insurance).
STEVE DOUGHERTY, AGE 49. Mr. Dougherty has served as a Director of the
Company since March 1995. Mr. Dougherty is currently President, General Partner
and a director of SLD Properties, Inc., a real estate concern based in Boca
Raton, Florida, a position he has held since January 1993. Mr. Dougherty
co-founded Office Depot, Inc., an office supply superstore retailer, and Mr. How
Warehouse, a retail home improvement chain. He served as President, Chief
Operating Officer and a director of Office Depot from March 1986 until his
retirement in July 1990 and prior thereto served as an executive officer and a
director of Mr. How Warehouse.
HAROLD TOPPEL, AGE 72. Mr. Toppel has served as a Director of the Company
since January 1995. Mr. Toppel is the founder and Chairman Emeritus of Pueblo
International, Inc./Xtra Food Centers, a retail supermarket chain. Since his
retirement from Pueblo in 1993, he has managed Toppel Partners, a family owned
company active in the areas of real estate development, the ownership and
operation of multi-family residential complexes and investments in various
venture capital and equity situations. Mr. Toppel previously served on the
Company's original Board of Directors until March 1990, when Kmart Corporation
acquired the Company. Mr. Toppel is also a director of First United Bank
(banking services), Interim Services, Inc. (staffing services) and Boca Raton
Community Hospital.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended January 26, 1997 (the "1996 fiscal
year") the Board held five Board meetings and the committees of the Board
held a total of five meetings. The membership and functions of the committees of
the Board are as follows: The Audit Committee was established for the purpose of
reviewing and making recommendations regarding the Company's engagement of
independent public accountants, the annual audit of the Company's financial
statements and the Company's internal controls, accounting practices and
policies.
The Audit Committee held three meetings during the 1996 fiscal year. The
current members of the Audit Committee are Messrs. Dougherty (Chair), Buoniconti
and Toppel.
The Compensation Committee was established for the purpose of making
recommendations to the Board regarding the nature and amount of compensation for
executive officers of the Company. The Compensation Committee also administers
certain of the Company's employee benefit plans. The Compensation Committee
held two meetings during the 1996 fiscal year. The current members of the
Compensation Committee are Messrs. Toppel (Chair) and Dougherty and Ms. Farmer.
The Nominating Committee was established for the purpose of nominating
individuals for election as Directors by the Company's stockholders. The
Nominating Committee will consider nominees recommended by stockholders.
Stockholders who desire to recommend nominees should contact the Company's
Secretary at the address shown on page 1. The Nominating Committee held no
meetings during the 1996 fiscal year. The current members of the Nominating
Committee are Ms. Farmer (Chair) and Messrs. Lynch, Romney and Smith.
The Executive Committee was established for the purpose of acting in the
stead of the entire Board during the periods between regular Board meetings. The
Board has delegated to the Executive Committee the power to act in lieu of and
with the powers and authority granted to the Board in the management and
direction of the Company, except as may be limited by Delaware General
Corporation Law. The Executive Committee held no meetings during the 1996 fiscal
year. The current members of the Executive Committee are Mr. Smith (Chair), Ms.
Farmer and Messrs. Lynch and Romney.
4
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At its March 12, 1997 meeting, the Board established the Governance
Committee for the purpose of considering issues relating to the governance of
the Board and other matters not within the purview of the Board's other
committees. The Governance Committee consists of Messrs. Dougherty (Chair),
Buoniconti, Kemp, Romney and Toppel and Ms. Farmer.
During the 1996 fiscal year, all of the Directors attended more than 75% of
the meetings of the Board and the committees on which they served, except Ms.
Farmer, who missed three of seven meetings, two of which occurred while she was
on business outside the United States.
COMPENSATION OF DIRECTORS
Under the Director Stock Plan, each Director who is not an employee of the
Company receives an annual retainer consisting of $25,000 worth of restricted
shares of Common Stock (the "Restricted Shares") at the beginning of each
calendar year. A person who becomes a Director during a calendar year receives
Restricted Shares at the end of the quarter during which he or she becomes a
Director, prorated for the year from the date of becoming a Director. The
restrictions lapse on the earlier of the end of the calendar year during which
the Restricted Shares are granted or proportionally on the date the grantee
ceases being a Director. In the latter case, the Restricted Shares applicable to
the portion of the year after the grantee ceases to be a Director are forfeited.
Vesting is accelerated on disability, death or a change in control of the
Company, but in no event may the Restricted Shares received on vesting be sold
until at least six months after the date of grant. Each Director who is not an
employee of the Company also receives $1,000 worth of Common Stock for each
Board meeting attended and $500 worth of Common Stock for each committee meeting
attended, paid at the end of the calendar quarter in which the meetings
occurred. Such Common Stock cannot be sold until at least six months after the
date of grant.
On March 12, 1997, the Board, upon the recommendation of the Compensation
Committee, adopted the Amended and Restated Director Stock Plan, subject to
approval by the Company's stockholders. See "Approval of the Amended and
Restated Director Stock Plan" on page 16.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") is composed of three
independent, non-employee Directors who have no "interlocking" relationships as
defined by the Securities and Exchange Commission. The Committee's goal is to
ensure the establishment and administration of executive compensation policies
and practices that will enable the Company to attract, retain and motivate the
management talent necessary to achieve the Company's goals and objectives.
The Committee's executive compensation philosophy includes the following
considerations:
/bullet/ A competitive mix of short-term (base salary and annual incentive
bonus) and long-term (stock options and restricted stock) compensation
opportunities which facilitate the Company's ability to attract and retain
executive talent;
/bullet/ An emphasis on total cash compensation wherein base salaries
generally reflect competitive industry levels and, when combined with annual
incentive bonus opportunities, may produce total compensation at or above
competitive levels if performance against predetermined objectives exceeds
expectations;
/bullet/ Common Stock ownership opportunities that align the interests of
Company executives with the long term interests of stockholders; and
/bullet/ Recognition that, as an executive's level of responsibility
increases, a greater portion of the total compensation opportunity should be
based upon Common Stock and other incentives and less upon base salary.
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The primary components of the Company's executive compensation program
are: (a) base salary; (b) annual cash incentive opportunities provided through
the Annual Incentive Bonus Plan; and (c) long term incentive opportunities
provided through the grant of stock options and restricted stock. Each of these
components is discussed separately in this report.
The Committee compares total compensation levels for executive officers to
compensation paid to executives at other retail companies with annual sales
between $1 billion and $3 billion. The companies chosen for compensation
comparisons in the most recent competitive study are not the same companies that
comprise the published industry index in the stock price performance graph shown
in "Comparative Stockholder Return" on page 13. The Committee believes
that the most direct competitors for executive talent are not necessarily all of
the companies that would be included in a published industry index for comparing
total stockholder returns.
BASE SALARY. Base salaries for Company executive officers are subject to
annual review and adjustment on the basis of individual and Company performance,
level of responsibility and competitive, inflationary, and internal equity
considerations. The Committee generally attempts to set base salaries of
executive officers at a level which is proximate to the "market" rate, as
that rate is determined from information gathered from published surveys and
independent compensation consulting firms. With respect to the $550,000 base
salary established for Mr. Smith in March 1996 (a 10.0% increase from his
previous base salary determined in March 1995), the Committee took into account
the factors described above.
ANNUAL CASH INCENTIVES. Under the Company's Annual Incentive Bonus Plan
(the "Bonus Plan"), executive officers and certain other employees are
eligible to receive cash bonuses based upon the Company's attainment of
specific performance goals. The performance goals may be different from year to
year, and expressed in either quantitative and/or qualitative terms, and to the
extent applicable, performance against these goals must be determined in
accordance with generally accepted accounting principles and reported upon by
the Company's independent public accountants. Target incentive bonus
opportunities are established at the beginning of the fiscal year for each
executive officer and expressed as a percentage of the executive officer's
competitive salary range midpoint. The Bonus Plan requires that a threshold
level of performance be established, below which no bonus award would be made,
levels of performance at which specified percentages of the target bonus would
be paid, and a maximum level of performance above which no additional bonus
would be paid. The Bonus Plan specifies that the maximum bonus payable to the
Chief Executive Officer of the Company is limited to three times the salary
range midpoint for the position. All other executive officers are limited to a
maximum bonus payment of two times their salary range midpoint.
Beginning in 1996, the Bonus Plan was coordinated with the 1996 Stock
Option and Restricted Stock Plan (the "1996 Stock Plan") to enable the
Company's executives to elect in advance to forego a portion of their cash
bonuses and to receive stock options in lieu thereof. See "Long Term
Incentives" below.
For the 1996 fiscal year, the Company exceeded its performance goal, which
was expressed in terms of earnings per share, by 11.7%. The bonuses for the 1996
fiscal year for Mr. Smith and the other executive officers were determined in
March 1997 on the same basis as for all other eligible employees under the Bonus
Plan. The total bonus for 1996 for which the Committee determined Mr. Smith was
eligible was $467,360, of which he received $396,710 in cash. In lieu of the
remaining $70,650 of bonus, Mr. Smith was granted stock options pursuant to his
prior election, as described in "Long Term Incentives" below.
LONG TERM INCENTIVES. The Company intends to foster an ownership culture
that will encourage superior performance by its executives. To facilitate that
culture, the Company has adopted and the stockholders have approved a stock
option plan in 1994 (the "Stock Option Plan") and the 1996 Stock Plan.
Both Plans are intended to align the executive's interests with the long-term
interests of the Company's stockholders by providing incentives that focus
attention on managing the Company from the perspective of an owner.
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Both Plans provide for the grant at fair market value of stock options with
such vesting and exercise periods as the Committee may determine. In determining
the number of shares of Common Stock in a stock option grant, the Committee
takes into consideration the individual's performance, the level of his or her
position, as well as the individual's present and potential contribution to the
success of the Company. The Committee intends to make periodic grants of stock
options to the Company's management personnel including its executive officers.
