SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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<PAGE>
THE SPORTS AUTHORITY, INC.
3383 North State Road 7
Ft. Lauderdale, Florida 33319
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 28, 1998
----------------------------------------
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 Thursday, May 28, 1998, 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 four Class I Directors of the Company, each to serve for a term
of three years;
2. To act on a proposal to approve the amendment and restatement of the
Annual Incentive Bonus Plan;
3. To act on a proposal to ratify the appointment of Price Waterhouse LLP
as the Company's independent public accountants for the 1998 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 30, 1998 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,
/s/ Frank Bubb
Frank W. Bubb, III
Secretary
Ft. Lauderdale, Florida
April 27, 1998
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.
<PAGE>
THE SPORTS AUTHORITY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 28, 1998
---------------
PROXY STATEMENT
---------------
This Proxy Statement is being mailed on or about April 27, 1998, 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 28, 1998, 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 four Class I Directors to serve for a term of three years, (ii) a proposal to
approve the amendment and restatement of the Annual Incentive Bonus 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 24, 1999 (the "1998 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 30, 1998 (the "Record
Date") are entitled to notice of and to vote at the Meeting. At the Record Date,
there were 31,649,576 shares of Common Stock ("Shares") outstanding. The
presence, either in person or by proxy, of the holders of a majority of the
Shares outstanding on the Record Date and entitled to vote at the Meeting 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, will have the 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 held in such stockholder's name as of the Record Date on
any matter submitted to a vote of stockholders at the Meeting. Shares
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 amendment and
restatement of the Annual Incentive Bonus Plan, and (iii) FOR the ratification
of Price Waterhouse LLP as the Company's independent public accountants for the
1998 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.
<PAGE>
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 $3,500. 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.
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 19.
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 ten Directors, of whom four are in
Class I, three are in Class II and three are in Class III.
The terms of the Company's four current Class I Directors, Jack A. Smith,
Julius W. Erving, Martin E. Hanaka and W. Mitt Romney, expire at the Meeting. At
the Meeting, four Class I Directors are to be elected to serve three-year terms
commencing at the Meeting and ending in 2001 or until their respective
successors are elected and qualified or until their earlier death, resignation
or removal. Each of the current Class I Directors is being nominated by the
Board to serve again 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 Class I Directors nominated will require the
affirmative vote of a plurality of the Shares 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 nominee for election as Class
I Directors and of all other Directors who will continue in office.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
Term Expiring in 2001
Jack A. Smith, age 62. 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) and the National Retail Federation, and he
is a member of the Board of Governors of the Nova University School of Business
and Entrepreneurship.
2
<PAGE>
Julius W. Erving, age 48. Mr. Erving has served as a Director of the
Company since May 1997. Since June 1997, Mr. Erving has served as Vice President
of RDV Sports and as Executive Vice President of its division, the Orlando Magic
Basketball Club. 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 (long distance telephone service), Converse, Inc.
(athletic shoes), Philadelphia Coca-Cola Bottling Company and Proffitts, Inc.
(department stores).
Martin E. Hanaka, age 48. Mr. Hanaka was elected as Vice Chairman and as a
Director of the Company on February 2, 1998. From August 1994 until October
1997, Mr. Hanaka served as President and Chief Operating Officer of Staples,
Inc., an office supply superstore retailer. Mr. Hanaka's extensive retail career
has included serving as Executive Vice President of Marketing and as President
and Chief Operating Officer of Lechmere, Inc. from September 1992 through July
1994, and serving in various capacities for 20 years at Sears Roebuck & Co.,
most recently as Vice President in charge of Sears Brand Central. Mr. Hanaka is
also a director of Wil-Mar Industries, Inc. (marketing and distributing repair
and maintenance products) and Nature's Heartland (food retailing).
W. Mitt Romney, age 51. 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.
INCUMBENT CLASS II DIRECTORS
Term Expiring in 1999
Nicholas A. Buoniconti, age 57. 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 50. 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 73. 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.
3
<PAGE>
INCUMBENT CLASS III DIRECTORS
Term Expiring in 2000
Carol Farmer, age 53. 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 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 62. Mr. Kemp has served as a Director of the Company
since March 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 and western New York area 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), Oracle Corporation (software), Everen Capital Corporation
(securities brokerage), and Carson, Inc. (ethnic personal care products).
Richard J. Lynch, Jr., age 46. 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. Mr. Lynch is also a director of PETCO Animal
Supplies, Inc. (pet food and supplies retailing).
Board of Directors Meetings and Committees
During the fiscal year ended January 25, 1998 (the "1997 fiscal year") the
Board held four Board meetings and the committees of the Board held a total of
eight 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 1997 fiscal year. The current members
of the Audit Committee are Messrs. Dougherty (Chair), Kemp and Romney.
The Compensation Committee was established for the purpose of determining
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 three meetings during the 1997
fiscal year. The current members of the Compensation Committee are Ms. Farmer
(Chair) and Messrs. Buoniconti and Toppel.
The Nominating Committee was established for the purpose of nominating
individuals for election as Directors by the Company's stockholders. The
Nominating Committee held one meeting during the 1997 fiscal year. The current
members of the Nominating Committee are Mr. Romney (Chair) and Messrs.
Buoniconti, Erving and Lynch. 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 of this
Proxy Statement.
4
<PAGE>
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 1997 fiscal
year. The current members of the Executive Committee are Mr. Smith (Chair),
Messrs. Buoniconti, Dougherty, Erving, Kemp, Romney and Toppel and Ms. Farmer.
The Governance Committee was established for the purpose of considering
issues relating to the governance of the Board and other matters prescribed by
the Board. The Governance Committee held one meeting during the 1997 fiscal
year. The Governance Committee consists of Messrs. Dougherty (Chair),
Buoniconti, Erving, Kemp, Romney and Toppel and Ms. Farmer.
During the 1997 fiscal year, all of the Directors attended more than 75% of
the meetings of the Board and the committees on which they served, except Mr.
Toppel, who missed three of nine meetings, and Mr. Kemp, who missed two of five
meetings.