In addition, to encourage further equity ownership by its executives at the
Vice President level and higher, the 1996 Stock Plan provides for the grant of
bonus replacement options, under which these executives may elect in advance to
forego a portion of their annual cash bonuses under the Bonus Plan and to
receive options to purchase shares of Common Stock at their fair market value on
the date of grant, which is the same date the Committee determines bonuses under
the Bonus Plan. The bonus replacement option feature of the 1996 Stock Plan
replaced the Management Stock Purchase Plan as a vehicle for executives to
forego a portion of their annual bonuses in exchange for a greater ownership
interest in the Company. Under the Management Stock Purchase Plan, management
personnel of the Company, including its executive officers, were required to
designate a minimum of 20%, and were permitted to designate up to 100%, of their
annual bonuses for the purchase of restricted shares of Common Stock at 80% of
the fair market value of the stock.
The number of shares of Common Stock for which a participant may receive a
bonus replacement option in any one fiscal year is capped at 15,000 for the
Chairman, 10,000 for the President, 6,000 for each Senior Vice President and
4,000 for each Vice President. To determine the relationship between the number
of bonus dollars a participant must forego and the number of options he or she
receives, the Committee first assumes that the value of a share is 80% of the
fair market value of a share on the date of grant and determines the value of an
option to purchase a share at that price under the Black-Scholes pricing
formula. For the grants made in March 1997, this calculation was based on an
expected volatility of 37%, a risk-free interest rate of 6.55% and an expected
life of ten years. In recognition of the fact that the executives who elect to
receive bonus replacement options will have placed the foregone portion of their
bonuses at risk of loss, the Committee then set the "price" (in terms of
bonus dollars foregone) for a bonus replacement option for one share at one-half
of the above mentioned Black-Scholes value. See note (3) to the Summary
Compensation Table on page 8.
Based on this formula, Mr. Smith was granted an option to purchase 15,000
shares of Common Stock at an exercise price of $19.25 per share, the fair market
value on the date of grant, in lieu of $70,650 of the bonus to which he was
entitled for 1996. In addition, during fiscal 1996, Mr. Smith was granted an
option to purchase 52,500 shares at an exercise price of $15.75.
The 1996 Stock Plan also provides for the grant of restricted shares of
Common Stock. In 1996 the Committee granted 66,750 restricted shares to Mr.
Smith in lieu of his participation in the Supplemental Executive Retirement
Plan, which was initiated at the same time See "Retirement Benefits" on
page 11.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT. Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code") generally limits the corporate deduction for compensation paid to
executive officers named in the proxy statement to $1 million, unless certain
requirements are met. The Committee intends to consider carefully any plan or
compensation arrangement that would result in the disallowance of compensation
deductions. It will use its best judgment in such cases, however, taking all
factors into account, including the materiality of any deductions that may be
lost.
Harold Toppel, Chair
Steve Dougherty
Carol Farmer
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EXECUTIVE COMPENSATION FOR LAST THREE FISCAL YEARS
The following table shows the compensation for each of the last three
fiscal years awarded to, earned by or paid to those persons who were, for the
1996 fiscal year, the Chief Executive Officer of the Company and its five other
most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
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SHARES
RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS(2) STOCK AWARDS(4) OPTIONS(#) COMPENSATION(5)
- ----------------------------- -------------- ----------- ----------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Jack A. Smith 1996 $550,000 $ 396,710(3) $1,335,000 67,500(3) $24,710
Chairman of the Board 1995 500,000 324,307 40,536 37,500 20,481
and Chief Executive 1994 450,000 182,714 812,532 150,936 23,702
Officer
Richard J. Lynch, Jr. 1996 325,000 230,368(3) - 40,000(3) 13,691
President and 1995 250,000 143,853 10,787 22,500 10,140
Chief Operating Officer 1994 220,000 88,018 280,849 78,532 10,491
Robert J. Timinski 1996 220,000 184,383(3) - 19,200(3) 6,459
Senior Vice President 1995 200,000 101,378 12,672 12,000 5,299
and General 1994 180,000 65,000 236,523 47,509 9,453
Merchandise Manager
Arnold D. Sedel 1996 215,000 148,554(3) 480,000 15,207(3) 8,915
Senior Vice President, 1995 200,000 81,520 4,078 9,000 -
Stores 1994 190,000 47,689 177,302 46,610 3,966
Anthony F. Crudele(1) 1996 160,000 105,609(3) - 14,307(3) 6,180
Senior Vice President
and Chief Financial
Officer
Samuel G. Allen(1) 1996 160,000 104,484(3) - 15,445(3) -
International President 1995 115,385 62,770 4,706 9,000 1,227
</TABLE>
- ----------------
(1) Mr. Crudele became an executive officer when he was promoted to his current
position in February 1996. Mr. Allen became an executive officer when he
joined the Company as its International President in April 1995.
(2) The bonus shown for each year is the bonus earned in that year and paid in
March of the following year.
(3) The amount of the 1996 bonus shown is the amount of cash paid in March 1997.
Each of the executive officers named in the table elected in advance to
forego a portion of his 1996 bonus and to receive an option to purchase
shares of Common Stock in lieu thereof under the 1996 Stock Plan. See the
discussion of bonus replacement options in the Compensation Committee Report
on page 5. The option exercise price is $19.25 per share, the fair market
value of a share on the date of grant, and the amount of bonus foregone in
exchange for an option to purchase one share was $4.71. The amount of bonus
foregone by each such executive officer, which is excluded from the 1996
bonus shown in the table, and the number of shares underlying options
granted in lieu thereof, which is included in the number of shares
underlying options shown in the table, are as follows: Mr. Smith, $70,650
and 15,000 shares; Mr. Lynch, $47,100 and 10,000 shares; Mr. Timinski,
$28,260 and 6,000 shares; Messrs. Sedel and Crudele, $24,996 and 5,307
shares; and Mr. Allen, $26,121 and 5,545 shares. These bonus replacement
options become exercisable on March 11, 1998 and expire on March 11, 2007.
If the executive officer's employment terminates for any reason before
March 11, 1998, the option will be forfeited and the amount of bonus
foregone will be paid to the executive officer without interest. If the
executive officer's employment terminates thereafter for any reason other
than cause, the option will terminate three months after termination, and if
the
8
<PAGE>
executive officer's employment terminates thereafter for cause, the option
will terminate upon termination of employment.
(4) The amounts shown for 1996 represent the value of the 66,750 restricted
shares of Common Stock granted to Mr. Smith and the 24,000 restricted shares
granted to Mr. Sedel, respectively, under the 1996 Stock Plan on May 30,
1996, the date the grants became effective by virtue of stockholder approval
of that plan. The restricted shares granted to Mr. Smith vest at the rate of
25% per year on June 21 of each year from 1997 through 2000, and will be
restricted from resale until the latter date. The restricted shares granted
to Mr. Sedel vest at the rate of 16.7% on June 5 of each year from 1997
through 2002, and will be restricted from resale until the latter date.
The amounts shown for 1995 represent the 20% discount from the closing price
of the Common Stock on the purchase on March 26, 1996 of restricted shares of
Common Stock under the Management Stock Purchase Plan with the portion of the
executive officer's bonus for 1995 designated by such executive officer for
such purchase. The restricted shares purchased are generally subject to
forfeiture and are restricted from resale for three years from the purchase
date.
A portion of the amounts shown for 1994 represent the difference between
$13.33, the closing price of the Common Stock on December 9, 1994, the date
shares were purchased, and the purchase price of $9.53 paid by each of the
executive officers for the purchase of restricted shares of Common Stock
under the Management Stock Purchase Plan whereby they received a discount
equal to 20% of the Initial Public Offering price net of the underwriting
discount ($12.67 less $0.76). The restricted shares purchased are generally
subject to forfeiture and are restricted from resale for three years from the
purchase date. The remainder of the amounts shown for 1994 represent the fair
market value of restricted shares of Common Stock issued on December 7, 1994,
after the forfeiture of restricted shares of Kmart Corporation common stock
upon consummation of the Initial Public Offering. Upon such forfeiture, the
Company issued similarly restricted shares of Common Stock having equivalent
value and the same vesting dates as the forfeited stock as follows: Mr.
Smith, 29,322 shares, Mr. Lynch, 12,239 shares, Mr. Timinski, 2,604 shares,
and Mr. Sedel, 7,101 shares. A portion of these restricted shares vested on
January 25, 1995 and the remainder vested on January 31, 1996.
Restricted shares of Common Stock receive dividends at the same rate as all
other shares of Common Stock. As of January 24, 1997, the number and value
(based on the closing price of the Common Stock of $17.75 on that date) of
all restricted shares (net of purchase price) held by the executive officers
were as follows: Mr. Smith, 184,588 and $2,114,248; Mr. Lynch, 31,925 and
$251,994; Mr. Timinski, 56,521 and $452,416; Mr. Sedel, 45,598 and $599,627;
Mr. Crudele, 10,300 and $78,858; and Mr. Allen, 1,494 and $7,694.
(5) "All Other Compensation" in the 1996 fiscal year consists of Company
contributions credited under the The Sports Authority 401(k) Savings and
Profit Sharing Plan and The Sports Authority Supplemental 401(k) Savings and
Profit Sharing Plan.
9
<PAGE>
STOCK OPTIONS
The following table sets forth certain information with respect to stock
options granted during the 1996 fiscal year under the Stock Option Plan (but not
the bonus replacement options granted in March 1997 under the 1996 Stock Plan)
to the executive officers named in the Summary Compensation Table on page 8.
These option grants are also included under the heading "Shares Underlying
Options" in that table. The hypothetical realizable values for each option
grant are shown based on compound annual rates of stock price appreciation of
0%, 5% and 10% from the grant date to the expiration date. The assumed rates of
appreciation are for illustration purposes only and are not intended to predict
future stock prices, which will depend upon market conditions and the Company's
future performance and prospects.