Compensation of Directors
Each Director who is not an employee of the Company is compensated under
the Director Stock Plan (the "Plan"). A plan year under the Plan is the 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. Under the Plan,
each non-employee Director receives his or her entire annual retainer for the
plan year in the form of restricted Shares valued at $25,000 on the first day of
the plan year, unless the Director elects in advance to receive his or her
retainer in the form of options to purchase Shares ("Options") at their fair
market value on the first day of the plan year. The restrictions on restricted
Shares lapse on the earlier of the end of the plan year or proportionally on the
date the grantee ceases being a Director, in which case the remaining restricted
Shares are forfeited. The Options, which are nonqualified stock options under
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
become exercisable at the end of the plan year for which they are granted and
terminate on the earlier of ten years after the date of grant or three months
after the grantee ceases being a Director. If a grantee ceases being a Director
due to death or disability, or if a change in control of the Company occurs, the
restrictions on the restricted Shares will lapse and the Options will be fully
vested and exercisable.
To determine the relationship between the number of retainer dollars a
non-employee Director must forego and the number of Options he or she receives,
the Plan requires the Compensation Committee to first determine the value of an
option to purchase Shares for a ten-year period, as determined by the
Black-Scholes option pricing formula, then to use the option pricing formula
based on a stock price equal to 80% of the fair market value of a Share on the
date of grant, and then to fix the number of Shares to be covered by the Option
by dividing the annual retainer by one-half of the value of an Option,
determined as set forth above. On May 29, 1997, each non-employee Director who
elected to receive Options received Options to purchase 5,607 Shares at $17.88
per Share and each other non-employee Director received 1,398 restricted Shares.
In addition, each non-employee Director receives $1,000 worth of
unrestricted Shares for each Board meeting attended and $500 worth of
unrestricted Shares for each Committee meeting attended, paid at the end of the
calendar quarter in which the meetings occurred. No Shares granted or purchased
under the Plan may be sold until at least six months after the date of grant or
purchase.
5
<PAGE>
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:
o 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;
o 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;
o Share ownership opportunities that align the interests of Company
executives with the long term interests of stockholders; and
o Recognition that, as an executive's level of responsibility increases, a
greater portion of the total compensation opportunity should be based upon Share
and other incentives and less upon base salary.
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 12. 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 $635,000 base
salary established for Mr. Smith in March 1997 (a 15.5% increase from his
previous base salary determined in March 1996), the Committee took into account
the factors described above.
Annual Cash Incentives. Under the Company's Annual Incentive Bonus Plan
(the "Bonus Plan"), which is administered by the Committee, 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
6
<PAGE>
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.
On March 19, 1998, the Board, upon the recommendation of the Compensation
Committee, amended and restated the Bonus Plan, subject to approval by the
Company's stockholders. See "Approval of Amendment and Restatement of Annual
Incentive Bonus Plan" on page 15.
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 1997 fiscal year, the Company's performance fell short of the
threshold level of performance and, as a result, no bonuses were paid to any of
the Company's executives.
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.
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 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. The 1996
Stock Plan also provides for the grant of restricted Shares.
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 at their fair market value on the date of
grant, which is the same date the Committee determines bonuses under the Bonus
Plan. Since no bonuses were granted to the Company's executives for the 1997
fiscal year, no bonus replacement options were granted.
Policy with Respect to the $1 Million Deduction Limit. Section 162(m) of
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.
Carol Farmer, Chair
Nicholas A. Buoniconti
Harold Toppel
7
<PAGE>
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
1997 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
----------------------- -------------------------------
Shares
Fiscal Restricted Underlying All Other
Name and Principal Position Year Salary Bonus (2) Stock Awards(4) Options(#) Compensation(5)
- --------------------------- ----- ---------- ---------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Jack A. Smith 1997 $ 635,000 $ 0 $ 0 35,000 $ 20,938
Chairman of the Board 1996 550,000 396,710(3) 1,335,000 67,500(3) 24,710
and Chief Executive 1995 500,000 324,307 40,536 37,500 20,481
Officer
Richard J. Lynch, Jr 1997 375,000 0 0 20,000 15,237
President and 1996 325,000 230,368(3) 0 40,000(3) 13,691
Chief Operating Officer 1995 250,000 143,853 10,787 22,500 10,140
Robert J. Timinski 1997 250,000 0 0 10,000 9,184
Executive Vice President 1996 220,000 184,383(3) 0 19,200(3) 6,459
and Chief Merchandising 1995 200,000 101,378 12,672 12,000 5,299
Officer
Arnold D. Sedel 1997 235,000 0 0 7,000 7,220
Senior Vice President, 1996 215,000 148,554(3) 480,000 15,207(3) 8,915
Stores 1995 200,000 81,520 4,078 9,000 0
Anthony F. Crudele 1997 180,000 0 0 7,000 4,736
Senior Vice President 1996 160,000 105,609(3) 0 14,307(3) 6,180
and Chief Financial
Officer (1)
Samuel G. Allen 1997 180,000 0 0 7,000 2,605
International 1996 160,000 104,484(3) 0 15,445(3) 0
President (1) 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 in lieu thereof under the 1996 Stock Plan. See the discussion of
bonus replacement options in the Compensation Committee Report on page 7.
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 became exercisable on
March 11, 1998 and expire on March 11, 2007. If the executive officer's
employment had terminated for any reason before March 11, 1998, the option
would have been forfeited and the amount of bonus foregone would have been
paid to the executive officer without interest.
(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 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
8
<PAGE>
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 Shares on the purchase on March 26, 1996 of restricted Shares
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 the resale for three years from the
purchase date.
Restricted Shares receive dividends at the same rate as all other Shares.
As of January 25, 1998, the number and value (based on the closing price of
the Shares of $11.125 on that date) of all restricted Shares (net of
purchase price) held by Mr. Smith was 79,619 Shares and $723,612, and the
number and value of all restricted share units (net of purchase price) held
by Mr. Smith was 104,969 and $167,740. The number and value (net of
purchase price) of all restricted Shares held by Mr. Sedel was 23,675 and
$247,093. The number of restricted Shares held by the remaining executive
officers named in the table was as follows: Mr. Lynch, 3,425; Mr. Timinski,
4,021; Mr. Crudele, 1,900; and Mr. Allen, 1,494. The value of these Shares
(net of purchase price) at January 25, 1998 was negative since the original
purchase price of these restricted Shares exceeded the January 25, 1998
closing price of $11.125.