STOCK OPTIONS GRANTED IN THE 1996 FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE APPRECIATION
SHARES GRANTED TO FOR OPTION TERM($)
UNDERLYING EMPLOYEES EXERCISE -----------------------------------
OPTIONS IN 1996 PRICE EXPIRATION
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 0% 5% 10%
- ----------------------- ------------- ------------- ------------ ------------ ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack A. Smith 52,500 7.13% $15.75 3/28/06 -0- $520,014 $1,317,823
Richard J. Lynch, Jr. 30,000 4.07% 15.75 3/28/06 -0- 297,150 753,042
Robert Timinski 13,200 1.79% 15.75 3/28/06 -0- 130,746 331,338
Arnold D. Sedel 9,900 1.34% 15.75 3/28/06 -0- 98,059 248,503
Anthony F. Crudele 9,000 1.22% 15.75 3/28/06 -0- 89,145 225,912
Samuel G. Allen 9,900 1.34% 15.75 3/28/06 -0- 98,059 248,503
</TABLE>
- ----------------
(1) All options granted in the 1996 fiscal year are exercisable at a price equal
to the fair market value of a share of Common Stock on the date of grant,
and become exercisable on March 26, 1999 if the executive remains in the
employ of the Company through that date. Exercisability is accelerated upon
death, total and permanent disability, a change in control of the Company,
or termination of employment after the optionee reaches age 65 and has ten
years of employment.
The following table shows for the executive officers named in the Summary
Compensation Table on page 8 the number and value of all stock options exercised
during the 1996 fiscal year and the stock options held at the end of the fiscal
year.
AGGREGATED OPTION EXERCISES IN THE 1996 FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT END OF 1996 FISCAL YEAR AT END OF 1996 FISCAL YEAR
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ----------------------- -------------- ----------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Jack A. Smith -0- -0- -0- / 240,936 -0- / $1,183,791
Richard J. Lynch, Jr. -0- -0- -0- / 131,032 -0- / 636,986
Robert J. Timinski -0- -0- -0- / 72,709 -0- / 366,994
Arnold D. Sedel -0- -0- -0- / 65,510 -0- / 339,390
Anthony F. Crudele -0- -0- -0- / 31,890 -0- / 148,630
Samuel G. Allen -0- -0- -0- / 18,900 -0- / 67,050
</TABLE>
- ----------------
(1) Calculated based on the closing price of the Common Stock of $17.75 on
January 24, 1997, less the option exercise price.
10
<PAGE>
RETIREMENT BENEFITS
In March 1996, the Company adopted an unfunded Supplemental Executive
Retirement Plan for its senior executives, including the executives named in the
Summary Compensation Table on page 8. Under the Plan, Messrs. Smith, Lynch and
Sedel are entitled to receive a monthly single life annuity starting at age 65
of $2,220, $372 and $128, respectively, in respect of their service while the
Company was a wholly-owned subsidiary of Kmart Corporation. In addition, the
following table shows the annual retirement benefits that a plan participant
(other than Messrs. Smith and Sedel, who have instead received grants of
restricted shares of Common Stock under the 1996 Stock Plan) would receive
without offset for Social Security or other benefits for a period of twenty
years, assuming he or she had retired at age 65 with twenty years of service
effective February 1, 1997.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS
YEARS OF EMPLOYMENT(1)
------------------------------------------------
AVERAGE FINAL
COMPENSATION(2) 5 10 15 20
- ----------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
$200,000 $17,500 $35,000 $52,500 $70,000
300,000 26,250 52,500 78,750 105,000
400,000 35,000 70,000 105,000 140,000
500,000 43,750 87,500 131,250 175,000
600,000 52,500 105,000 157,500 210,000
</TABLE>
- ----------------
(1) For purposes of calculating years of service, only the period after June
1990 during which the executive served at the level of Vice President or
higher is included. No more than twenty years of service is used to
calculate retirement benefits. As of February 1, 1997, Messrs. Lynch,
Timinski, Crudele and Allen had 7,3, 6 and 2 years of service, respectively,
as defined in the plan.
(2) Average final compensation under the plan is the average of compensation for
the three complete calendar years out of the executive's last five complete
calendar years of service during which his or her compensation was highest.
Compensation includes base salary and annual bonus in the year received.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
The Company has entered into certain severance and change in control
agreements with Messrs. Smith, Lynch, Timinski, Sedel and Allen.
The agreement with Mr. Smith, which was entered into on August 29, 1996,
provides that he will continue to render services for the Company as its Chief
Executive Officer until June 30, 2000, subject to the provisions of the
agreement. If Mr. Smith's employment is terminated other than for cause (as
defined in the agreement) or is terminated by death, the Company will pay Mr.
Smith (or his estate) through June 30, 2000 monthly payments equal to his
monthly base salary at the time of termination, plus one-twelfth of the "on
plan" bonus amount targeted for him under the Bonus Plan for the fiscal year
in which termination occurs, and will provide certain medical and dental
benefits for Mr. Smith and his wife. In addition, all of Mr. Smith's unvested
stock options and restricted stock granted under the Management Stock Purchase
Plan (but not the restricted stock granted under the 1996 Stock Plan) will vest
on the termination of his employment. The agreement also provides that, if Mr.
Smith terminates his employment between March 31, 1997 and June 30, 2000, he
will receive the benefits described above, except that the period during which
payments in respect of salary and bonus are payable may not exceed one year and
the unvested restricted stock will not vest on termination. The agreement also
provides that, if there is a change in control (as defined in the agreement) of
the Company, and if Mr. Smith's employment is terminated (i) by the Company
other than for cause (as defined in the agreement), (ii) at his election for
good reason (as defined in the agreement), or (iii) by his death, in each case
within two years after the change in control, the Company will pay Mr. Smith a
lump sum cash payment equal to 2.99 times the sum of his annual rate of base
salary at the time of termination or
11
<PAGE>
immediately prior to the change in control, whichever is greater, and the "on
plan" bonus amount targeted for him under the Bonus Plan for the fiscal year
in which termination occurs or the fiscal year immediately prior to the change
in control, whichever bonus amount is greater. This lump sum payment is subject
to reduction as necessary to prevent it from being treated as an "excess
parachute payment" under Section 280G of the Internal Revenue Code. Finally,
the agreement obligates Mr. Smith not to compete against the Company, solicit
its employees or disclose confidential information about the Company before June
30, 2000.
Each of the agreements between the Company and Messrs. Lynch, Timinski and
Sedel provides that if the officer's employment is terminated other than for
cause or disability (as defined in the agreements) or at such officer's
election for good reason (as defined in the agreements), the officer would be
entitled to severance benefits. These severance benefits include monthly
payments equal to the officer's monthly base salary at the time of termination,
plus one-twelfth of the "on plan" bonus amount targeted for such officer
under the Bonus Plan for the fiscal year in which termination occurs. Such
monthly severance payments commence in the month of termination and continue for
12 full calendar months, unless termination occurs within two years after a
change in control (as defined in the agreement) of the Company, in which case
severance payments continue for 24 full calendar months and are equal to the
officer's monthly base salary at the time of termination or immediately prior
to the change in control, whichever is greater, plus one-twelfth of the "on
plan" bonus amount targeted for such officer under the Bonus Plan for the
fiscal year in which termination occurs or the fiscal year immediately prior to
the change in control, whichever bonus amount is greater. The severance
agreement with Mr. Allen is substantially similar to those described above
except that it contains no change in control provisions.
12
<PAGE>
COMPARATIVE STOCKHOLDER RETURN
The following line graph compares the cumulative total stockholder return
on the Company's Common Stock from November 17, 1994, the date of the Initial
Public Offering of the Company's Common Stock, through January 24, 1997 with
the cumulative total return on the Standard & Poor's 500 Stock Index ("S&P
500") and the Dow Jones Retailers-All Specialty Index ("D J Retailers-All
Specialty") for the same period. In accordance with the rules of the
Securities and Exchange Commission, the returns are indexed to a value of $100
at November 17, 1994 and assume reinvestment of all dividends.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
THE SPORTS AUTHORITY, INC., S&P 500 AND D J RETAILERS-ALL SPECIALTY
1/20/95 1/26/96 1/24/97
------- ------- -------
THE SPORTS AUTHORITY, INC. 92 97 140
S&P 500 101 137 174
DJ RETAILERS-ALL SPECIALTY 94 97 118
13
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information concerning the
beneficial ownership of shares of Common Stock by each stockholder who is known
by the Company, based on the most recent Schedules 13G filed with the Securities
and Exchange Commission, to own beneficially more than 5% of the outstanding
Common Stock. This information is shown as of December 31, 1996. The table also
sets forth information concerning the beneficial ownership of shares of Common
Stock by each Director and each Director nominee, by the executive officers
named in the Summary Compensation Table on page 8 and by all Directors, nominees
and executive officers as a group, as of March 31, 1997. Except as otherwise
indicated, all persons listed below have sole voting power and sole dispositive
power with respect to the number of shares of Common Stock shown, except to the
extent that power is shared by spouses under applicable law.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF COMMON
NAME AND ADDRESS OF COMMON STOCK STOCK OUTSTANDING(1)
- --------------------------------------------------- ------------------- ----------------------
<S> <C> <C>
JUSCO Co., Ltd. ................................. 3,030,000 9.6%
51-1, 1-chome,
Nakase, Mihama-ku,
Chiba-shi, Chiba 261, Japan
AIM Management Group, Inc. and its
wholly-owned subsidiaries, AIM Advisors, Inc.
and AIM Capital Management, Inc. .................. 2,653,450(2) 8.4%
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Ohio Public Employee Retirement System ......... 2,250,000 7.2%
277 East Town Street
Columbus, Ohio 43215
The Capital Group Companies, Inc. and
The Capital Research and Management Company ...... 2,132,860(3) 6.7%
333 South Hope Street
Los Angeles, CA 90071
Jack A. Smith .................................... 332,680(4) 1.0%
Richard J. Lynch, Jr. ........................... 111,444(5) *
Robert J. Timinski .............................. 101,243(6) *
Arnold D. Sedel ................................. 83,760(7) *
Anthony F. Crudele .............................. 28,512(8) *
Samuel G. Allen ................................. 1,494(9) *
Nicholas A. Buoniconti ........................... 5,740(10) *
Steve Dougherty ................................. 56,918(10) *
Julius W. Erving ................................. 0 *
Carol Farmer .................................... 9,155(10) *
Jack F. Kemp .................................... 988(11) *
W. Mitt Romney .................................... 4,973(10) *
Harold Toppel .................................... 51,453(10) *
All Directors, nominees and executive officers
as a group (13 persons) ........................ 788,360 2.5%
</TABLE>
- ----------------
* Represents less than one percent.
14
<PAGE>
(1) The percentage shown for each stockholder listed is calculated by including
in the total Common Stock outstanding the number of shares, if any, which
the stockholder has the right to acquire before May 30, 1997 upon the
conversion of the Company's 5.25% Convertible Subordinated Notes due 2001
held by that stockholder or upon the exercise of options granted under the
Stock Option Plan.
(2) The person named reported shared voting power and shared dispositive power
with respect to all shares of Common Stock shown.
(3) The persons named reported sole dispositive power with respect to all of
the shares of Common Stock shown but no voting power. The shares reported
include 337,060 shares which the persons named have the right to acquire
upon conversion of $11,000,000 principal amount of the Company's 5.25%
Convertible Subordinated Notes due 2001.
(4) Includes 117,838 restricted shares of Common Stock purchased pursuant to
the Management Stock Purchase Plan; 66,750 restricted shares granted under
the 1996 Stock Plan; 1,554 shares held under the Employee Stock Purchase
Plan, all of which are unrestricted; 2,484 shares held under The Sports
Authority 401(k) Savings and Profit Sharing Plan; 114,332 shares with
respect to which options granted under the Stock Option Plan become
exercisable before May 30, 1997; and 29,722 unrestricted shares.
(5) Includes 31,925 restricted shares of Common Stock purchased pursuant to the
Management Stock Purchase Plan; 1,370 shares held under the Employee Stock
Purchase Plan, all of which are unrestricted; 1,859 shares held under The
Sports Authority 401(k) Savings and Profit Sharing Plan; 63,901 shares with
respect to which options granted under the Stock Option Plan become
exercisable before May 30, 1997; and 12,389 unrestricted shares.
(6) Includes 56,521 restricted shares of Common Stock purchased pursuant to the
Management Stock Purchase Plan; 1,996 shares held under The Sports
Authority 401(k) Savings and Profit Sharing Plan; 40,122 shares with
respect to which options granted under the Stock Option Plan become
exercisable before May 30, 1997; and 2,604 unrestricted shares.
(7) Includes 21,598 restricted shares of Common Stock purchased pursuant to the
Management Stock Purchase Plan; 24,000 restricted shares granted under the
1996 Stock Plan; 1,454 shares held under The Sports Authority 401(k)
Savings and Profit Sharing Plan; 34,104 shares with respect to which
options granted under the Stock Option Plan become exercisable before May
30, 1997; and 2,604 unrestricted shares.
(8) Includes 10,300 restricted shares of Common Stock purchased pursuant to the
Management Stock Purchase Plan; 1,060 shares held under the Employee Stock
Purchase Plan, of which 1,009 are restricted from transfer; 1,495 shares
held under The Sports Authority 401(k) Savings and Profit Sharing Plan;
13,992 shares with respect to which options granted under the Stock Option
Plan become exercisable before May 30, 1997; and 1,665 unrestricted shares.
(9) Consists of 1,494 restricted shares of Common Stock purchased pursuant to
the Management Stock Purchase Plan.
(10) Included in the number shown for each of these Directors is 1,149
restricted shares of Common Stock granted under the Director Stock Plan on
December 31, 1996 as the Director's 1997 annual retainer. See
"Compensation of Directors" on page 5.
(11) Consists of 988 restricted shares of Common Stock granted under the
Director Stock Plan on March 31, 1996 as Mr. Kemp's 1997 annual retainer.
See "Compensation of Directors" on page 5.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and executive officers to file with the Securities and
Exchange Commission and the New York Stock Exchange initial reports of
beneficial ownership and reports of changes in beneficial ownership of shares of
the Common Stock. Copies of all such Section 16(a) reports are required to be
furnished to the Company. These filing requirements also apply to holders of
more than ten percent of the Common
15
<PAGE>
Stock. To the Company's knowledge, based solely on a review of the copies of
Section 16(a) reports furnished to the Company for the 1996 fiscal year, and on
representations furnished to the Company indicating that no Form 5 was due, all
reports were filed on a timely basis except that one Form 4, Statement of
Changes in Beneficial Ownership of Securities, reporting one transaction was
filed late by Mr. Smith and one Form 4 reporting two transactions was filed late
by Mr. Crudele.
CERTAIN TRANSACTIONS
In January 1995, the Company entered into a Joint Venture Agreement with
JUSCO Co., Ltd. ("JUSCO"), a major Japanese retailer, which owns 9.6% of
the Company's outstanding Common Stock. In the Joint Venture Agreement, as
amended in 1996, the Company and JUSCO agreed to develop and operate The Sports
Authority stores in Japan through a jointly owned Japanese corporation, Mega
Sports Co., Ltd. ("Mega Sports"), of which 51% is owned by the Company and
49% by JUSCO. Mega Sports currently operates three stores in Japan.
As contemplated by the Joint Venture Agreement, the Company has entered
into a License Agreement and a Services Agreement with Mega Sports, and JUSCO
has entered into a Services Agreement with Mega Sports. JUSCO's Services
Agreement with Mega Sports requires JUSCO to provide certain management and
other services to Mega Sports in exchange for a fee equal to 1% of Mega Sports'
gross sales and reimbursement of reasonable expenses. In the 1996 fiscal year,
the total amount of this fee was $130,000. This Agreement expires on January 31,
2000 and is automatically renewed for successive five year periods unless
terminated by either party, and terminates automatically if JUSCO ceases to have
an ownership interest in Mega Sports.
PROPOSAL 2
APPROVAL OF THE AMENDED AND RESTATED DIRECTOR STOCK PLAN
On March 12, 1997, upon the recommendation of the Compensation Committee,
the Board adopted the Amended and Restated Director Stock Plan (the "Plan"
or the "amended Plan"), subject to approval by the Company's
stockholders. The complete text of the Plan is set forth in Exhibit A. The
original Director Stock Plan (the "Original Plan") was adopted by the
Board on November 16, 1994 and was approved by Kmart Corporation, as the
Company's sole stockholder, on that date, immediately before the Initial Public
Offering. The purpose of amending and restating the Original Plan was to allow
non-employee Directors to elect to receive stock options in lieu of restricted
stock for their annual retainers and, in order to accomplish this purpose, to
increase the number of shares of Common Stock ("Shares") issuable under
the Plan.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDED PLAN. The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or by proxy and entitled to vote at the Meeting
is required to approve adoption of the amended Plan. In determining whether this
proposal has received the requisite number of affirmative votes, abstentions
will be counted and will have the same effect as a vote against the proposal and
broker non-votes will have no effect.
DESCRIPTION OF THE PLAN
PURPOSE
The purpose of the Plan is to increase the proprietary interest in the
Company of its non-employee Directors by providing further opportunity for
ownership of shares of the Common Stock, and to increase the incentives for the
non-employee Directors to contribute to the success of the Company's business.
16
<PAGE>
EFFECTIVE DATE AND TERM
The amended Plan will become effective May 29, 1997, subject to approval by
the stockholders at the Meeting. The amended Plan will have the same remaining
term as the Original Plan, which was scheduled to expire on December 31, 2004.
Grants may be made during the term of the Plan, and grants outstanding on
December 31, 2004 will continue in accordance with their terms.
ADMINISTRATION
The Plan is administered by the Compensation Committee, except that the
Board may reserve the right to approve grants under the Plan. The Committee has
authority and discretion to construe and interpret the Plan. All actions by the
Committee will be conclusive and binding on all parties.
SHARES SUBJECT TO THE PLAN; ADJUSTMENTS
The number of Shares reserved for the grants under the Original Plan was
79,683 (as adjusted for the three-for-two stock split effected in July 1996), of
which 51,294 Shares remained available for issuance as of April 1, 1997. The
number of Shares reserved for grants under the amended Plan is 150,000. If any
outstanding grants are forfeited, expire unexercised or otherwise terminate, the
Shares allocable to the terminated portion of such grant may again be subject to
a grant under the Plan. If there is any extraordinary dividend, Share dividend,
recapitalization, merger, Share split, warrant or rights issuance, combination
or exchange of Shares or similar transaction, the number and type of Shares
available for grant, the number and type of Shares covered by outstanding grants
and the price per Share of outstanding option grants shall be appropriately
adjusted by the Committee, and the Committee may make other adjustments as it
deems appropriate.
AMENDMENT OF THE PLAN
The Board may from time to time amend or terminate the Plan, provided that
no amendment that requires stockholder approval in order to comply with
applicable law will be effective unless the amendment is approved by the
Company's stockholders.
ELIGIBILITY
Directors who are not employees of the Company ("non-employee
Directors") are eligible to participate in the Plan. There are currently six
non-employee Directors. Grants are to be made under the Plan as compensation for
services as a Director.
ELECTIONS
Under the Original Plan, non-employee Directors received their annual
retainers in the form of restricted Shares ("Restricted Shares"). Under
the amended Plan, each non-employee Director will be able to elect to receive
his or her entire annual retainer in the form of Restricted Shares or in the
form of options to purchase Shares ("Options"). Each non-employee
Director's election must be made before the beginning the Plan Year to which
the election applies, unless the Director becomes a non-employee Director during
the Plan Year. If a Director makes no election, the Director's annual retainer
will be paid in the form of Restricted Shares. Meeting fees will continue to be
paid in the form of unrestricted Shares.
The Plan Year under the Original Plan is the calendar year. The Plan Year
under the amended Plan is the 12-month period beginning on the day after the
date of each annual meeting of the Company's stockholders and ending on the
date of the next annual meeting.
If the amended Plan is approved at the Meeting, the Restricted Shares that
non-employee Directors received as of January 1, 1997 under the Original Plan
for the 1997 Plan Year will be forfeited to the extent they relate to services
to be rendered after May 29, 1997. Each non-employee Director may elect to
receive his or her annual retainer for the Plan Year beginning May 30, 1997 in
the form of Restricted Shares or Options.