(5) "All Other Compensation" in the 1997 fiscal year consists of Company
contributions credited under the 401(k) Savings and Profit Sharing Plan and
the Supplemental 401(k) Savings and Profit Sharing Plan.
Stock Options
The following table sets forth certain information with respect to stock
options granted during the 1997 fiscal year (including the bonus replacement
options granted in lieu of a portion of the bonus for 1996) under the 1996 Stock
Plan to the executive officers named in the Summary Compensation Table on page
8. These option grants are also included under the heading "Shares Underlying
Options" in that table. The hypothetical realizable values for each option grant
are shown based on compound annual rates of Share price appreciation of 0%, 5%
and 10% from the grant date to the expiration date. The assumed rates of
appreciation are for illustration purposes only and are not intended to predict
future Share prices, which will depend upon market conditions and the Company's
future performance and prospects.
Stock Options Granted in the 1997 Fiscal Year
<TABLE>
<CAPTION>
% of Total
Number of Potential Realizable Value
Number of Options at Assumed Annual Rates
Shares Granted to of Share Price Appreciation
Underlying Employees Exercise for Option Term ($)
Options in 1997 Price Expiration ----------------------------
Name Granted(1) Fiscal Year ($/Share) Date(2) 0% 5% 10%
- ---- --------- --------- ------- -------- --- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack A. Smith 50,000 7.97% $19.25 3/11/07 -0- $605,311 $1,533,977
Richard J. Lynch, Jr. 30,000 4.78% 19.25 3/11/07 -0- 363,187 920,386
Robert J. Timinski 16,000 2.55% 19.25 3/11/07 -0- 193,700 490,873
Arnold D. Sedel 12,307 1.96% 19.25 3/11/07 -0- 148,991 377,573
Anthony F. Crudele 12,307 1.96% 19.25 3/11/07 -0- 148,991 377,573
Samuel G. Allen 12,545 2.00% 19.25 3/11/07 -0- 151,873 384,875
</TABLE>
- ----------
(1) All options granted in the 1997 fiscal year are exercisable at a price
equal to the fair market value of a Share on the date of grant. All such
options become exercisable March 11, 2000 if the executive remains in the
employ of the Company through that date, except that the bonus replacement
options granted in lieu of a portion of the bonus for 1996, as described in
note 3 to the Summary Compensation Table on page 8, became exercisable on
March 11, 1998. Exercisability is accelerated upon death, total and
permanent disability, a change in control of the Company, or termination of
employment after the executive reaches age 65 and has ten years of
employment. See also "Employment and Severance Agreements" on page 11.
(2) If the executive's employment terminates for any reason other than cause,
the options will terminate three months after termination, and if the
executive's employment terminates for cause, the option will terminate
immediately.
9
<PAGE>
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 1997 fiscal year and the stock options held at the end of the fiscal
year.
Aggregated Option Exercises in the 1997 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 1997 Fiscal Year at End of 1997 Fiscal Year
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- ----------- -------- --------------------------- ----------------------------
<S> <C> <C> <C> <C>
Jack A. Smith -0- -0- 150,936 / 140,000 -0- / -0-
Richard J. Lynch, Jr. -0- -0- 78,532 / 82,500 -0- / -0-
Robert J. Timinski -0- -0- 47,509 / 41,200 -0- / -0-
Arnold D. Sedel -0- -0- 46,610 / 31,207 -0- / -0-
Anthony F. Crudele -0- -0- 17,640 / 26,557 -0- / -0-
Samuel G. Allen -0- -0- -0- / 31,445 -0- / -0-
</TABLE>
- ----------
(1) Calculated based on the closing price of the Shares of $11.125 on January
25, 1998, less the option exercise price.
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 benefit 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 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, 1998.
Pension Plan Table
<TABLE>
<CAPTION>
Annual Retirement Benefits
Years of Service (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, 1998, Messrs. Lynch,
Timinski, Crudele and Allen had 8, 4, 7 and 3 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 (including the
amount of bonus foregone in exchange for bonus replacement options) in the
year received.
10
<PAGE>
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, restricted Shares and restricted share units granted under the
Management Stock Purchase Plan (but not the restricted Shares 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 Shares and restricted share
units 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 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 agreement) or at such officer's election
for good reason (as defined in the agreement), 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.
11
<PAGE>
Comparative Stockholder Return
The following line graph compares the cumulative total stockholder return
on the Shares from November 17, 1994, the date of the Initial Public Offering,
through January 25, 1998 with the cumulative total return on the Standard &
Poor's 500 Stock Index ("S&P 500 Index") and the Dow Jones Retailers - All
Specialty Index ("D J Retailers - All Specialty Index") 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 Index and D J Retailers -
All Specialty Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
The Sports DJ Retailers -
Date Authority, Inc. All Speciality S&P 500
- ---- --------------- --------------- -------
11/17/94 $100 $100 $100
1/20/95 92 94 101
1/26/96 97 97 137
1/24/97 140 118 174
1/23/98 88 179 219
12
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information concerning the
beneficial ownership of Shares 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 Shares. This
information is shown as of December 31, 1997. The table also sets forth
information concerning the beneficial ownership of Shares by each Director and
the executive officers named in the Summary Compensation Table on page 8 and by
all Directors and executive officers as a group, as of March 30, 1998. Except as
otherwise indicated, all persons listed below have sole voting power and sole
dispositive power with respect to the number of Shares shown, except to the
extent that power is shared by spouses under applicable law.
<TABLE>
<CAPTION>
Percent of Shares
Name and Address Number of Shares 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
Wellington Management Company ...................................... 2,348,500(2) 7.4%
75 State Street
Boston, MA 02109
The Capital Group Companies, Inc. and
The Capital Research and Management Company ........................ 2,295,360(3) 7.2%
333 South Hope Street
Los Angeles, CA 90071
Jack A. Smith ...................................................... 434,950(4) 1.4%
Richard J. Lynch, Jr. .............................................. 160,655(5) *
Robert J. Timinski ................................................. 126,712(6) *
Arnold D. Sedel .................................................... 107,887(7) *
Anthony F. Crudele ................................................. 43,087(8) *
Samuel G. Allen .................................................... 16,999(9) *
Nicholas A. Buoniconti ............................................. 10,926(10) *
Steve Dougherty .................................................... 117,182(10) *
Julius W. Erving ................................................... 1,523(11) *
Carol Farmer ....................................................... 9,417(10) *
Jack F. Kemp ....................................................... 1,763(11) *
W. Mitt Romney ..................................................... 10,183(10) *
Harold Toppel ...................................................... 76,590(10) *
All Directors and executive officers as a group (15 persons) ....... 1,167,874 3.6%
</TABLE>
- ----------
* Represents less than one percent.
(1) The percentage shown for each stockholder listed is calculated by including
in the total Shares outstanding the number of Shares, if any, which the
stockholder has the right to acquire before May 29, 1998 upon the
conversion of the Company's 5.25% Convertible Subordinated Notes due 2001
(at a conversion price of $32.635 per share) held by that stockholder or
upon the exercise of options granted under the Stock Option Plan, the 1996
Stock Plan or the Director Stock Plan.
(2) The person named reported shared voting power with respect to 1,874,100 of
the Shares shown and shared dispositive power with respect to all Shares
shown.
(3) The persons named reported sole dispositive power with respect to all of
the Shares 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.
13
<PAGE>
(4) Includes 12,869 restricted Shares and 46,903 restricted share units (which
cannot be voted and with respect to which Mr. Smith has no dispositive
power) purchased pursuant to the Management Stock Purchase Plan; 66,750
restricted Shares granted under the 1996 Stock Plan; 2,908 Shares purchased
under the Employee Stock Purchase Plan, 2,835 of which are unrestricted;
2,564 Shares held under the 401(k) Savings and Profit Sharing Plan; 203,436
Shares with respect to which options granted under the Stock Option Plan
and the 1996 Stock Plan are exercisable or will become exercisable on or
before May 29, 1998; 1,532 Shares which Mr. Smith has the right to acquire
upon conversion of $50,000 principal amount of the Company's 5.25%
Convertible Subordinated Notes due 2001; and 97,988 unrestricted Shares.
(5) Includes 3,425 restricted Shares purchased pursuant to the Management Stock
Purchase Plan; 2,643 Shares purchased under the Employee Stock Purchase
Plan, all of which are unrestricted; 2,666 Shares held under the 401(k)
Savings and Profit Sharing Plan; 111,032 Shares with respect to which
options granted under the Stock Option Plan and the 1996 Stock Plan are
exercisable or will become exercisable on or before May 29, 1998; and
40,889 unrestricted Shares.
(6) Includes 4,021 restricted Shares purchased pursuant to the Management Stock
Purchase Plan; 2,078 Shares held under the 401(k) Savings and Profit
Sharing Plan; 65,509 Shares with respect to which options granted under the
Stock Option Plan and the 1996 Stock Plan are exercisable or will become
exercisable on or before May 29, 1998; and 55,104 unrestricted Shares.
(7) Includes 1,293 restricted Shares purchased pursuant to the Management Stock
Purchase Plan; 22,382 restricted Shares granted under the 1996 Stock Plan;
386 Shares held under the 401(k) Savings and Profit Sharing Plan; 60,917
Shares with respect to which options granted under the Stock Option Plan
and the 1996 Stock Plan are exercisable or will become exercisable on or
before May 29, 1998; and 22,909 unrestricted Shares.
(8) Includes 1,900 restricted Shares purchased pursuant to the Management Stock
Purchase Plan; 1,060 Shares held under the Employee Stock Purchase Plan, of
which 911 are unrestricted; 1,865 Shares held under the 401(k) Savings and
Profit Sharing Plan; 28,197 Shares with respect to which options granted
under the Stock Option Plan and the 1996 Stock Plan are exercisable or will
become exercisable on or before May 29, 1998; and 10,065 unrestricted
Shares.
(9) Includes 1,494 restricted Shares purchased pursuant to the Management Stock
Purchase Plan; 960 Shares held under the 401(k) Savings and Profit Sharing
Plan; and 14,545 Shares with respect to which options granted under the
Stock Option Plan and the 1996 Stock Plan are exercisable or will become
exercisable on or before May 29, 1998.
(10) Included in the number shown for each of these Directors is 5,607 Shares
with respect to which options granted under the Director Stock Plan become
exercisable on or before May 29, 1998. See "Compensation of Directors" on
page 5.
(11) Included in the number shown for each of these Directors is 1,398
restricted Shares granted under the Director Stock Plan. 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 on Form 3 and reports of changes in beneficial ownership of
Shares on Form 4 or Form 5. 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 Shares. To the Company's knowledge,
based solely on a review of the copies of Section 16(a) reports furnished to the
Company for the 1997 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 3 was filed late by Mr. Erving and one Form 4
reporting one transaction was filed late by Ms. Farmer.
14
<PAGE>
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
outstanding Shares. 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. At the end of
the 1997 fiscal year, Mega Sports operated seven 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 1997 fiscal year,
the total amount of this fee was $487,000. 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 AMENDMENT AND RESTATEMENT OF
THE ANNUAL INCENTIVE BONUS PLAN
On March 19, 1998, upon the recommendation of the Compensation Committee,
the Board amended and restated the Annual Incentive Bonus Plan (the "Plan"),
subject to approval by the Company's stockholders at the Meeting. The Plan was
originally adopted in November 1994 in accordance with applicable proposed
Treasury regulations to permit it to serve as a qualified performance-based
compensation program under Section 162(m) of the Internal Revenue Code ("Section
162(m)") in order to preserve the Company's tax deduction for bonuses paid under
the Plan to those executive officers subject to Section 162(m). Subsequently,
the Internal Revenue Service adopted final Treasury regulations under Section
162(m), which included a transition period for plans previously adopted. The
last plan year covered by this transition period was 1997. Therefore, in order
to preserve the Company's tax deduction for bonuses paid for future plan years,
the Board has amended and restated the Plan in certain minor respects, has
extended its term to include a 2002 plan year, and is submitting it for
stockholder approval. The Plan as amended and restated is described below and
the complete text of the Plan as amended and restated is set forth in Exhibit A.