17
<PAGE>
RESTRICTED SHARES
Under the Original Plan and the amended Plan, each non-employee Director
who is to receive Restricted Shares for a Plan Year receives his or her entire
annual retainer in the form of a grant of Restricted Shares made on the first
business day of the Plan Year. The Restricted Shares will have a fair market
value on that date equal to the annual retainer then in effect for non-employee
Directors.
Restricted Shares may not be sold or transferred (except by will or by the
laws of descent and distribution) between the date of grant and the end of the
Plan Year for which the Restricted Shares are granted, except as described
below. Except for the restrictions described in the Plan, a non-employee
Director holding Restricted Shares will have all the rights of a stockholder
during such period, including the right to receive dividends and the right to
vote the Shares at meetings of stockholders of the Company.
Except as provided below, if a non-employee Director ceases to be a member
of the Board during the Plan Year for which Restricted Shares are granted, the
Director will receive a number of Shares based on the portion of the Plan Year
during which he or she served as a Director. Any additional Restricted Shares
will be forfeited. The Shares issued generally cannot be sold for six months
after the original date of grant. If a non-employee Director ceases to be a
Director as a result of death or disability, or if a change of control of the
Company occurs, the restrictions on the Director's Restricted Shares will
lapse.
DEFERRAL ELECTION
A non-employee Director may elect to defer the receipt of Shares
attributable to meeting fees and Restricted Shares to a date after the Director
ceases to be a member of the Board. Deferred Shares will be distributed in one
or more installments. Deferred Shares will be credited with dividend equivalents
as dividends are paid on outstanding Shares. The dividend equivalents will be
converted into additional deferred Shares as of the payment date of the
dividend.
OPTIONS
Under the amended Plan, each non-employee Director who elects to receive
Options for a Plan Year will have his or her entire annual retainer converted
into an Option to purchase Shares as of the first business day of the Plan Year.
Each Option will be a nonqualified stock option under the Internal Revenue Code.
The Committee will determine the number of Shares to be covered by a
non-employee Director's Option based on the following formula:
(i) First, the Committee will determine the value of an option to purchase
Shares for a ten-year period, as determined by the Black-Scholes option
pricing formula. The Committee will use the option pricing formula value
based on a stock price equal to 80% of the fair market value of a Share
on the date of grant.
(ii) The number of Shares to be covered by the Option will be determined by
dividing the annual retainer by one-half of the value of an Option as
determined under item (i) above.
This formula is the same as the formula used to calculate the bonus
replacement options granted in March 1997 to executive officers of the Company,
as described in the Compensation Committee Report on page 5.
The option exercise price of each Option shall be the fair market value on
the date of grant of the Shares covered by the Option. An Option may not be
exercised after the first to occur of (i) ten years after the date of grant or
(ii) three months after the non-employee Director ceases to be a Director.
An Option may not be exercised until the end of the Plan Year for which it
is granted and shall become exercisable as of that date only if the non-employee
Director has continued to serve as a Director throughout the Plan Year. Except
as described below, if a non-employee Director ceases to be
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a Director during that Plan Year, the Option will terminate, and the Company
will grant to the Non- Employee Director Restricted Shares in the amount that
would have been computed for the year if the non-employee Director had elected
to have his or her annual retainer paid in the form of Restricted Shares.
However, if a non-employee Director ceases to be a Director on account of death
or disability, or if a change of control of the Company occurs, his or her
Option will be fully vested and exercisable.
A non-employee Director may pay the option exercise price in cash or in
Shares (subject to any restrictions the Committee may impose) valued at the fair
market value on the date notice is received by the Company, or a combination
thereof. No Option will be subject to any debts or liabilities of the Director
or be assignable or transferrable, except by will or the laws of descent and
distribution, and except that Options may be transferred if and to the extent
permitted by the Committee.
TAX TREATMENT
The following discussion is based on the Internal Revenue Code as presently
in effect, which is subject to change, and does not purport to be a complete
description of the federal income tax aspects of grants under the Plan.
TAX TREATMENT OF OPTIONS
No income will be realized by a non-employee Director upon grant of an
Option under the Plan. Upon exercise of an Option, the Director will recognize
ordinary income in an amount equal to the excess, if any, of the fair market
value of the Shares acquired over the option exercise price at the time of
exercise, and this same amount will be deductible by the Company for federal
income tax purposes. The Director's tax basis in the Shares acquired will equal
the exercise price plus the amount taxable as compensation to the Director. Upon
a sale of the Shares acquired upon exercise, any gain or loss will be long-term
or short-term capital gain or loss, depending on the holding period. The
required holding period for long-term capital gain is presently one year. The
Director's holding period for Shares acquired upon exercise will begin on the
date of exercise.
TAX TREATMENT OF SHARES AND RESTRICTED SHARES
Unrestricted Shares will be taxed to the non-employee Director at the date
they are issued, and the Company will receive a corresponding income tax
deduction at that time.
Except as described below, no income will be realized by a non-employee
Director upon the grant of Restricted Shares. When Restricted Shares vest, the
Director will recognize ordinary income equal to the fair market value of the
Shares at the time they vest. A Director may elect to make a "Section 83(b)
election" under the Internal Revenue Code, in which case the Director will
recognize ordinary income on the value of the Restricted Shares at the time the
Restricted Shares are granted. The Company will be entitled to a federal income
tax deduction at the time the Director recognizes ordinary income on the
Restricted Shares. The Director's tax basis in the Shares will equal the amount
taxable as compensation to the Director. Upon a sale of the Shares, any gain or
loss will be long-term or short-term capital gain or loss, depending on the
holding period. The Director's holding period for Restricted Shares will begin
on the date the Director recognizes income on the Shares.
If a non-employee Director elects to defer receipt of Shares or Restricted
Shares, the Director will not be taxed on the Shares or Restricted Shares when
they are granted or vest. Instead, the Director will be taxed on the then value
of the Shares when they are distributed, and the Company will receive a
corresponding income tax deduction at that time.
MARKET PRICE OF COMMON STOCK
The closing price of the Common Stock, as reported in THE WALL STREET
JOURNAL, New York Stock Exchange Composite Transactions, for April 11, 1997 was
$18.75.
PLAN BENEFITS
If the price of the Company's Common Stock on the first day of a Plan Year
were equal to the $18.75 closing price on April 11, 1997, and if the number of
Shares to be covered by an Option were
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determined as of the same date using the methodology described under
"Description of the Plan- Options" on page 18, then for that Plan Year
each non-employee Director would be entitled to elect to receive either 1,333
Restricted Shares or an Option to purchase 5,327 Shares at an option exercise
price of $18.75 per Share. A Director who elects to receive an Option will
realize value from its exercise only to the extent the price of the Common Stock
increases from its fair market value on the date of grant during the term of the
Option.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to stockholder ratification, the Board has reappointed the firm of
Price Waterhouse LLP as independent public accountants to make an examination of
the financial statements of the Company for the 1997 fiscal year. Price
Waterhouse LLP has served as the independent public accountants of the Company
since 1987. One or more representatives of Price Waterhouse LLP will be present
at the Meeting and will have an opportunity to make a statement if they desire
to do so and will be available to respond to questions.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" SUCH RATIFICATION.
Ratification will require the affirmative vote of the holders of a majority of
the Common Stock present in person or by proxy and entitled to vote at the
Meeting. In determining whether this proposal has received the requisite number
of affirmative votes, abstentions will be counted and will have the same effect
as a vote against the proposal and broker non-votes will have no effect.
STOCKHOLDER PROPOSALS AND NOMINATIONS
In accordance with Rule 14a-8 under the Exchange Act, any stockholder
proposals intended to be presented at the 1998 Annual Meeting of Stockholders
must be received by the Company no later than December 23, 1997 in order to be
considered for inclusion in the Proxy Statement and proxy relating to that
meeting.
Sections 8 and 9 of Article II of the Company's By-Laws provide that, in
order for a stockholder to nominate a person for election to the Board or to
propose any matter for consideration at an annual meeting of the Company, such
stockholder must be a stockholder of record on the date the notice described
below is given and on the record date for the annual meeting, and must have
given timely prior written notice to the Secretary of the Company of such
stockholder's intention to make such nomination or bring such business before
the meeting. To be timely, notice must be received by the Company not less than
60 days nor more than 90 days prior to the date of the annual meeting; provided,
however, that in the event less than 70 days notice or prior public disclosure
of the date of the meeting is given to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the annual meeting
was made, whichever first occurs.
If such notice relates to a nomination, it must contain certain information
about the person whom the stockholder proposes to nominate and the stockholder
giving the notice, including the name, age, residence and business address,
occupation, and class and number of shares of capital stock owned beneficially
or of record by the proposed nominee and the name, record address and class and
number of shares of capital stock owned beneficially or of record by such
stockholder as well as a description of any arrangements or understandings
between such stockholder and the proposed nominee pursuant to which the
nomination is to be made. In addition, such notice must contain any other
information related to the proposed nominee or such stockholder that would be
required to be disclosed in a proxy statement. The notice must also contain a
representation that such stockholder intends to appear in
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person or by proxy at the meeting to nominate the person named in such notice.
Such notice must be accompanied by a written consent of each proposed nominee to
being named as a nominee and to serve as a Director if elected.
If such notice relates to any matter other than a nomination, it must
contain certain information about such matter and the stockholder who proposes
to bring the matter before the meeting, including the name and record address of
such stockholder, a brief description of the matter the stockholder proposes to
bring before the meeting, the reasons for bringing such matter before the annual
meeting, the class and number of shares of capital stock owned beneficially or
of record by such stockholder, any material interest of such stockholder in the
matter so proposed, a description of all arrangements or understandings between
such stockholder and any other person or persons (including their names) in
connection with the proposal by such stockholder and a representation that such
stockholder intends to appear in person or by proxy at the annual meeting to
bring such matter before the meeting.