The Board recommends that stockholders vote "FOR" approval of the Plan. The
affirmative vote of the holders of a majority of the Shares present in person or
by proxy and entitled to vote at the Meeting is required to approve the 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 (i) to attract and retain highly-qualified
executives by providing appropriate performance-based short-term incentive
awards, (ii) to align executive and stockholder long-term interests by creating
a direct link between executive compensation and stockholder return, and (iii)
to serve as a qualified performance-based compensation program under Section
162(m) to preserve the Company's tax deduction for compensation paid under the
Plan to executives subject to Section 162(m).
Effective Date and Term
The Plan, as amended and restated, became effective on March 19, 1998,
subject to approval by the stockholders at the Meeting. No bonuses may be
granted under the Plan with respect to any plan year after 2002. Under the Plan,
a "plan year" means the Company's fiscal year.
15
<PAGE>
Administration
The Plan is administered by the Compensation Committee of the Board (the
"Committee"). Each member of the Committee may be an "outside director" under
Section 162(m) and the regulations promulgated thereunder. The Committee has the
authority and sole discretion to administer the Plan, including the authority
and discretion to grant bonuses, determine the persons to whom and the time or
times at which bonuses will be granted, to determine the terms, conditions,
restrictions and performance criteria relating to any bonus (including partial
payment of any bonus upon a participant's termination of employment due to death
or disability), to make adjustments in the performance goals in response to
changes in applicable laws, regulations or accounting principles to the extent
permitted by Section 162(m), to determine compensation payable upon attainment
of performance goals, to construe and interpret the Plan and any bonus, to make
factual determinations and to establish and amend rules for the administration
of the Plan. All actions by the Committee will be conclusive and binding on all
parties.
Amendment or Termination 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 Section
162(m) will be effective unless the amendment is approved by the Company's
stockholders.
Eligibility
The Committee may grant bonuses under the Plan to the Chief Executive
Officer of the Company and the other four most highly compensated officers of
the Company who are subject to Section 162(m) (the "Covered Employees") and
other officers and key employees of the Company and its subsidiaries
("participants"). In determining the individuals to whom bonuses will be
granted, the Committee will consider such factors as it may deem relevant in
connection with accomplishing the purposes of the Plan. There are currently 23
Covered Employees, officers and key employees eligible to participate in the
Plan.
Performance Goals
For each plan year, the Committee must establish in writing objective
performance goals and the threshold, target and maximum bonus payments that may
be made if the performance goals are met. The Committee must act within the
first 90 days of the plan year, or by such other date required or permitted
pursuant to Section 162(m).
Performance goals may be expressed in terms of (i) the Company's return on
equity, assets, capital or investment, (ii) pre-tax or after-tax profit levels,
(iii) expense reduction levels, (iv) implementation of critical projects or
processes, (v) level of sales, (vi) changes in the market price of Shares, (vii)
market share or (viii) strategic business criteria consisting of one or more
objectives with respect to revenue, market penetration, geographic business
expansion, cost targets or acquisitions or divestitures, in each case for the
Company and its subsidiaries as a whole or any combination thereof. Performance
goals must include a threshold level of performance below which no bonus payment
shall be made, levels of performance at which specified percentages of the
target bonus shall be paid, and a maximum level of performance above which no
additional bonus shall be paid. The performance goals established by the
Committee from among those goals described above may be (but need not be)
different each plan year and different goals may be applicable to different
participants.
The performance goals shall satisfy the requirements for "qualified
performance-based compensation" under Section 162(m), including the requirement
that the achievement of the goals be substantially uncertain at the time they
are established and that the goals be established in such a way that a third
party with knowledge of the relevant facts could determine whether and to what
extent the goals have been met.
Annual Incentive Bonuses
The Committee must certify in writing whether and the extent to which the
performance goals for a plan year have been met within 120 days following the
end of the plan year, and bonuses earned must be paid in cash within a
reasonable period of time after the end of the plan year to participants
employed on the date of payment. The actual amount of a bonus for any individual
may be reduced by the Committee, based upon such factors that the
<PAGE>
Committee deems relevant. Under the Plan, the maximum bonus payable to the
Company's Chief Executive Officer for any plan year (including the value of
bonus replacement options) is three times the salary midpoint for the salary
grade of the Chief Executive Officer at the time the Committee establishes the
performance goals, and the maximum bonus payable to the other Covered Employees
for any plan year (including the value of bonus replacement options) is two
times the salary midpoint for each such Covered Employee's salary grade at the
time the Committee establishes the performance goals. While this maximum Plan
limit for 1998 is $2,070,000 for the Chief Executive Officer and $1,674,000 for
the next highest paid officer, the actual limits approved by the Compensation
Committee for 1998 are $1,242,000 and $1,004,400, respectively. The limits
imposed by the Plan for years after 1998 will depend upon future adjustments in
salary midpoints, but in no event will the amount paid under the Plan to any
officer or key employee for any plan year exceed $2,070,000, escalated after
1998 at a rate of 6% annually.
Bonus Replacement Options
The Committee may allow certain participants to elect to forego all or a
portion of their respective cash bonuses and to receive bonus replacement
options in lieu thereof. The Committee has the discretion to determine which
participants will be permitted to forego bonuses and to set limits on the amount
of bonuses which may be foregone. The Committee is not required to treat
participants uniformly or to act on a consistent basis from year to year. Bonus
replacement options are options to purchase Shares which will be granted under
the Company's 1996 Stock Plan, which was approved by the Company's stockholders
at the 1996 annual meeting, or any other similar plan approved by the Company's
stockholders. The bonus replacement options will be governed by the 1996 Stock
Plan or such other applicable plan. There are currently 1,049,957 Shares
reserved for issuance under the 1996 Stock Plan.
The Committee will specify for each Covered Employee, at the time
performance goals are established for a plan year, the maximum amount of bonus,
if any, that the Covered Employee may elect to forego in exchange for bonus
replacement options. The Committee will also specify at such time for each such
Covered Employee the method for determining the number of Shares which may be
subject to the bonus replacement options and the exercise price of the options.
Change in Control
If a change in control of the Company (as defined below) occurs, bonuses
will be treated as follows: (i) if the change in control occurs after the end of
a plan year as to which the Committee has certified that the performance goals
for such plan year have been met and has determined the actual bonuses to be
paid (but such bonuses have not been paid), such bonuses will be immediately
paid in cash; (ii) if the change in control occurs after the end of a plan year
as to which the Committee has not yet certified whether the performance goals
for such plan year have been met and has not yet determined the actual bonuses
to be paid, the Committee will immediately certify whether the performance goals
have been met and determine the bonus amount to be paid, and the bonuses will be
immediately paid in cash; and (iii) if a change in control occurs during a plan
year as to which target bonuses have been established (but the actual bonuses to
be paid have not been determined), the plan year shall be deemed to have been
completed, the target levels of performance set forth under the respective
performance goals shall be deemed to have been attained, and a pro rata portion
of the bonus so determined for each participant for such partial plan year shall
be immediately paid in cash to each participant for whom a target bonus for such
plan year was established.
A change in control of the Company will occur upon the first to occur of
the following events: (i) the "beneficial ownership" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934 (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 the Company or any trustee or other fiduciary holding
securities under an employee benefit plan of the Company); (ii) the stockholders
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, individuals who at the beginning of such period
were members of the Board cease for any reason to constitute at least a majority
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thereof (unless the election, or the nomination for election by the Company's
stockholders, 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).
Federal Income 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 Deductibility under Section 162(m)
Section 162(m) disallows a public company's deductions for employee
remuneration exceeding $1,000,000 per year for the chief executive officer and
the four other most highly compensated executive officers, but contains an
exception for "performance-based compensation." The Plan has been drafted and is
intended to be administered to enable bonuses to qualify as "performance-based
compensation."
Tax Treatment of Bonuses
The participants will recognize ordinary compensation income in an amount
equal to the bonus received. The Company generally will be entitled to a
corresponding federal income tax deduction at the time of the bonus payment.
Tax Withholding
The Company will deduct from all bonuses paid in cash, any federal, state
or local taxes required by law to be withheld with respect thereto.
Benefits Payable Under the Plan
As indicated in the Compensation Committee Report on Executive Compensation
on page 7, no bonuses were paid under the Plan, as currently in effect, for the
1997 plan year. Under the performance criteria which have been adopted by the
Compensation Committee under the Plan, as amended and restated, for the 1998
plan year, no bonuses would be payable if the Company's 1998 performance is the
same as its 1997 performance.
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 1998 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 appropriate questions.
The Board recommends that stockholders vote "FOR" such ratification.
Ratification will require the affirmative vote of the holders of a majority of
the Shares 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.
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STOCKHOLDER PROPOSALS AND NOMINATIONS
In accordance with Rule 14a-8 under the Exchange Act, any stockholder
proposals intended to be presented at the 1999 Annual Meeting of Stockholders
must be received by the Company no later than December 28, 1998 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 matter 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 annual 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 person or by proxy at
the annual 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 annual 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 1997 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, VICE PRESIDENT AND
TREASURER, THE SPORTS AUTHORITY, INC., 3383 NORTH STATE ROAD 7, FORT LAUDERDALE,
FLORIDA 33319.
19
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EXHIBIT A
THE SPORTS AUTHORITY, INC. ANNUAL INCENTIVE BONUS PLAN
1. Purposes.
The purposes of The Sports Authority, Inc. Annual Incentive Bonus Plan (the
"Plan") are to attract and retain highly-qualified executives by providing
appropriate performance-based short-term incentive awards and to align executive
and shareholder long-term interests by creating a direct link between executive
compensation and shareholder return. An additional purpose of the Plan is to
serve as a qualified performance-based compensation program under Section 162(m)
of the Internal Revenue Code of 1986, as amended, in order to preserve the
Company's tax deduction for compensation paid under the Plan to Covered
Employees.
2. Definitions.
The following terms, as used herein, shall have the following meanings:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Bonus" shall mean any annual incentive bonus award granted pursuant to
the Plan; the payment of any such award shall be contingent upon the attainment
of Performance Goals with respect to a Plan Year.
(c) "Bonus Replacement Options" shall mean options to purchase Shares which
are granted pursuant to the Option Plan wholly or partially in lieu of Bonuses
foregone pursuant to Section 6(d).
(d) "Change in Control" shall mean the occurrence of an event described in
Section 6(e).
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" shall mean the Compensation Committee of the Board.
(g) "Company" shall mean The Sports Authority, Inc., a corporation
organized under the laws of the State of Delaware, or any successor corporation.
(h) "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code (or any successor provision).
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Option Plan" shall mean The Sports Authority, Inc. 1996 Stock Option
and Restricted Stock Plan and any other plan under which stock options may be
granted to employees of the Company which has been approved by the stockholders
of the Company.
(k) "Participant" shall mean an officer or other employee of the Company or
one of its Subsidiaries who is eligible to participate herein pursuant to
Section 3 of the Plan and for whom a target Bonus is established with respect to
the relevant Plan Year.
(l) "Performance Goal(s)" shall mean the criteria and objectives which must
be met during the Plan Year as a condition of the Participant's receipt of
payment with respect to a Bonus, as described in Section 5.
(m) "Plan" shall mean The Sports Authority, Inc. Annual Incentive Bonus
Plan, as amended from time to time.
(n) "Plan Year" shall mean the Company's fiscal year.
(o) "Shares" shall mean common shares, $.01 par value, of the Company.
(p) "Subsidiary" shall mean any subsidiary of the Company which is
designated by the Board or the Committee to have any one or more of its
employees participate in the Plan.
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3. Eligibility.