WHEN IT BECOMES AVAILABLE, THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY
PERSON FROM WHOM A PROXY IS SOLICITED BY THE BOARD, UPON WRITTEN REQUEST, A COPY
OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K, INCLUDING ITS FINANCIAL
STATEMENTS AND SCHEDULES (AS WELL AS EXHIBITS, IF SPECIFICALLY REQUESTED),
REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WRITTEN
REQUESTS SHOULD BE DIRECTED TO ALEXANDER L. STANTON, INVESTOR RELATIONS, THE
SPORTS AUTHORITY, INC., 3383 NORTH STATE ROAD 7, FORT LAUDERDALE, FLORIDA 33319.
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EXHIBIT A
THE SPORTS AUTHORITY, INC.
AMENDED AND RESTATED DIRECTOR STOCK PLAN
1. PURPOSE.
1.1 The Sports Authority, Inc. Director Stock Plan is intended to increase
the proprietary interest of non-employee members of the Board of Directors of
The Sports Authority, Inc. by providing further opportunity for ownership of the
Company's common shares. By means of such increased proprietary interest, the
Plan is intended to increase their incentive to contribute to the success of the
Company's business.
1.2 The Plan is intended to comply with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, as such Rule may be amended from time to time,
and shall be interpreted in a manner consistent with the requirements thereof,
as now or hereafter construed, interpreted and applied by regulations, rulings
and cases. The amendment and restatement of the Plan shall be effective as of
May 29, 1997.
2. DEFINITIONS. As used in this Plan, the following words and phrases
shall have the meanings indicated:
(a) "Annual Retainer" shall mean the annual retainer fee paid by the
Company to a Participant for his or her services as a director, and shall not
include meeting fees.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Change in Control" shall mean the occurrence of an event
described in Article 11 hereof.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" shall mean the Compensation Committee of the Board.
(f) "Company" shall mean The Sports Authority, Inc., a corporation
organized under the laws of the State of Delaware, or any successor corporation.
(g) "Date of Grant" shall mean the date on which an Option is granted
pursuant to Article 10.
(h) "Deferred Shares" means Shares or Restricted Shares that are
deferred at the election of a Participant pursuant to Article 7.
(i) "Disability" shall mean a Participant's total and permanent
inability to perform his or her duties to the Company by reason of any medically
determinable physical or mental impairment, as determined by a physician
selected by the Participant and acceptable to the Company.
(j) "Dividend Equivalents" shall mean amounts credited pursuant to
Article 8.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(l) "Fair Market Value" per Share shall mean the closing price on the
New York Stock Exchange Composite Transactions Tape (or its equivalent if the
Shares are not traded on the New York Stock Exchange) of a Share on the trading
day immediately prior to the relevant valuation date or Date of Grant.
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(m) "Option" shall mean an option to purchase Shares granted pursuant
to Article 10.
(n) "Participant" shall mean a non-employee member of the Board.
(o) "Plan" shall mean The Sports Authority, Inc. Director Stock Plan,
as amended from time to time.
(p) "Plan Quarter" shall mean a calendar quarter ending on May 31,
August 31, November 30 or February 28 (or 29).
(q) "Plan Year" shall mean the approximately 12-month period
beginning on the day after the date of each annual meeting of the Company's
shareholders and ending on the date of the next following annual meeting of the
Company's shareholders. The first Plan Year under the amended and restated Plan
shall begin on May 30, 1997.
(r) "Prior Plan" shall mean the Plan as in effect before the May 29,
1997 amendment and restatement of the Plan.
(s) "Restricted Period" shall have the meaning given in Section
6.3(c).
(t) "Restricted Share" shall mean a Share granted subject to
restrictions pursuant to Article 6.
(u) "Rule 16b-3" shall mean Rule 16b-3, as in effect from time to
time, promulgated by the Securities and Exchange Commission under Section 16 of
the Exchange Act, including any successor to such Rule.
(v) "Shares" shall mean the common shares of the Company, $.01 par
value.
3. SHARES. The maximum number of Shares which shall be reserved for the
grant of Shares, Restricted Shares and Options under the Plan shall be 150,000
Shares, which number shall be subject to adjustment as provided in Article 12
hereof. Such Shares may be either authorized but unissued Shares or Shares that
shall have been or may be reacquired by the Company. If any Restricted Shares
under the Plan are forfeited and reacquired by the Company, or if any Options
terminate or expire unexercised, the Shares forfeited or covered by the
terminated or expired Option shall (unless the Plan shall have been terminated)
again become available for use under the Plan.
4. ELECTION TO RECEIVE ANNUAL RETAINER IN THE FORM OF OPTIONS OR RESTRICTED
SHARES.
4.1 ELECTIONS. Before the beginning of each Plan Year that commences on
or after May 30, 1997, each Participant may elect to receive his or her Annual
Retainer for the Plan Year in the form of Restricted Shares as described in
Article 6 or in the form of Options as described in Article 10. The election
shall be made by filing a written election with the Secretary of the Company
before the beginning of the Plan Year. The election shall be irrevocable as of
the first day of the Plan Year.
4.2 1997 PLAN YEAR. The plan year under the Prior Plan that began January
1, 1997 shall end on May 29, 1997. As of May 29, 1997, each Participant shall
receive a number of unrestricted Shares (except as provided below) determined by
multiplying the number of Restricted Shares held by the Participant for the year
that began January 1, 1997 by a fraction, the numerator of which shall be the
number of days between and including January 1, 1997 and May 29, 1997 in which
the Participant served as a director, and the denominator of which is 365. The
Shares issued may not be sold until December 31, 1997. The additional Restricted
Shares granted for the year that began January 1, 1997 shall be forfeited as of
May 29, 1997. Each Participant may make an election under Section 4.1 with
respect to the Annual Retainer to be earned during the Plan Year beginning May
30, 1997.
4.3 ELECTIONS FOR NEW PARTICIPANTS. If an individual becomes a Participant
during a Plan Year, the Participant may elect to receive his or her Annual
Retainer for the Plan Year in the form of Restricted
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Shares or Options, by filing a written election with the Secretary of the
Company before the individual becomes a Participant. The election shall be
irrevocable as of the date on which the individual becomes a Participant.
4.4 FAILURE TO MAKE AN ELECTION. If a Participant makes no election under
this Article 4 for a Plan Year, the Participant's Annual Retainer shall be paid
in the form of Restricted Shares.
5. GRANTS OF SHARES FOR MEETING FEES.
5.1 GRANTS SUBJECT TO DEFERRAL ELECTION, IF ANY. The provisions of this
Article 5 with respect to grants of Shares shall be subject to any deferral
election made with respect to such Shares by a Participant in accordance with
Article 7.
5.2 MEETING FEES. The meeting fees of each Participant shall be provided
in the form of a grant of Shares made on the last business day of the Plan
Quarter in which the relevant meetings occur. Shares so granted shall have a
Fair Market Value on such date equal to the aggregate amount of the meeting fees
for the Participant with respect to meetings occurring in such Plan Quarter.
Such Shares shall not be sold until at least six months after their date of
grant. Fractional Shares shall be paid in cash.
6. GRANT OF RESTRICTED SHARES FOR ANNUAL RETAINER.
6.1 GRANTS SUBJECT TO DEFERRAL ELECTION, IF ANY. All provisions of this
Article 6 with respect to grants of Restricted Shares shall be subject to any
deferral election made with respect to such Restricted Shares by a Participant
in accordance with Article 7.
6.2 GRANTS OF RESTRICTED SHARES FOR ANNUAL RETAINER. Each individual who
is a Participant at the beginning of a Plan Year and who is to receive
Restricted Shares for the Plan Year pursuant to Article 4 shall receive his or
her Annual Retainer in the form of a grant of Restricted Shares made on the
first business day of the Plan Year. The Restricted Shares so granted shall have
a Fair Market Value on such date equal to the amount of the Annual Retainer in
effect on such date for the Participant. Fractional Shares shall be paid in
cash.
In the case of an individual who becomes a Participant during a Plan Year
and who is to receive Restricted Shares for the Plan Year pursuant to Article 4,
his or her Annual Retainer with respect to such Plan Year shall be provided in
the form of a grant of Restricted Shares made on the last business day of the
Plan Quarter in which he or she becomes a Participant (except that if the Plan
Quarter ends on February 28 (or 29), the grant of Restricted Shares shall be
made on the next following March 15, or the next business day after March 15 if
March 15 is not a business day). The Restricted Shares so granted shall have a
Fair Market Value on such date equal to the amount of the applicable Annual
Retainer multiplied by a fraction, the numerator of which is the number of days
remaining in such Plan Year from and after the date the individual becomes a
Participant and the denominator of which is the number of days in the Plan Year.
Fractional Shares shall be paid in cash.
If an increase in the Annual Retainer becomes effective during a Plan Year,
an additional grant of Restricted Shares shall be made on the last day of the
Plan Quarter in which the increase in the Annual Retainer becomes effective
(except that if the last day of the Plan Quarter is February 28 (or 29), the
grant shall be made on the next following March 15, or the next business day
after March 15 if March 15 is not a business day). The Restricted Shares so
granted shall have a Fair Market Value on such date equal to the amount of such
increase multiplied by a fraction, the numerator of which is the number of days
remaining in the Plan Year from and after the effective date of the increase and
the denominator of which is 365. Fractional Shares shall be paid in cash. Any
increase in the Annual Retainer during a Plan Year shall be paid in Restricted
Shares, without regard to whether the Participant elected to receive his or her
Annual Retainer as of the beginning of the Plan Year in the form of Options.
6.3 TERMS OF RESTRICTED SHARES. Each grant of Restricted Shares under the
Plan shall comply with the following terms and conditions:
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(a) Each grant shall state the number of Restricted Shares to be granted.
(b) Restricted Shares may not be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of (except by will or the applicable laws of
descent and distribution) during the Restricted Period.
(c) Subject to Sections 6.3(d) and 6.3(f) hereof, the Restricted Period for
Restricted Shares granted under the Plan shall begin with their grant and end
upon completion of the Plan Year in which they are granted.