All Covered Employees and such other Company officers and key employees of
the Company and its Subsidiaries as are designated by the Committee shall
participate in the Plan. In determining the persons to whom Bonuses shall be
granted, the Committee shall take into account such factors as the Committee
shall deem relevant in connection with accomplishing the purposes of the Plan.
4. No Shares Subject to the Plan.
No Shares of the Company shall be reserved for, or issued under, the Plan.
To the extent that Bonuses are foregone and Bonus Replacement Options are
granted in lieu thereof, such Bonus Replacement Options shall be granted under,
and the Shares issuable upon exercise of such Bonus Replacement Options shall be
issued under, and subject to the terms and conditions of, the Option Plan.
5. Performance Goals.
(a) In General. Performance Goals may be expressed in terms of (i) the
Company's return on equity, assets, capital or investment, (ii) pre-tax or
after-tax profit levels, (iii) expense reduction levels, (iv) implementation of
critical projects or processes, (v) level of sales, (vi) changes in market price
of the Shares, (vii) market share, or (viii) strategic business criteria
consisting of one or more objectives with respect to revenue, market
penetration, geographic business expansion, cost targets or acquisitions or
divestitures, in each case for the Company and its Subsidiaries as a whole or
any combination thereof. To the extent applicable, any such Performance Goal
shall be determined in accordance with generally accepted accounting principles
and reported upon by the Company's independent accountants. Performance Goals
shall include a threshold level of performance below which no Bonus payment
shall be made, levels of performance at which specified percentages of the
target Bonus shall be paid, and a maximum level of performance above which no
additional Bonus shall be paid. The Performance Goals established by the
Committee may be (but need not be) different each Plan Year and different goals
may be applicable to different Participants.
(b) Establishment of Performance Goals. For each Plan Year, the Committee
shall establish in writing (i) the objective Performance Goals that must be met
during such Plan Year in order for Bonus payments to be made under the Plan for
such Plan Year, (ii) the threshold, target and maximum Bonus payments that may
be made if the Performance Goals are met, (iii) for each Covered Employee, the
maximum amount of Bonus which may be foregone in exchange for Bonus Replacement
Options pursuant to Section 6(d) and the method for determining (A) the number
of Shares subject to such Bonus Replacement Options and (B) the exercise price
thereof, and (iv) any other conditions that the Committee deems appropriate and
consistent with the Plan and Section 162(m) of the Code. The Committee shall
take such actions no later than the earlier of (i) 90 days after the beginning
of the Plan Year or (ii) the date on which 25% of the Plan Year has been
completed, or such other date as may be required or permitted under applicable
regulations under Section 162(m) of the Code. The Performance Goals shall
satisfy the requirements for "qualified performance-based compensation" under
Section 162(m) of the Code, including the requirement that the achievement of
the goals be substantially uncertain at the time they are established and that
the goals be established in such a way that a third party with knowledge of the
relevant facts could determine whether and to what extent the Performance Goals
have been met.
(c) Certification with Respect to Performance Goals. The Committee shall
certify in writing whether and the extent to which the Performance Goals for
each Plan Year have been met within 120 days following the end of such Plan
Year.
6. Bonuses.
(a) In General. A Participant's target Bonus for each Plan Year shall be
expressed as either a dollar amount or as a percentage of the salary midpoint
for the Participant's salary grade as in effect at any time during the Plan
Year; provided that the salary midpoint used to determine the target Bonus of
each Covered Employee shall be the salary midpoint for such Covered Employee in
effect at the time the Committee establishes the Performance Goals for such Plan
Year pursuant to Section 5(b). Unless otherwise provided by the Committee in its
discretion in connection with terminations of employment or except as set forth
in Section 6(e), payment of a Bonus for a
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particular Plan Year shall be made only if and to the extent the Performance
Goals with respect to such Plan Year are attained and only if the Participant is
employed by the Company or one of its Subsidiaries on the date of payment of the
Bonus. The actual amount of a Bonus payable under the Plan shall be determined
as a percentage of the Participant's target Bonus, which percentage shall vary
depending upon the extent to which the Performance Goals have been attained and
may be lesser than, greater than, or equal to 100%. The Committee may, in its
discretion, reduce or eliminate the amount payable to any Participant (including
a Covered Employee), in each case based upon such factors as the Committee may
deem relevant, but shall not increase the amount payable to any Covered
Employee.
(b) Special Limitation on Certain Bonuses. Notwithstanding anything to the
contrary contained in this Section 6, the actual Bonus paid to the Company's
Chief Executive Officer under the Plan for any Plan Year (including the value of
Bonus Replacement Options granted as provided in Section 6(d)) may not exceed
three times the salary midpoint for the salary grade of the Chief Executive
Officer, as in effect at the time the Committee establishes the Performance
Goals for such Plan Year pursuant to Section 5(b), as such salary grade midpoint
is determined by the Committee based on competitive data, including a survey of
comparable companies; and the Bonus for each other Covered Employee under the
Plan (including the value of Bonus Replacement Options granted as provided in
Section 6(d)) may not exceed two times the salary midpoint for such Covered
Employee's salary grade, as in effect at the time the Committee establishes the
Performance Goals for such Plan Year pursuant to Section 5(b).
(c) Time of Payment. Unless otherwise determined by the Committee, or
except as provided in Section 6(e), all payments in respect of Bonuses granted
hereunder shall be made within a reasonable period after the end of the Plan
Year. In the case of Participants who are Covered Employees, unless otherwise
determined by the Committee in connection with terminations of employment and
except as provided in Section 6(e) hereof, such payments shall be made only
after achievement of the Performance Goals has been certified in writing by the
Committee pursuant to Section 5(c) and the Committee has informed each Covered
Employee of the amount of his or her Bonus.
(d) Form of Payment. Except as provided in Section 6(e), the Committee may
in its discretion allow certain Participants to elect to forego all or a portion
of their respective Bonuses and to receive Bonus Replacement Options in lieu
thereof. The Committee shall have sole discretion to determine which
Participants will be allowed to forego Bonuses as provided above and to set
limits on the amount of each Bonus which may be foregone. The Committee shall
not be required to treat Participants uniformly or to act on a consistent basis
from one Plan Year to the next.