(d) Except as provided in Section 6.3(f) hereof, if during the Restricted
Period a Participant's service as a member of the Board (whether or not a
non-employee member) terminates, the Participant shall receive a number of
unrestricted Shares (except as described below) determined by multiplying the
number of Restricted Shares held by the Participant by a fraction, the numerator
of which shall be the number of days during which the Participant served as a
director during the Restricted Period and the denominator of which shall be the
number of days in the Restricted Period. Any additional Shares shall be
forfeited. The Shares issued shall be subject to the six-month sale restriction
of Section 6.3(g) below.
(e) During the Restricted Period, the Participant shall possess all
incidents of ownership of such Restricted Shares, including the right to vote
and to receive dividends with respect to such Restricted Shares, subject to the
restrictions and limitations described in this Article.
(f) Upon the termination of a Participant's service as a member of the
Board which results from the Participant's death or Disability, or upon the
occurrence of a Change in Control of the Company, all restrictions then
outstanding with respect to Restricted Shares granted hereunder shall
automatically expire and be of no further force and effect.
(g) Notwithstanding any other provisions hereof, unless an event described
in Section 6.3(f) occurs, no Shares from a grant of Restricted Shares may be
sold until at least six months after the date of grant of the Restricted Shares.
(h) Upon the grant of Restricted Shares, either (i) a share certificate or
certificates representing such Restricted Shares shall be registered in the
Participant's name, shall bear an appropriate legend referring to the
restrictions applicable thereto, and shall be held in custody by an escrow agent
appointed by the Committee for the account of the Participant, or (ii) the
Company's share transfer agent or other designee shall credit such Restricted
Shares to the Participant's Restricted Shares account, which Shares shall be
subject to the restrictions applicable thereto under the Plan. Any attempt to
dispose of any such Shares in contravention of such restrictions shall be null
and void and without effect.
(i) A Participant shall have only the rights as a shareholder described in
Section 6.3(e) with respect to any Restricted Shares during the Restricted
Period. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distribution of other rights
for which the record date is prior to the date an unrestricted Share certificate
is issued, except as provided in Article 12 hereof.
7. DEFERRAL ELECTIONS.
7.1 ELECTIONS. Each Participant may elect to defer the receipt (a
"Deferral Election") of all or a portion of the Shares under Article 5 and
the Restricted Shares under Article 6 that are otherwise deliverable to the
Participant with respect to his or her services as a director during a Plan Year
("Deferred Shares"). When the applicable deferral period ends, such
Deferred Shares shall be deliverable in unrestricted Shares.
The Participant shall elect (a) that Deferred Shares be distributed in a
lump sum or in equal annual installments (not exceeding ten), and (b) that the
lump sum or first installment be distributed on the
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tenth day of the calendar year immediately following either (i) the year in
which the Participant ceases to be a director of the Company, or (ii) the
earlier of the year in which the Participant ceases to be a director of the
Company or a date designated by the Participant, provided, however, that any
such election shall be subject to Article 9 hereof. Installments subsequent to
the first installment shall be distributed on the tenth day of each succeeding
calendar year until all of the Participant's Deferred Shares shall have been
distributed.
In the event the Participant should die before all of the Participant's
Deferred Shares have been distributed, the balance of the Deferred Shares shall
be distributed in a lump sum to the person or persons whom the Participant shall
have designated in writing on a form prescribed by and filed with the Committee,
or, if no such designation has been made, to the person or persons to whom the
Participant's rights shall have passed by will or the laws of descent and
distribution. The Committee may require an indemnity and such evidence or other
assurances as it may deem necessary in connection with an exercise by a legal
representative, guardian, beneficiary or successor.
In the event the Participant should terminate his or her service as a
member of the Board during the period which would have been a Restricted Period
with respect to a particular grant of Deferred Shares hereunder, except that the
Participant made an effective Deferral Election with respect to such grant, such
Deferred Shares shall be treated in the same manner as Restricted Shares under
Sections 6.3(d) and 6.3(f) hereof.
7.2 TIMING AND FORM OF DEFERRAL ELECTIONS. Any deferral election:
(a) shall be in the form of a document executed by the Participant and
filed with the Secretary of the Company,
(b) shall be made before the first day of the Plan Year in which the
applicable retainer fee or meeting fees are earned and shall become irrevocable
on the last day prior to the beginning of such Plan Year (except that an
election with respect to the first Plan Year in which an individual becomes a
Participant shall be made before the first date on which he or she is a
Participant and shall become irrevocable on the last day prior to such date),
and
(c) shall continue until a Participant ceases to be a director or until he
or she terminates or modifies such election by written notice, any such
termination or modification to be effective as of the end of the Plan Year in
which such notice is given with respect to fees payable in subsequent Plan
Years.
8. DIVIDEND EQUIVALENTS. Deferred Shares shall be credited with an amount
equivalent to the dividends which have been paid on an equal number of
outstanding Shares ("Dividend Equivalents"). Dividend Equivalents shall be
credited (i) as of the payment date of such dividends, and (ii) only with
respect to Deferred Shares which were otherwise deliverable, or into which
Dividend Equivalents were converted pursuant to the second paragraph of this
Article 8, prior to the record date of the dividend. Deferred Shares held
pending distribution shall continue to be credited with Dividend Equivalents.
Dividend Equivalents so credited shall be converted into an additional
whole number of Deferred Shares as of the payment date of the dividend (based on
the Fair Market Value of a Share on such payment date). Such Deferred Shares
shall thereafter be treated in the same manner as any other Deferred Shares
under the Plan. Dividend Equivalents resulting in fractional shares shall be
held for the credit of the Participant until the next dividend payment date and
shall be converted into Deferred Shares on such date. Upon the final
distribution of the Participant's Deferred Shares, any Dividend Equivalents not
previously converted into Deferred Shares shall be paid in cash.
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9. EFFECT OF CERTAIN EVENTS. Notwithstanding a deferral election pursuant
to Article 7 hereof:
(a) If, as determined by the Board in its sole discretion, the Participant
(during or following his or her membership on the Board) engages in any activity
or association in competition with or adverse or detrimental to the interests of
the Company (i) all of such Participant's Deferred Shares shall be distributed
immediately in the form of Shares, (ii) Dividend Equivalents not yet converted
into Deferred Shares shall be distributed immediately in cash, and (iii) all of
such Participant's fees earned and not yet converted into Shares, Restricted
Shares or Deferred Shares under the terms of this Plan shall be distributed in
the form of Shares as soon as practicable, with any fractional Share being
distributed in cash.
(b) Upon the occurrence of a Change in Control, (i) all Deferred Shares to
the extent credited prior to the Change in Control shall be distributed
immediately in the form of Shares, and (ii) all Dividend Equivalents not yet
converted into Deferred Shares and all fees earned and not yet converted into
Shares, Restricted Shares, Deferred Shares or Options under the terms of this
Plan shall be distributed immediately in cash.
10. GRANT OF OPTIONS.
10.1 GRANT OF OPTIONS WITH RESPECT TO ANNUAL RETAINERS. Each individual
who is a Participant at the beginning of a Plan Year and who has elected to
receive Options for the Plan Year pursuant to Article 4 shall have his or her
Annual Retainer for the Plan Year converted into an Option to purchase Shares
pursuant to the formula described below. The Company shall grant the Option, at
the direction of the Committee, on the first business day of the Plan Year (the
"Date of Grant"). The Board may determine that Option grants shall be
subject to approval of the Board. Each Option shall be a non-
qualified stock option and shall be evidenced by a Share Option Agreement in
such form as the Committee shall approve. The Committee shall determine the
number of Shares for which the Participant shall receive an Option for the Plan
Year based on the following formula:
(a) First, the Committee shall determine the value (as of the last trading
day immediately before the Date of Grant) of an option to purchase Shares for a
ten-year period, as determined by the Black-Scholes option pricing formula. The
Committee shall use the Black-Scholes value based on a stock price equal to 80%
of the Fair Market Value of a Share on the Date of Grant.
(b) The number of Shares to be covered by the Option shall be determined by
dividing the Annual Retainer by one-half of the value of an option determined
under subsection (a) above and shall be rounded down to the nearest whole Share.
(c) Any portion of an Annual Retainer that is not converted into an Option
shall be paid in the form of Restricted Shares, except that fractional Shares
shall be paid in cash.
10.2 OPTION PRICE. The option exercise price of each Option granted under
the Plan shall be the Fair Market Value on the Date of Grant of the Shares
covered by the Option.
10.3 NEW PARTICIPANTS. An individual who becomes a Participant during a
Plan Year and who elects to receive an Option for the Plan Year pursuant to
Article 4 shall receive an Option on the last business day of the Plan Quarter
in which he or she becomes a Participant (except that if the Plan Quarter ends
on February 28 (or 29), the Date of Grant for the Option shall be the next
following March 15, or the next business day after March 15 if March 15 is not a
business day). The Committee shall grant the Participant an Option based on the
Participant's Annual Retainer multiplied by a fraction, the numerator of which
is the number of days remaining in such Plan Year from and after the date the
individual becomes a Participant and the denominator of which is the number of
days in the Plan Year. The Option shall be based on the Fair Market Value of
Shares on the Date of Grant in the manner described in Section 10.1.
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10.4 OPTION TERM; VESTING.
(a) An Option may not be exercised after the first to occur of (i) ten
years from the Date of Grant or (ii) three months after the Participant ceases
to be a Director for any reason. Any Option not exercised within the foregoing
Option term shall automatically terminate at the expiration of such Option term.
(b) Except as set forth below, an Option may not be exercised until the end
of the Plan Year in which the Option is granted, and shall be exercisable as of
that date only if the Participant has continued to serve as a director of the
Company through that Plan Year. Except as provided below, if a Participant
ceases to be a member of the Board during such Plan Year, the Option shall
terminate. In that event, the Company shall grant to the Participant
unrestricted Shares (except as provided below) in the amount that would have
been computed for the Plan Year pursuant to Section 6.3(d) if the Participant
had elected to have his or her Annual Retainer paid in the form of Restricted
Shares. The Shares issued shall be subject to the six-month sale restriction of
Section 6.3(g), with the six-month period measured from the Date of Grant of the
Option.
(c) If a Participant ceases to be a member of the Board on account of the
Participant's death or Disability, or upon the occurrence of a Change in
Control of the Company, the Participant's outstanding Options shall be fully
vested and exercisable. In the event of the death of a Participant, the
Participant's outstanding Options may be exercised by the person or persons
whom the Participant shall have designated in writing on a form prescribed by
and filed with the Committee, or, if no such designation has been made, by the
person or persons to whom the Participant's rights shall have passed by will or
the laws of descent and distribution. The Committee may require an indemnity and
such evidence or other assurances as it may deem necessary in connection with an
exercise by a legal representative, guardian, beneficiary or successor.
10.5 EXERCISE AND PAYMENT.
(a) An exercisable Option may be exercised by notice (in the form
prescribed by the Committee) to the Company specifying the number of Shares to
be purchased. Payment for the number of Shares purchased upon the exercise of an
Option shall be made in full at the price provided for in the applicable Share
Option Agreement. Such purchase price shall be paid by the delivery to the
Company of cash (including check or similar draft) in United States dollars or
whole Shares (subject to any restrictions the Committee may impose), or a
combination thereof. Shares used in payment of the purchase price shall be
valued at their Fair Market Value as of the date the notice of exercise is
received by the Company. Any Shares delivered to the Company shall be in such
form as is acceptable to the Company.
(b) The Company may defer making delivery of Shares under the Plan until
satisfactory arrangements have been made for the payment of any tax attributable
to exercise of the Option. The Committee may, in its sole discretion, permit a
Participant to elect, in such form and at such time as the Committee may
prescribe, to pay all or a portion of any taxes arising in connection with the
exercise of an Option by electing to (a) have the Company withhold whole Shares,
or (b) deliver other whole Shares previously owned by the Participant having a
Fair Market Value not greater than the amount to be withheld; provided that the
amount to be withheld shall not exceed the total Federal, State and local tax
withholding obligations associated with the transaction. Notwithstanding the
foregoing, any tax withholding obligation with respect to each Section 16
insider under the Exchange Act shall be satisfied solely by the Company's
withholding of whole Shares.
10.6 NONTRANSFERABILITY. No Option or any rights with respect thereto
shall be subject to any debts or liabilities of a Participant, nor shall they be
assignable or transferable except by will or the laws of descent and
distribution; provided that, if the Committee deems it appropriate, an Option
may permit the Participant to transfer the Option to one or more transferees
during the Participant's lifetime, and such transferees may exercise rights
thereunder in accordance with the terms hereof, but only if and to the extent
permitted by the Committee.
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10.7 RIGHTS AS A SHAREHOLDER. A Participant shall have no rights as a
record holder with respect to Shares covered by his or her Option until the date
of issuance to him or her of a certificate evidencing such Shares after the
exercise of such Option and payment in full of the purchase price. No adjustment
will be made for cash dividends for which the record date is prior to the date
such certificate is issued.
11. CHANGE IN CONTROL OF THE COMPANY. The first to occur of any of the
following events shall be deemed a Change in Control of the Company; provided,
however, that in no event shall the initial public offering of the Shares be
deemed a Change in Control of the Company for purposes of this Plan:
(i) the "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities representing more than 20% of the combined voting
power of the Company is acquired by any "person," as defined in sections
13(d) and 14(d) of the Exchange Act (other than Kmart Corporation, the Company,
any trustee or other fiduciary holding securities under an employee benefit plan
of the Company, or any corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of Shares of the Company, or any "person" acquiring such
securities in a sale or transfer by Kmart Corporation in a transaction not
involving a public offering), or
(ii) the shareholders of the Company approve a definitive agreement to
merge or consolidate the Company with or into another corporation or to sell or
otherwise dispose of all or substantially all of its assets, or adopt a plan of
liquidation, or
(iii) during any period of three consecutive years beginning after the
completion of the initial public offering of the Shares, individuals who at the
beginning of such period were members of the Board cease for any reason to
constitute at least a majority thereof (unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved
by a vote of at least a majority of the directors then still in office who were
directors at the beginning of such period or whose election or nomination was
previously so approved).
12. EFFECT OF CERTAIN CHANGES. In the event of any extraordinary dividend,
share dividend, recapitalization, merger, consolidation, share split, warrant or
rights issuance, or combination or exchange of such shares, or other similar
transactions, the number and type of Shares available for grant, the number and
type of outstanding Restricted Shares, Deferred Shares and Options, and the
Option price of outstanding Options shall be equitably adjusted by the Committee
to reflect such event and preserve the value of such grants, and the Committee
may make such other adjustments to the terms of outstanding Restricted Shares,
Deferred Shares and Options as it may deem equitable under the circumstances;
provided, however, that any fractional Shares resulting from such adjustment
shall be eliminated.
13. NO RIGHTS TO CONTINUANCE AS DIRECTOR. Nothing in the Plan or in any
grant made pursuant hereto shall confer upon any Participant the right to
continue to serve as a member of the Company's Board or to be entitled to any
remuneration or benefits not set forth in the Plan.
14. ADMINISTRATION. The Plan shall be administered by the Committee, except
as otherwise specifically provided in the Plan. The Committee shall have the
full authority and discretion to make such interpretations and constructions of
the Plan as are necessary to administer the Plan in accordance with, and subject
to, the Plan's provisions. Without limiting the foregoing, the Committee is
specifically authorized to make such modifications to the administration of the
Plan as it deems appropriate if an annual meeting of the Company's shareholders
is not held on a date that is approximately 12 months after the last annual
shareholders meeting. If the Board deems it appropriate, the Board may reserve
the right to approve grants under the Plan.
The Board shall fill all vacancies, however caused, in the Committee. The
Board may from time to time appoint additional members to the Committee, and may
at any time remove one or more Committee members and substitute others. The
Committee may appoint a chairperson and a secretary
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and make such rules and regulations for the conduct of its business as it shall
deem advisable, and shall keep minutes of its meetings. The Committee shall hold
its meetings at such times and places as it shall deem advisable. All
determinations of the Committee shall be made by a majority of its members
either present in person or participating by conference telephone at a meeting
or by unanimous written consent. The Committee may delegate to one or more of
its members or to one or more agents such administrative duties as it may deem
advisable, and the Committee or any person to whom it has delegated duties as
aforesaid may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan.
All decisions, determinations and interpretations of the Committee and the
Board shall be final and binding on all persons, including the Company, the
Participant (or any person claiming any rights under the Plan from or through
any Participant) and any shareholder. No member of the Board or Committee shall
be liable for any action taken or determination made in good faith with respect
to the Plan or any grant hereunder.
15. AMENDMENT AND TERMINATION OF THE PLAN. The Board at any time and from
time to time may suspend, terminate, modify or amend the Plan; provided,
however, that an amendment which requires shareholder approval in order for the
Plan to continue to comply with any law, regulation or stock exchange
requirement shall not be effective unless approved by the requisite vote of
shareholders. Except as provided in Article 12 hereof, no suspension,
termination, modification or amendment of the Plan may adversely affect any
grant previously made, unless the written consent of the Participant is
obtained.
16. GOVERNING LAW. The Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of the
State of Delaware without giving effect to the choice of law principles thereof,
except to the extent that such law is preempted by federal law.
17. APPROVAL OF SHAREHOLDERS.
17.1 The amended and restated Plan shall take effect upon its adoption by
the Board and approval by the shareholders of the Company.
17.2 The Plan shall remain in effect until December 31, 2004, unless sooner
terminated by the Board; provided, however, that Shares and Dividend Equivalents
may be delivered pursuant to a Deferral Election after such date, the Restricted
Period of Restricted Shares granted prior to such date may extend beyond such
date, Options granted prior to such date may be exercised after such date, and
the provisions of the Plan shall continue to apply to such Deferred Shares,
Dividend Equivalents, Restricted Shares and Options.
18. MISCELLANEOUS.
18.1 The right of a Participant to Restricted Shares, Deferred Shares,
Dividend Equivalents and Options shall be non-assignable (except as specifically
provided otherwise in the Plan) and shall not be subject in any manner to the
debts or other obligations of the Participant or any other person.
18.2 The Company shall not be required to reserve or otherwise set aside
funds with respect to grants under the Plan.
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THE SPORTS AUTHORITY, INC.
PROXY
1997 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JACK A. SMITH, RICHARD J. LYNCH, JR. and
each of them, the true and lawful attorneys, agents and proxies for and in the
name of the undersigned, with full power of substitution for and in the name of
the undersigned, to vote all shares of Common Stock the undersigned is entitled
to vote at the 1997 Annual Meeting of Stockholders of THE SPORTS AUTHORITY, INC.
to be held on May 29, 1997 at 9:00 A.M. at the Company's corporate headquarters
located at 3383 North State Road 7, Fort Lauderdale, Florida 33319, and at any
and all adjournments thereof, on the following matters:
(1) FOR [ ] WITHHOLD VOTE [ ] the election of Carol Farmer, Jack F. Kemp
and Richard J. Lynch, Jr. as Class III Directors to serve until the Annual
Meeting of Stockholders in 2000 or until their successors are duly elected
and qualified, and Julius W. Erving as a Class I Director to serve until the
Annual Meeting of Stockholders in 1998 or until his successor is duly
elected and qualified; except vote withheld from the following nominee(s)
_______________________________;
(2) FOR [ ] AGAINST [ ] ABSTAIN [ ] approval of the Amended and Restated
Director Stock Plan;
(3) FOR [ ] AGAINST [ ] ABSTAIN [ ] ratification of the appointment of
Price Waterhouse LLP as the Company's independent public accountants
for the 1997 fiscal year; and
(4) In their discretion, on any other matters which may properly come before the
Meeting or any adjournment or postponement thereof.
[ ] I plan to attend the Meeting.
(SEE REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" ITEMS 1, 2 AND 3.
Date:_____________,1997
_______________________
_______________________
_______________________
_______________________
Please sign exactly as
your name appears hereon.
If stock is registered in
more than one name, each
holder should sign. When
signing as an attorney,
administrator, executor,
guardian or trustee,
please add your title as
such. If executed by a
corporation or
partnership, the proxy
should be signed in full
corporate or partnership
name by a duly authorized
officer or partner as
applicable.