(e) Change in Control. Notwithstanding any other provision of the Plan to
the contrary, (i) if a "Change in Control" of the Company (as defined in this
Section 6(e)) shall occur following a Plan Year as to which the Committee has
certified that the Performance Goals have been met and has determined the actual
Bonuses to be paid (but such Bonuses have not yet been paid), such Bonuses shall
be paid immediately in cash, (ii) if a Change in Control shall occur following a
Plan Year as to which the Committee has not yet certified whether the
Performance Goals have been met and determined the actual Bonuses to be paid,
the Committee shall immediately certify whether the Performance Goals have been
met and shall immediately determine the actual Bonuses to be paid, and such
Bonuses shall be immediately paid in cash, and (iii) if a Change in Control
shall occur during a Plan Year as to which target Bonuses have been established
but the actual Bonuses to be paid have not yet been determined, such Plan Year
shall be deemed to have been completed, the target levels of performance set
forth under the respective Performance Goals shall be deemed to have been
attained, and a pro rata portion of the Bonus so determined for each Participant
for such partial Plan Year (based on the number of full and partial months which
have elapsed with respect to such Plan Year) shall be paid immediately in cash
to each Participant for whom a target Bonus for such Plan Year was established.
For purposes of this Section 6, a Change in Control of the Company shall
occur upon the first to occur of the following:
(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 the Company or any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company), or
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(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).
7. Administration.
The Plan shall be administered by the Committee. The Committee shall have
the authority in its sole discretion, subject to and not inconsistent with the
express provisions and limitations contained in the Plan, to administer the Plan
and to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Bonuses; to determine the
persons to whom and the time or times at which Bonuses shall be granted; to
determine the terms, conditions, restrictions and performance criteria relating
to any Bonus (including the partial payment of any Bonus upon a Participant's
termination of employment due to death or disability); to make adjustments in
the Performance Goals in response to changes in applicable laws, regulations, or
accounting principles to the extent permitted by Section 162(m); to adjust
compensation payable upon attainment of Performance Goals; to construe and
interpret the Plan and any Bonus; to prescribe, amend and rescind rules and
regulations relating to the Plan; and to make all other determinations,
including factual determinations, deemed necessary or advisable for the
administration of the Plan.
The Committee shall consist of two or more persons each of whom may be an
"outside director" within the meaning of Section 162(m) of the Code. The
Committee may appoint a chairperson and a secretary and may make such rules and
regulations for the conduct of its business as it shall deem advisable, and
shall keep minutes of its meetings. 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 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 the Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Bonus
granted hereunder.
8. General Provisions.
(a) Compliance with Legal Requirements. The Plan and the granting of
Bonuses, and the other obligations of the Company under the Plan shall be
subject to all applicable federal and state laws, rules and regulations, and to
such approvals by any regulatory or governmental agency as may be required.
(b) No Right To Continued Employment. Nothing in the Plan or in any Bonus
granted shall confer upon any Participant the right to continue in the employ of
the Company or any of its Subsidiaries or to be entitled to any remuneration or
benefits not set forth in the Plan or to interfere with or limit in any way the
right of the Company to terminate such Participant's employment.
(c) Withholding Taxes. The Company or Subsidiary employing any Participant
shall deduct from all payments and distributions under the Plan any taxes
required to be withheld by federal, state or local governments.
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(d) Amendment and Termination of the Plan. The Board may at any time and
from time to time alter, amend, suspend, or terminate the Plan in whole or in
part; provided, however, that no amendment which requires stockholder approval
in order for the Plan to continue to comply with Code Section 162(m) shall be
effective unless the same shall be approved by the requisite vote of the
shareholders of the Company. Additionally, the Committee may make such
amendments as it deems necessary to comply with other applicable laws, rules and
regulations. Notwithstanding the foregoing, no amendment shall affect adversely
any of the rights of any Participant, without such Participant's consent, under
any Bonus theretofore granted under the Plan.
(e) Participant Rights. No Participant shall have any claim to be granted
any Bonus under the Plan, and there is no obligation for uniformity of treatment
for Participants.
(f) Unfunded Status of Bonuses. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payments which
at any time are not yet made to a Participant pursuant to a Bonus, nothing
contained in the Plan or any Bonus shall give any such Participant any rights
that are greater than those of a general creditor of the Company.
(g) 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.
(h) Interpretation. The Plan is designed and intended to comply with
Section 162(m) of the Code, to the extent applicable, and all provisions hereof
shall be construed in a manner to so comply.
(i) Effective Date. The Plan shall become effective on March 19, 1998,
subject to approval by the affirmative vote of the holders of a majority of the
Shares present or represented and entitled to vote at the 1998 annual meeting of
stockholders of the Company, and any actions taken by the Committee with respect
to Bonuses for the 1998 Plan Year shall be subject to such approval.
(j) Term. No Bonus may be granted under the Plan with respect to any Plan
Year after fiscal year 2002.
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Appendix
THE SPORTS AUTHORITY, INC.
PROXY
1998 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jack A. Smith, Martin E. Hanaka, Richard J.
Lynch, Jr. and each of them, the true and lawful attorneys, agents 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 1998 Annual Meeting of Stockholders of THE SPORTS
AUTHORITY, INC. to be held on May 28, 1998 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. The election of Jack A. Smith, Julius W. Erving, Martin E. Hanaka and W.
Mitt Romney as Class I Directors to serve until the Annual Meeting of
Shareholders in 2001 or until their successors are duly elected and
qualified; except vote withheld from the following nominee(s)
______________________.
|_| FOR |_| WITHHOLD VOTE
2. Approval of the amendment and restatement of the Annual Incentive Bonus
Plan,
|_| FOR |_| AGAINST |_| ABSTAIN
3. Ratification of the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the 1998 fiscal year; and
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, on any other matters which may properly come before
the Annual Meeting or any adjournment or postponements thereof.
|_| I PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS.
<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.
Dated: ______________________ , 1998
____________________________________
____________________________________
IMPORTANT: 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.
